Good value puts Selfridges on the shopping list

Taylor & Francis; Ask Central  
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The Independent Online

Selfridges, the department store group, seems to be recovering nicely after a nasty shock in the Autumn when sales were hit badly after the 11 September disaster. Visitor numbers to the flagship store on London's Oxford Street are not yet back to normal but at least the trends are in the right direction. Though US tourists are still thin on the ground, the Europeans are returning.

These trends have been reflected in the share price which sank to 266.5p in the wake of the attacks but has now bounced to 336p. This was up another 6 per cent yesterday on strong results which show the good times are starting to roll again for this company.

Pre-exceptional profits for the full year to 2 February were up 16.4 per cent due to the strong performance from the store in Manchester's Trafford Centre. Profits there almost doubled to £6.8m as the centre reaches maturity.

Profits were flat at the Oxford Street store but new initiatives such as a sports section due to open in 10 days time and a new "kids supermarket" should add further impetus. Sales across the group are up 6 per cent in current trading.

The key to Selfridges growth, however, is the new space coming on stream. The new store in central Manchester is set to open in September with the new Birmingham branch scheduled for autumn 2003. Between them the openings will increase Selfridges floor space by 47 per cent over the next 18 months while also reducing the group's reliance on London's West End.

Selfridges has tapped into the lifestyle trends of the moment with consumers shifting upmarket and seeking more and more branded goods. Assuming full-year profits of £48.5m the shares trade on a forward p/e of 15. Good value.

Taylor & Francis

Taylor & Francis's progress in tough market conditions last year was so sure-footed that it could have been taken from one of the academic journals it publishes.

Growth in periodical and book publishing led to a 25 per cent increase in pre-tax profit to £27m in the 12 months to 31 December. The figures pushed the shares up 9 per cent to 592.5p.

After methodically integrating the Gordon & Breach journals business it bought in February, which was earnings enhancing in the first year, T&F has now set its sights on the much larger prize of Blackwell Publishing.

The £300m deal would almost double T&F's size, promising fast growth in its mature sector. T&F has a proven track record of successfully merging businesses into its own.

But the doyens of the Blackwell family are wrangling about whether to sell the business and the danger is T&F might end up overpaying, or walking away with its credibility damaged.

It would not be a disaster for T&F to soldier on alone. Blackwell Publishing has less rights over its journals than T&F enjoys. And academic publishing remains a fragmented market with plenty of other acquisition opportunities. The company is also producing organic growth.

Brewin Dolphin predicts T&F will make £31m this year, putting it on a forward p/e of 24. Not cheap but decent value.

Ask Central

The wider picture at Ask Central yesterday was as comforting as the pizzas it sells in its restaurants. The group, which owns the Ask, Zizzi and Its brands, served up tasty financial results topped with plans to grow its current base of 129 sites by at least 25 outlets a year.

Ask also offered its investors the prospect of "going large" with a potential move from AIM to the main market. This would improve the group's City reputation and widen its potential shareholder base.

Analysts applaud Ask's multi-brand offering, which combines pizza and pasta choices more successfully then its larger rival, Pizza Express. They also like its management team, led by the well-respected Kaye family. The group will grow both the Ask and Zizzi chains going forward and can cover the costs from free cash flow.

Pre-tax profits for the year to end December grew by 30 per cent to £13.6m on sales up similarly to £78.9m.

The shares, up 3.5p to 193.5p, trade on a p/e ratio of about 16 times. While there have been cheaper times to buy the stock, earnings growth forecasts of 20 per cent – nearly double that of Pizza Express – are enough to persuade investors to take another slice.

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