City File: Rank chief faces a grilling

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The Independent Online
MICHAEL GIFFORD, the abrasive chief executive of Rank Organisation, will have some tough questions to answer when the group announces its full- year results on Thursday.

Has Butlins been hit by the foreign holidays price war? What is the group going to do about the loss-making video duplication operation? Is it really going to sell its stake in Rank Xerox? And why doesn't it accept the tempting price on offer for the films business?

The rumours about Xerox have reached such a fever pitch that if Rank sells this staple of its earnings make-up the shares could soar. As for Butlins, the prospects may not be encouraging, and as for video duplication, well something has to be done.

Nigel Reed at Paribas is looking for pounds 268m of pre-tax profits, a rise of nearly 15 per cent. But with the shares trading at over 20 times earnings, it will take some exceptional news to make them outperform.

TRIO Holdings, the group which owns the moneybroker Martin Bierbaum, is one of the few shares in this frothy market trading on a single figure earnings multiple.

Trio was transformed after David Hagan, who created the City's first inter-dealer broker while at Tullett & Tokyo, took control a year ago. Trio bought Martin Bierbaum, a once mighty moneybroker group which had fallen on hard times but was still a leader in German mark business, and invested in new systems in London and staff in New York.

A quiet period in the foreign exchange markets forced Trio to issue a profit warning which brought the shares down 40 per cent. In the event pre-tax profits of pounds 5.08m for the year to September were not that bad and if markets pick up, Trio will be in a good position to benefit. Smith New Court is predicting pounds 7.2m of profits for this year without any substantial recovery, putting the shares at 58p on just under 10 times earnings. A re-rating perhaps?

WELLCOME'S shares have risen by 30p to 689p since the post-Christmas announcement that the Wellcome Trust is delaying further disposals from its 40 per cent holding. But a learned tome from Salomon Brothers makes a strong case that the shares - over 100p below the price at which the Trust placed its previous tranche in June 1992 - are undervalued.

Earnings are expected to rise at an average 12 per cent over the next few years: Salomon reckons that the various scares which have hung over the shares are overdone and that Wellcome has a number of nice little earners in the pipeline.

MATTHEW CLARK - a long- time favourite of the Independent on Sunday - is one of those rare companies which survived two rights issues in a year and still saw its shares nearly double - they closed at 576p on Friday.

Such is the market's recognition of the transformation of Matthew Clark from a sleepy family-controlled company importing Martell to a big force in wholesaling liquor - spiced with some valuable brands including Strathmore bottled water. Stick with them - and buy if the market is disappointed by the profit figures. There's more to be squeezed from the brands, and the wholesaling business is booming as pubs gain freedom to shop around for beer.

IT TAKES Tu Tu Tango to put more fizz into the shares of Pelican, the restaurant chain that was greeted ecstatically by the market last week when it announced half-year profits up from pounds 357,000 to pounds 960,000.

The group has plenty of expansion plans in this country, opening gimmick-laden themed eateries at the rate of six a year.

That is why Tu Tu Tango is so significant. The recently formed Pelican USA bought a half-share in this exotically- named chain, which creates an 'artist's garret' look as a setting for diners to be immortalised in oils while eating - without counting the Italian dressing on the salads.

The shares, at 75p, yield a tiny 2 per cent and are fully up with values on competitors such as City Centre Restaurants and Pizza Express. But Pelican looks pick of the bunch.

RELIANCE Security Group shares are becoming an interesting play on economic recovery. Although the group is moving into electronic security equipment, the bulk of its business lies in supplying men to stand guard on customers' sites and it was hit by recession.

The pain was borne by a 68 per cent drop in profits for the year to last April, but the first half of the current year has shown the first signs of recovery. That should follow through in the second half to take profits up from pounds 1.1m to more than pounds 2m, justifying a tempting 5.4 per cent yield at the current 105p.

AS THE battle for control of Everton Football Club continues, it may be time to reflect on what's going on at Park Food Group, the company headed by one of the Everton suitors, Peter Johnson. Park's shares have been a-leaping over the Christmas period.

The company specialises in supplying Christmas hampers direct to homes, and seems to be doing fine. But there must be doubts over whether Mr Johnson, who holds 35 million shares, will hang on to all his shares if he wins control of Everton. He assures City File that trading went well over Christmas, but the shares have risen sufficiently for the time being on favourable press reports, climbing from 245p last summer to close at 286p on Friday. A nice profit, if you've been part of it, but probably a company to avoid until the dust settles over Everton.