CITY TALK : BPP may derive gain from City's loss
Sunday 09 April 1995
Recent full-year results were ahead of forecasts, with profits up 9.5 per cent at £6.9m. Investment in new multimedia products will be costly, it adds, but should prove worthwhile in the long term. Buy.
RESEARCH by UBS, the investment bank, rates Boots as the No 1 cash generator across a range of household product and consumer companies. Boots' management says it will pay out surplus cash to investors if it cannot find good opportunities within its core businesses to invest the money.
Providing it sticks to its word, and does not fritter the money away, the shares represent good medium-term potential, says analyst Andrew Hughes. Having burnt its fingers once with Do-It-All, the current management is unlikely to make the same mistake twice. Buy.
GROUPS whose fortunes are tied to the construction sector remain under pressure, and the current results season has yet to bring much joy. Redland, with its strength in roofing tiles, where it is the world's No 1, has some resilience. And this makes it more attractive than many of its peers. But the Smith New Court analyst Kevin Cammack is disenchanted with the company's prospects. Recent full-year results saw the dividend fall to 19.4p from 25p, and future earnings growth will come mainly from improvements to Redland's ACT position.
Mr Cammack sees cash continuing to seep out of the business until 1996. He doubts its premium to the sector is justified, and says a share price closer to 420p is better value than the current 456p. Sell.
DIFFICULT to know if problems at Nobo, the office equipment supplier, are fully discounted by the 61p plunge in its shares to 148p on Tuesday - or whether worse is to come. The company has warned pre-tax profits will be significantly lower than the market expected. Nobo's broker, Granville Davies, slashed its forecasts for the year ending April from £3.7m to £2.7m. The company says the fall-off is because of a drop in orders from one of its main UK customers. But the question remains as to whether this is the full story.
Nobo should still make money this year, but debts have been edging higher. Shares recovered some ground last week, so if you enjoy taking risks, long-term recovery should be achievable, and the shares might be worth a small punt. If you already own them, don't panic.
KEN SCOBIE, the company doctor put in to sort out Brent Walker's problems, has assembled a heavyweight management team to run Allied Leisure, where he is now chairman. As finance director he has brought in Damien Harte, previously at Isosceles, the vehicle that bought into the Gateway supermarket chain. He poached Neil Goulden from his position as chief executive of Letheby & Christopher, the upmarket sports caterers, to run Allied.
The market has cottoned on to the prospects of revival, and the shares have risen from a low of 17p in September to 26p now. Gearing is still 67 per cent, but that is a vast improvement on the 112 per cent when Mr Scobie moved in. Followers expect to see the company branch out from ten- pin bowling and build a portfolio of leisure businesses. Scope for further gains.
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