City talk: Time for a hard look at Display.IT

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The Independent Online
And then there were none. The plot thickens at Display.IT, the Ofex-listed Internet software business; last week came the news that its three remaining directors had stood down. The move left two shareholders holding the reins at the troubled group, whose shares were suspended at 245p last month.

It would appear - despite comments to the contrary by founder Peter Levine, who was among the most recent departures - that an pounds 11m contract with a Luxembourg concern has failed to put any money into Display.IT's pockets. The Security and Futures Authority is investigating dealings in the group's shares, but surely there is a pressing need for a wider inquiry.

Shareholders in Holliday Chemical enjoyed a fillip after the group posted sparkling results. A 64 per cent jump in first half pre-tax profits came about mainly through the expiry of the US patent on Zantac, Glaxo Wellcome's anti-ulcer blockbuster. One company's misery is another's joy: the shares rose 23.5p to 176.5p on the day.

But, surprisingly, the market failed to cotton on to Holliday's prospects. Holliday is the leading producer of ranitidine, the generic version of Zantac. Holliday supplies most of the non-patent version at present, and although there is a possibility of price pressure emerging in the future, it is clearly well-placed to clean up over the next two years or so as Zantac loses its stranglehold. The shares remain below the 195p at which they were floated in 1993. Now at 185p, they are still good value.

Orange, the mobile telephone operator, produced a good set of results last week, at the top end of forecasts. A pre-tax loss for the first half of pounds 73.5m was down from a loss of pounds 125.2m for the same period the year before.

While the market was keen - the shares surged 8.5p to 220.5p - the question is whether the entire UK industry is suffering from a dangerous slowdown. Compare penetration rates for mobile phone sales to domestic users on the continent and in Scandinavia, and some worrying contrasts emerge. The rate of growth in set sales has slowed dramatically here. The industry overall reported second quarter net subscriber additions of 293,000, with Orange and One 2 One between them notching up 166,000 gains. On previous growth the industry should have hit 350,000 net additions.

The main reason for the lower growth could be price. Mobiles are commonplace, but they still represent substantial monthly outgoings to most users. If the industry is not to see further slowdowns in subscriptions, the only solution is for some hefty price cuts. With the continued competitive pressures in the industry, this should not be that far off.

However, this also suggests that shares in the sector remain over priced. Whether it's a mobile phone you want, or a mobile phone share, it would be sensible to wait a while.

Dixons has already said it is a winner, but figures elsewhere show little evidence of retailers gaining from conversion windfalls in consumers' pockets. However, obvious candidates to benefit include Carpetright, DFS Furniture and MFI. But whether any long-term views on these shares should be adjusted is moot. Windfall gains are one-offs; in a year or so the sector will return to business as usual.

Shares in Lasmo have come a long way in the last year, and have proven a worthwhile investment. Interims out earlier this month were good, with further expansion via a $453m licence purchase in Venezuela and a major gas find in Pakistan keeping the shares bubbling. But similar gains over the next year are unlikely; a weaker outlook for oil and less chance of major surprises mean the shares are likely to mark time. A hold, at best.