CITY TALK: Avis is driving on a skid-pan

The PR machine for the flotation of Avis Europe is cranking into gear, with Friday scheduled for the publication of a pathfinder prospectus and pricing range for the car-rental firm. Avis, expected to be valued at up to pounds 700m, is the biggest offer for sale since the Sun Life & Provincial offer worth pounds 562m last July.

However, interested investors should be aware of the following fact: Avis wants to bill itself as a pure transport play, and as such, has requested it be classified in that sector. Transport stocks in general - look at Stagecoach, or National Express - have been on a roll for a good while, and there is every benefit to be had from being named in such good company.

But hang on a second - Eurodollar, another car-rental firm, and Avis's nearest stock market rival, is classified as a distributor. Given that many of the companies in that sector - Car Group, DC Cook and Reg Vardy - are car traders, there is some sense for Eurodollar's inclusion as a distributor.

Although classifications can be confusing, they are also relevant to investors' views, and affect the weightings that institutions place on individual stocks.

The next meeting of the classification committee is on Monday 3 March, when a decision is expected. Avis will be arguing hard for its case, but frankly, there seems little reason why it should not be included in the same sector as Eurodollar. Sadly, that will do it no favours, as Eurodollar shocked the market with a spate of three profit warnings in the space of a year after coming to the market in 1994.

Finally, being classified as a transport play will encourage investors to focus their attention on the demand for car rental and hire - which would seem to be the fundamental business of the group. In fact, Avis's profitability is just as subject to the vagaries of car prices in the new and second-hand market. Last year it spent pounds 1.5bn on buying cars - making it the largest private purchaser of cars in Europe. Any upturn in the new car market - or a downturn in the used car market - can have a dramatic impact on Avis's bottom line. This will be an area the company will be keen to downplay. Avoid.

Looking even further ahead, to the next quarterly meeting of the FT-SE 100 Index committee, set for 12 March, the brief will be to decide on who is in and who is out of the blue-chip rankings. One of the contenders for inclusion will be Compass Group, the contract catering and restaurant services company. Heady growth has propelled it to a market capitalisation of pounds 2.3bn; sales have risen from pounds 345m in 1992 to pounds 2.65bn in 1996. And it has a growth rating to match; one reason why the more conservative City fund managers are loath to overexpose themselves to the shares. And despite glowing reports, the shares are not so closely followed as they remain relatively illiquid.

The shares have climbed from around 500p a year ago to their current 728.5p, up 5p on Friday, having been exceptionally strong since the turn of the year.

Should the group hit index status, a phenomenal technical situation could develop, especially if overseas institutions buy - in which case, expect a sharp upward movement. Other candidates for promotion include British Land, Electrocomponents, MEPC, Premier Farnell, and Southern Electricity.

Figures are due next week from Mayflower Corporation, the automotive engineer. The company has won the contract to supply the rear body of the MGF sports car, the new model which is selling like gangbusters, as one market source put it. Last week the shares closed strongly higher, up 4.5p to 141.5p on Friday, and up from 132p over the previous two weeks. There are hints in some quarters to expect further upward momentum after the figures. We shall see.

Centrica, the domestic pipeline business of the former British Gas, has had a dismal week. The shares, having opened at 76p on Monday, closed the week at 68.5p, down 1.75p again on Friday, in heavy volumes. The angst seems to be a mix of the potentially damaging take-or-pay situation over North Sea gas contracts, and tougher competition. Yet, like Railtrack - whose shares have continued to surge in the opposite direction - Centrica has unique assets: an enormous customer database, and the Morecambe Bay gas field. Surely some upside.

Voices
On the last day of campaigning before the polling booths open, the SNP leader has written to voters in a final attempt to convince them to vote for independence
voicesIs a huge gamble on oil keeping the First Minister up at night?
Life and Style
tech

Apple has been hit by complaints about the 1.1GB download

Arts and Entertainment
Pointless host Alexander Armstrong will voice Danger Mouse on CBBC
tv

Much-loved cartoon character returns - without Sir David Jason

Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

PROMOTED VIDEO
Arts and Entertainment
Actor and director Zach Braff
tv

News
i100
Arts and Entertainment
Rosalind Buckland, the inspiration for Cider with Rosie died this week
booksBut what is it like to be the person who inspires a classic work of art?
Arts and Entertainment
tv

News
i100
Arts and Entertainment
The former Doctor Who actor is to play a vicar is search of a wife
film

Matt Smith is set to join cast of the Jane Austen classic - with a twist

News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Lionel Messi in action for Barcelona
filmWhat makes the little man tick?
Arts and Entertainment
Meera Syal was a member of the team that created Goodness Gracious Me
tv

Actress to appear in second series of the hugely popular crime drama

Arts and Entertainment
tvReview: An undercooked end (spoiler alert)
Life and Style
i100

Arts and Entertainment
Pharrell dismissed the controversy surrounding
musicThe singer said 'the last thing I want to do is degrade'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Property Underwriter

£70-90,000: Saxton Leigh: Our client a London Market Insurer are seeking a Pro...

Operational Risk Manager - Asset Management

£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week