The Investment Column: Sell-off plans fail to lift Alpha

SHARES in Alpha Airports, the airline catering group, have crash landed in recent months. Yesterday's announcement that it had decided to get out of duty-free retailing failed to halt the fall. Its share price fell another 1.5p to 71p, almost half the 1994 flotation price of 140p when it was hived off from Forte.

Getting out of retailing makes sense. Threats to the future of duty free in 1999 and the end of BAA franchises at Heathrow and Gatwick spell trouble for the company.

However, the group shocked the market by announcing a pounds 14m hit to close kitchens at Heathrow and write down the value of its troubled catering business at Orly airport in Paris.

Kevin Abbott, the new chief executive, admits the credibility of the group is strained and is trying to do something about it. The proceeds of the retail business, perhaps pounds 60m to pounds 70m, will be poured back into airline catering and ground handling.

An expansion of cut-price airlines throughout Europe could also trigger opportunities. Alpha is already working for easyJet and is bidding for deals with GO, the new BA discount airline.

However, the catering market is still dogged by intense competition. And Sri Lanka apart, Alpha's experiences in Asia have not been happy. Alpha admitted yesterday it might pull out of a planned investment in Hong Kong at a cost of pounds 1.2m.

Two potential purchasers are said to have shown interest in Alpha's retail division but no buyers have emerged so far. And Mohamed Al Fayed, the Harrods boss who holds a 28 per cent stake in Alpha, has not as yet been tempted to buy up the rest, which may say something for its prospects.

Analysts forecast pre-tax profits of pounds 29m, before the pounds 14m write-off, with earnings likely to be flat the following year. That puts the shares on a prospective price-earnings ratio of 7, a sharp discount to the market. But given the uncertainties surrounding the group that rating looks justified.