Servisair gains Heathrow toehold

INVESTMENT COLUMN

Servisair, the UK's leading airport baggage handler, has handsomely rewarded investors who backed its placing at 135p last October. The shares have been on a steady climb ever since and now stand, unchanged yesterday, at a high of 210p.

That performance should be underpinned by yesterday's announcement that the group has won its first toehold at Heathrow. Servisair already commands 70 per cent of the available UK market in aircraft ground handling, bar catering and refuelling, covering nearly all the major airports in the UK. But until yesterday it was excluded from Heathrow, the world's biggest.

It has now paid pounds 400,000 for a half share in a cargo-handling joint venture with Air France, which could add 40 per cent to the 250,000 tonnes a year currently handled in the rest of the UK.

But more exciting is the potential to break in to a slice of the 55m passengers handled at Heathrow every year, almost twice the group's current total of 30m passengers. Servisair has appointed an ex-BAA man to spearhead its expansion and Air France, as one of eight handlers currently licensed at Heathrow, looks an obvious way in.

The good news was reinforced yesterday by interim figures showing profits had leapt from pounds 347,000 to pounds 1.45m in the six months to June. Even excluding one-off charges last time, there was still a healthy underlying rise of 48 per cent. The more important second half has got off to a good start. Aircraft turnrounds, which generate most of the group's business, are up between 7 and 8 per cent in the key summer months since June.

Meanwhile, the EU is on the verge of opening up state monopolies at airports throughout the union. Servisair is already established in Dublin and is looking at Sweden next.

The prospects are fully reflected in the share price, which is on a prospective multiple of over 20, assuming profits hit pounds 5.6m this year. Servisair also remains heavily exposed to two big contracts with Britannia and Air UK, which represent 20 per cent of the business, while former parent Securum of Sweden still sits on 40 per cent of the shares.