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.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

Everyone is talking about The Trews

Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

'Queer saint' who bankrolled artworld giants

British culture owes a huge debt to Peter Watson, says Michael Prodger
Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

Pushkin Prizes brings countries together

Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
14 best kids' hoodies

14 best kids' hoodies

Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

The acceptable face of the Emirates

Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk