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The Investment column: NFC

UNLIKE SAGE, a company which voices caution about a plausible Internet strategy, the distributor NFC is bullish about the prospects the Internet generates. But the upside here is less obvious.

Now it's completed the disposal of non-core assets, NFC is renaming itself Exel, after its core logistics business. As Exel, it expects all sales to be e-commerce related in five years.

Gerry Murphy, chief executive, says the real potential of the Internet is in transforming business-to-business transactions rather than consumer deals. He says almost 90 per cent of GDP comes from such activity. The difficulty with such a claim is that commerce has been wrapping its supply chains with electronic fibres for some time, leaving NFC's real growth potential in its traditional physical handling businesses.

The company can reel off an impressive list of significant business wins from new and existing clients, which include contracts with the likes of Apple.

A raft of exceptionals muddied yesterday's results. Underlying sales in the continuing businesses grew 11 per cent to pounds 1.8bn, and profits grew only 9 per cent because of the loss of US business amid Y2K fears. Higher interest charges following the return of capital to shareholders sent pre-tax profits into reverse, though earnings per share rose.

Analysts expect pre-tax profits of pounds 108m and earnings of 12p per share this year, putting the shares, up 14p at 231p - close to their high - on a forward rating of 19. That's expensive for a business dwarfed by rivals like Deutsche Post and investors should take profits.

Edited by Chris Hughes