TBI shows no promise of happy landing

Sportingbet.com; Inventive Leisure
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The Independent Online

One day, a French predator thought TBI shares were worth 90p and the management snorted that the offer was derisory. The next, management turned tail and agreed the bid while the French thought the regional airports operator was suddenly worth a good deal less. That day was 11 September and, with the French group Vinci having walked away, the shares are grounded at 54.75p.

A "new commercial agreement" with easyJet, the most significant user of its Luton Airport, looked like it might give investors a chance to take a new look at TBI shares. But it was not the promised settlement to the stand-off between the airport group and Stelios Haji-Ioannou's cheap and cheerful airline which has left revenues from Luton deeply uncertain. Although Luton will get fees totalling £6 per passenger from easyJet – a better deal than many had feared – this only applies up to the current level of passenger numbers. How much Luton can charge addional passengers in the future remains under discussion. The suspicion is that a bare-bones deal was rushed through for announcement yesterday so the row did not distract from easyJet's results and fundraising.

There are problems at other airports. The lucrative full-price airlines are deserting TBI's airports in the wake of the slump in air travel. British Midland has restarted flying to Heathrow from TBI's Bristol International, but it doesn't make up for the loss of British Airways from the route, and fees are under pressure. There is also not likely to be significant growth from charter flights, which make up the bulk of TBI's passenger through-put, while business deal-doing and economic growth is depressed.

The shares trade on 22 times ABN Amro's forecast of this year's earnings, higher than the market despite there being no growth in prospect the following year. The growth prospects in regional airports do not currently outweigh the company's high risk profile. Avoid.


Sportingbet.com, the offshore gambling group, is a risky business – and not just for investors. Nigel Payne, the chief executive, is threatened with legal action by the state of New Jersey for accepting illegal bets from the state.

It was ever thus. Investors were warned on the subject in the flotation prospectus in January. "Although it is likely that certain of the group's activities do violate US federal and state law, any offences would be committed either by a company not incorporated and without a physical presence in the US or an individual not present in the US." So although New Jersey citizens may be betting with Sportingbet, the state's legislators might not be able to get at them. Despite the bluster from New Jersey – home of Atlantic City, the faded "East Coast Las Vegas" – no legal papers have been served.

Mr Payne professed himself relaxed about the issue when he presented yesterday's interim results. These showed the group closing in on profitability, generating cash and making money at an operating level. With write-offs and exceptional costs, the pre-tax loss for the six months to 30 September was £0.63m, down from £1.63m the year before.

The business model is on track and Sportingbet has learnt how to get the best out of its foreign-language sites, spending more time tailoring them to local markets. With some hiccups – notably in Japan – that is progressing, and customers are placing more bets as a result. If it hadn't been for the hiatus in US sporting events after 11 September, customer activity there would have been more than flat, too, and the company said business has returned to pre-terror levels.

The acquisition of Sportsbook in July quadrupled the customer base and has been integrated ahead of schedule; customer acquisition costs are staying constant; and the group is not taking on riskier bets to boost turnover. Future growth should feed nicely through to the bottom line. The shares, down 5.5p at 94p, are attracting institutional investor support and are worth tucking away.

Inventive Leisure

The ideology behind Inventive Leisure's plans to roll out its ultra-cool Revolution bars is as clear as the liquor they serve: to fan the flames of the British thirst for vodka, which accounts for one-fifth of all UK spirit sales.

The Manchester-based firm plans to double the number of trendy vodka bars to 49 by July 2003, opening 10 this year and another 10 the year after.

The expansion away from its Northern heartland will boost brand awareness – as long as Revolution can cope with the extra competition that comes from opening sites in London's West End. Unlike elsewhere in the country, Revolution Soho won't have students propping up the bar to prop up its sales.

Analysts rate the management's entrepreneurial spirit, helping Inventive stand out from other quoted pubcos like SFI and Regent Inns.

Pre-tax profits increased by 68 per cent to £2.2m in the year to 30 June, on sales up 55 per cent to £18.7m. Earnings per share, at 8.9p, increased by nearly one-third and should do so again next year.

The shares, up 6.5p to 160p, trade on a forward p/e ratio of about 15 times. This is a premium to most of Inventive's peers and reflects the company's gathering momentum. Worth a shot.