Hold

Hold.Allied Carpettimes it rightAllied Carpets’ decision to seek a stock market listing is nicely timed. Its research shows that many customers think of its sites as Tom Cobleighs first and pubs second, a reflection of its success in creating a viable brand.The group plans to spend pounds 25m on capital expenditure this year, adding 15 pubs to its current managed portfolio of 41. That would plainly put a big dent in a balance sheet boasting net assets of pounds 40.7m and pounds 6.9m borrowings. Sale and leaseback deals look likely to ease gearing which should end the year at about 70 per cent.Putting a sensible price on this mix of factors is further complicated by speculation that Cobleigh’s venture capitalist backers, owning 50 per cent of the shares currently, will be open to a sensible offer from a major such as Whitbread, keen to muscle in on a plainly attractive formula.On the basis of forecast profits this year of pounds 4m, the shares stand on a prospective price/earnings ratio in the low 20s.Even for this sector that is high on fundamental grounds, but speculative froth puts a floor under the shares. Set against that are understandable worries about the company’s gearing and cash flow.Attention to detail, the creation of a brand, an emphasis on staff training and motivation and an understanding of the psychology of eating out was clearly reflected in a 48 per cent rise in operating profits to pounds 3.9m in the year to March.

Pro forma earnings per share, assuming a full-year benefit from the pounds 21m flotation proceeds, increased 32 per cent to 8p and a dividend of 1.6p was paid (in a full year on the market it would have been 2.7p).Cobleigh makes 40 per cent of its sales from food and it is attracting customers at times, such as between 5 and 7 o’clock, when many people want to eat but most pubs are not serving food. Large edge-of-town family pubs with a heavy emphasis on food are flavour of the month and nobody seems to create much better ones than Tom Cobleigh.It has also benefited from enormous enthusiasm in the City for the managed pub sector and a healthy dollop of bid speculation. It is believed these rights could fetch as much as pounds 20m a year in the next contract round, up from pounds 8m currently.BSkyB is believed by most analysts to have the inside track for the next exclusive contract, although regulators could pose obstacles. Sky is proposing a digital service that would allow all Premiership matches to be broadcast. Viewers would also be able to purchase “season’s tickets” giving them access to all the games of their home team.Sky is also proposing services including viewer-selected camera angles, slow motion and other innovations made possible by digital technology.Media, section two. Oracle, the US software company, yesterday launched Network Computer Inc, a new subsidiary aimed at developing low cost computers and appliances for linking to the Internet.

The new operating unit is expected to develop “dumb” terminals costing about pounds 500, which will enable customers to access the Internet without having to use more expensive personal computers. The technology, supported by several leading manufacturers, would be an “open” platform based on a common standard.
Oracle said it expected to make the Internet as prevalent as the telephone and the television are today.Lawrence Ellison, Oracle’s chief executive, said the market for software and Internet applications is “explosive”.He added: “The formation of Network Computer allows us to focus our resources on this dynamic segment.”The proposed dumb terminal would allow users to download operating software directly from the Internet, dispensing with the need for expensive operating systems in the terminal itself.The launch is a direct attack on Microsoft, the US computer giant, which dominates the world’s operating-system market with its MS-Dos.Oracle plans to develop an industry standard for the new technology, supported by a range of computer manufacturers and telecommunications companies. Sun Microsystems, IBM and Apple Computer have all expressed support for the new platform, as have AT&T, the long-distance telephone operator, and Netscape, the Internet service provider.. Argos said sales, including the impact of more new stores, rose 17 per cent in the first four and a half months of 1996 from the same year-earlier period. On a like-for-like basis, turnover rose more than 9 per cent, he added.

However, the chairman Sir Richard Lloyd cautioned that Argos’s performance was heavily dependent on the last quarter of each year.. APV, the food processing equipment maker which recently returned to profit after two years of re-structuring, went into reverse yesterday when it issued a profits warning. The shares slumped by 17 per cent when the company warned shareholders that pre-exceptional profits would be “significantly lower” than last year’s pounds 7.1m. The main dent to the bottom line will be additional restructuring costs which will knock at least pounds 8m off profits.
Addressing shareholders at its annual meeting yesterday, the directors blamed the downturn on a 5 per cent reduction in its profit margins over the past year and “challenging conditions” in most of its main markets.Although APV said it expected to make progress in the second half backed by the restructuring benefits, the shares slid 15.5p to 74p on the warning.The slump is a significant setback for the company, which had been limping towards recovery after five lean years helped by former finance director Neil French. He was appointed in late 1994 to replace Clive Strowger who departed after a profits warning and a dividend cut.Mr French had acted to halt the slide in operating margins and funded a restructuring programme by selling seven peripheral businesses.He axed nearly 1000 jobs and incurred exceptional charges of pounds 32m in 1995. As the company grows, it will have to swallow bigger businesses to maintain momentum, but last year’s volume growth of 6 per cent in the existing business remains impressive and there remains plenty more to buy. The trouble is, assuming pre-tax profits of pounds 20.5m this year, the shares, up 3p at 508p, are up with events on a p/e of 18.

Hold.Tom Cobleighcomes piping hotTom Cobleigh has been something of a roller-coaster ride since coming to the market at the end of last year. The managed pub company with the saccharine motto, “unspoilt pubs for nice people”, enjoyed a bumper first-day premium on its 150p flotation price and quickly rose to a peak of 256p. It has since fallen back to a less heady 215p.The gyrations have been caused by a variety of conflicting factors that make valuing the company difficult In its favour, it is plainly onto an impressive formula. Last year’s like- for-like sales growth of 12 per cent is more like 9 per cent when the last two years’ purchases are excluded. There should be no let-up in the number of orphan brands around after recent drugs mergers and takeovers.