Stock Exchange demands too high a premium

Grundig deal makes ambitious Alba a hold: Crest Nicholson's rise built on firm foundations

Taking heart that the economy is looking up, many in the City have had a spring in their step in the past few months, and that has been reflected in the flurry of companies bursting on to the stock market.

Some 81 companies braved public ownership in the three months to December - almost twice the number to list in the same period in 2002. That is good news for the London Stock Exchange, which saw turnover from its issuer services department, which handles IPOs, rise 23 per cent to £10.7m for the period, according to figures out yesterday.

The Exchange has also made good progress in the services it offers brokers, through its electronic trading platform, SETS. The number of transactions that passed through the platform rose 26 per cent in the third quarter compared with 2002.

Clara Furse, the chief executive of the LSE, has also focused on shunting the tradition-loving Exchange into the twenty-first century, modernising the once archaic institution and cutting its costs. In the past six months she has built up derivatives trading, launching EDX, a derivatives and equity trading platform in the summer. But all that activity cannot disguise the fact that growth prospects for the LSE look slim. Its turnover from information services - which provides data for terminals used by analysts and other City employees - continued its downward trend. While IPOs were up in the run up to Christmas, January blues seem to have taken over, with the Exchange warning that appetite has been subdued in recent weeks, and below last year's levels. The LSE's shares fell 5p to 363p.

The prices the Exchange charges are also coming under ever more competitive pressure. The UK's competition authorities have also waded into the arcane world of the cost of trading, forcing the LSE to cut prices for new listings.

An upturn in the economy would alleviate some of these pressures, though it would probably take the long-awaited bid for the LSE from the likes of Deutsche Börse to inject real life into the shares. However, as the Exchange already trades on 18 times future earnings, there may not be much of a premium to be gained. Avoid.

Grundig deal makes ambitious Alba a hold

The consumer electronics business Alba - best known, perhaps, for buying up flagging but well-known brand names and turning them around - has snapped up another. This time it is buying the Grundig brand - albeit in a 50-50 joint venture with Beko of Turkey - from the administrator for a maximum of €80m (£54m).

The deal is key for Alba. About 85 per cent of its total turnover comes from the UK - where it owns brands including Bush and Goodmans.

With Grundig on board, assuming the deal goes through, the company reckons half of its turnover could come from overseas in three years' time - making Alba a truly pan-European business.

Grundig is a well known brand, with TVs, video recorders, DVD players and cordless phones among its range. It currently trades under the Roadstar name in Europe.

The advantage of buying from the administrator is that much of the cost-cutting has already been done. Staff levels have been cut to about 350 compared with a peak of 2,700.

Nor does Alba expect that investment costs will shoot up. Its best guess is that Grundig will be at a break-even position in the year to April 2005 but enhancing thereafter. Analysts' early estimates are that the deal could lift earnings by as much as 7 per cent in the 2006 financial year.

Unsurprisingly, Alba shares shot up 14 per cent yesterday to close at 765p, reflecting the potential upside from the deal. Given that sharp rally, the shares are a hold.

Crest Nicholson's rise built on firm foundations

Crest Nicholson is the sort of housebuilder that John Prescott, the deputy prime minister, should love. This government has outsourced much of the delivery of social policy to the private sector and housing is no exception.

The company, which reported full-year results yesterday ahead of expectations, has shifted its strategy to become an urban regenerator. It has moved increasingly into the area of affordable housing and social (housing association) housing. It has moved into the lower priced end of the market more generally and away from the inflated South-east.

It has done this not for reasons of philanthropy but because it sees opportunity. Crest Nicholson has tuned into government policy, which manifests itself through the planning system, and also to demographic pressures - we need more homes at the bottom of the market. The company has already established itself as a favourite among local authorities - it is doing up a sink estate in Birmingham, for instance.

The change in strategy did hit margins initially but yesterday it reported a healthy 15.9 per cent operating margin. Pre-tax profit for the year ended October were up 18 per cent at £74.6m. The shares eased 5p at 318p yesterday.

With low interest rates and high employment, the housing market should be resting on firm foundations. Add to that Crest Nicholson's less risky positioning in the market and the fact that it is seen as a takeover target. Buy.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Guru Careers: Stockbroker

£Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

Recruitment Genius: Financial Adviser

£20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

SThree: Graduate Recruitment Resourcer

£20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

Guru Careers: Application Support Analyst / 1st Line Support

£25 - 30k: Guru Careers: We are seeking an Application Support Analyst / 1st L...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence