Regus is worth a punt for recovery

Irn Bru not enough to keep the fizz in Barr; Hold is the message from Metal Bulletin figures
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The Independent Online

Investors may be forgiven for believing that we had more or less seen the end of Regus, the once high-flying serviced offices provider. The company has been through a torrid time, including having to sell off a majority stake in its UK business, a £55m rights issue and filing for bankruptcy protection in the United States.

Investors may be forgiven for believing that we had more or less seen the end of Regus, the once high-flying serviced offices provider. The company has been through a torrid time, including having to sell off a majority stake in its UK business, a £55m rights issue and filing for bankruptcy protection in the United States.

The company has bounced back, with yesterday's full-year results providing fresh evidence of a considerable revival. Regus saw a "marked" improvement in trading in the fourth quarter of 2003, and those trends have continued this year. Inquiry levels rose 28 per cent in January and February this year, compared with the same months last year.

Prices for new workstation sales and renewals were up 6.1 per cent on the average for the fourth quarter of 2003. Revenues in February were up 5.4 per cent on January and we expect further growth in March. The pre-tax loss was £29.2m for 2003, an improvement on the £119m loss in 2002 - at the ebitda level, there was a profit of £3.8m, from a loss of £22.9m in 2002.

Regus expanded too far, too fast, only to come unstuck when the stock market's technology bubble burst in 2000, causing rents and occupancy rates to plummet.

The company has now been through a successful restructuring and its markets are coming back quite strongly. It has closed unprofitable centres in its portfolio and sold a 58 per cent stake in the UK business to a private equity house.

The US business, which was particularly hard-hit by the technology crash, emerged from bankruptcy protection in January 2003. Mr Dixon has now moved to the US to focus on the company's 91 centres (out of 400) in that country.

Peel Hunt, the house broker, forecasts a small pre-tax profit this year, rising steeply to a £40.2m in 2005. The shares, which closed at 74.75p, trade at 16 times 2005 earnings. The company is highly geared to the economic recovery, making this a speculative buy.

Irn Bru not enough to keep the fizz in Barr

AG Barr, the soft drinks business, has relied on the appetite of its native Scots population for its Irn Bru, the fizzy beverage, for more than 100 years.

But Barr is aware of the growing health kick in the UK. As it reported a 13 per cent rise in annual profits yesterday, it said the trend towards healthier, water-based drinks would continue. The market for carbonated drinks rose by 4 per cent over the year, while water rose 19 per cent.

Barr has already developed its healthier drinks range. Alongside Irn Bru, Tizer and the Orangina franchise in the UK, Barr has Lipton Ice Tea and Simply Citrus brands, as well as a Findlays mineral water label.

The diet versions of its carbonated drinks are sold at a higher price to its full-sugar drinks, so its margins are holding up.

The branded drinks sector is an extremely competitive market, and Barr, with its years of experience, does appear to be doing well - even with increasing pension costs. It appointed the first chief executive from outside the family gene pool this year, which may help invigorate its brands and give it a more commercial focus. It is certainly keen to get to know the City, and is making efforts with institutional investors. Some additional interest may help the share price for a while.

At 646p, Barr is trading at about 12 times earnings. It is a solid business that knows its market well, but there is not much fizz in its growth potential. Hold.

Hold is the message from Metal Bulletin figures

Business-to-business publishing has seen a strong recovery and yesterday Metal Bulletin became the latest player to confirm a rebound in the second half of last year.

However, the company is focused on more global markets than many peers, making the Iraq war and the outbreak of the Sars virus last year more of a concern.

An 8 per cent fall in revenues in the first half was followed by a 4 per cent increase in the second half of 2003. The company started out as a metals and minerals news publisher, a sector that still makes up over a third of the group. There is also a financial and economic division, which is now marginally bigger than metals, plus a smaller commodities and energy business.

In metals, booming demand conditions for the likes of steel and aluminium, driven partly by demand from China, has helped advertising revenues and brought new entrants to the metals industry - which then boosts subscriptions.

Full-year turnover for 2003 slipped a little but underlying pre-tax profit edged up by 4 per cent at £7.6m. The best performer was the BCA economic information business bought in 2001.

The shares, which closed at 219p, trade on a forward multiple of 20, which seems high enough. Hold.

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