City File: Good news from Reuters

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The Independent Online
WITH shares at pounds 19.35 on over 30 times earnings, the market clearly believes that Reuters can do no wrong - and there is plenty of evidence to support the view.

A steady flow of purchases in niche or bolt-on businesses, a willingness to hand surplus cash back to shareholders and an ingenious incentive scheme that links senior executives' pay to the performance of the company rather than its shares are all signs of a well-run company.

But Reuters has such a grip on the world's financial markets that there is limited scope for its existing products. Future purchases will be made in an overexcited marketplace.

And even though earnings, due on Tuesday, could be up by 15 per cent, the shares are vulnerable to any shift in market sentiment.

THE CITY'S new issue machine moves up a gear this week as two prospectuses hit would-be investors' mats. Parkside International, a five-year old management buyout, is coming to market for pounds 32m, giving a gross yield of 3.4 per cent covered more than twice by forecast earnings of around 6.5p.

Venture capital backers, Quayle Munro, and the management, who together will have a stake of over 60 per cent after the float, have promised not to sell their shares for one and two years respectively. Clients include Andrex, Tampax and Coca-Cola. A good bet on economic recovery.

This week's other debutante is Multisoft, which has a joint-venture paper mill in China that makes Cotton Tail, a cotton-based, environmentally correct toilet tissue. A new company, Multisoft expects to lose pounds 160,000 in the year to September, but projects pounds 230,000 profits for next year, to give earnings per share of 2.9p. Worth a punt at up to 30p.

DAVID Simon has done nothing wrong since he took over at British Petroleum in the wake of the boardroom coup that ousted Bob Horton in June 1992. Debt has fallen faster than promised and his motto of PRT (Profit, Reputation, Teamwork) has stood the test of a falling oil price - normally a danger signal for a company that relied on production, rather than refining or marketing, for more of its profits than its competitors did.

The shares have responded, rising from a low of under 200p on Simon's arrival to close at 368p on Friday. But Fergus MacLeod of NatWest Securities reckons that 1993 profits, reported next Thursday, could be over pounds 900m, giving earnings of 16.7p per share.

NEXT week sees the resumption of share trading in Utility Cables, a company known previously as Baillie Gifford Technology. The name change came after the recent reverse takeover by Luke Johnson and former financial journalist, Stephen Hargrave.

The shares were suspended before Christmas at 31p prior to the announcement that the trust was to be reborn as a specialist cable-laying firm through an pounds 8.75m takeover of the J P Fitzpatrick companies. Brokers expect the shares to trade at between 25p and 30p, and recommend investors to buy up to 30p. Could be an exciting ride.

WHY NOT motor with Caverdale, the small Luton-based motor dealer whose shareholders include Sir James Goldsmith and the sons of Kerry Packer and John Aspinall? Caverdale is moving into the big time with the appointment of Kleinwort Benson as brokers in a move designed to lift its profile among institutional investors and provide corporate back-up for what is likely to be a bumper year of acquisitions.

Arild Nerdrum, the Norwegian entrepreneur who led a pounds 2m management buy-in of Caverdale three years ago, is determined to build it into a national car dealership.

Last week saw a big management team reshuffle including the appointment of a new managing director.

Next month, Caverdale is expected to report a turnaround from a pounds 408,000 loss in 1992 to taxable profits of pounds 1.4m last year, rising to about pounds 1.8m this year. The shares, at 17.75p, on below 15 times 1994 earnings - well below the sector average - should rev ahead.

SHARES in Rhino Group, the video games retailer, look oversold. The company has hardly put a foot wrong since control was bought by Bev Ripley and Terry Norris, who made a fortune by building, then selling the Cityvision video chain.

The duo snapped up 29 stores from Richard Branson's Virgin just before Christmas for pounds 12.5m, taking Rhino's total network to 75. However, the shares have been hit by disappointing Christmas sales at rivals Dixons and Comet.

Although Rhino made an upbeat statement about its own sales, the shares, at 42p, are still selling below the rights issue that accompanied the Virgin purchase.

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