Investment Column: Nth Leisure

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The Independent Online
Nth Leisure

IN COMMON with the 14 nightclubs it took over this year, Northern Leisure, the UK's largest nightclub business, is under new management. Adam Mills and Ray McEnhill, the entrepreneurs behind the National Express bus empire, joined in May as chief executive and corporate development director following the reverse takeover of Fife, the former engineer. Mr Mills claims to be quite a mover on the dancefloor, so will investors soon be dancing all the way to bank?

He has inherited a growing business. Although the shares tumbled last year amid investor anxiety over the retail sector and the collapse of takeover talks, solid trading has prompted a gentle recovery. In the 10 months to 30 June like-for-like sales rose 2 per cent and sales picked up later in the period, up 8.5 per cent in May and June.

Mr Mills is now targeting the over-25s instead of the 18-22 year-old market, continuing NL's aggressive expansion plan. He is surely tempted by Rank's nightclub division and First Leisure's family entertainment portfolio, but refuses to be drawn on whether any bids are forthcoming. He's also hoping for some sales uplift from millennium celebrations. Analysts expect pre-tax profits of around pounds 21.5m and earnings of 12p this year, putting the shares, at 178p, on a p/e of 15. The shares' previous volatility partly explains the rating, but the stability and encouraging trading of late argues that's no longer fair. Buy.

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