Hodder boosted by Le Carre: The Investment Column

John le Carre's new book Desperation combined with the new Stephen King tome and the Kenny Dalglish autobiography to ensure an upbeat Christmas at Hodder Headline, the aggressive publisher.

It was sales of hardback blockbusters such as these that were behind a 9 per cent increase in like-for-like sales in the last quarter of 1996. Sales were also 9 per cent ahead in the 12 months to 31 December.

But, healthy as these figures were, Hodder will need a few more statements like it to help win back the friends it lost in 1995 when a profits warning knocked a third off the share price. The shares have been going nowhere ever since as investors have stayed away.

At the time of the warning, Hodder blamed destocking by big customers such as WH Smith and a rise in the price of paper for its dented margins. This was true but not the whole story. Some of the problems were self- inflicted, with poor stock control and a poor mix of sales which was skewed towards lower-margin exports. There was also an element of letting the market run away with over-optimistic expectations after Hodder made a fortune out of Schindler's List.

But things seem to have changed at Hodder. There is a new finance director and a more cautious approach at the company.

However, investors may need a little longer to forget the trials of the recent past. While the collapse of the net book agreement has led to a significant rise in hardback fiction, the market as a whole has increased only modestly.

The good news for Hodder is that, while the demise of the NBA caused more upheaval than anticipated, Hodder should ultimately benefit as it has a strong presence in hardback fiction.

House broker NatWest is forecasting full-year profits of pounds 6.5m this year. With shares up 5p to 225p yesterday, they trade on a forward rating of 17. High enough.

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