The Investment Column: High-flying Alpha delights City

Alpha Airports, the former Forte airline catering business 27.8 per cent-owned by Mohamed al Fayed, delighted the market with better- than-expected half-year profits yesterday. The 40 per cent jump to pounds 14m for the six months to July compared with market forecasts of a mere 30 per cent improvement.

The growth in operating profits from continuing operations was a more modest 14 per cent. All three divisions, catering services, ground services and especially airport retailing, increased profits.

New contracts have been won in the US, Italy and Hong Kong, and profits grew faster than the underlying increase in airline traffic, which has itself been buoyant.

The appointment of Kevin Abbott from Rexam as chief executive completes the transition from the old Forte management.

Air travel remains a growth industry. But this business remains competitive, winning new contracts costs time and money and Alpha is not banking on success in picking up any of British Airways' Heathrow catering businesses when the successful bid is announced shortly.

The strength of sterling has affected spending by passengers arriving at Heathrow and Gatwick.

Meanwhile, BAA will start taking back retail management contracts in the UK next year and the loss of duty-free sales on regional flights to the EU is drawing closer, despite impassioned pleas of the entire travel industry.

On yesterday's figures, brokers have moved their profit forecast for the full year up from pounds 27.2m to pounds 29m. Even after a 7p jump to 93p yesterday, the shares are trading on only eight times prospective earnings. That looks cheap, with the hovering prospect of a bid from Mr al Fayed providing some underpinning.