THE sale by Forte of Alpha Airports Group is likely to put a value on
the airline catering and airport retailing business of between #200m and
#220m, depending on market conditions during the next few weeks.
The sale, which will be part placing and part offer is a plank of the
Forte strategy of concentrating on hotels -- 853 at the last count --
and restaurants such as Little Chef and Happy Eater.
However, it will retain a 25% stake in Alpha.
A pathfinder document early next week will show that in the year to
last January, Alpha achieved trading profits of #17.2m on overall
turnover of #405m with the retailing side bringing in a quarter of the
total.
Alpha supplies in-flight catering for more than 100 airlines although
six account for 45% of the business. British Airways is the largest
client with about 15% of the divisional turnover.
Alpha supplies all BA's internal requirements in the UK apart from
Heathrow where the airline has its own kitchens.
The other significant clients are American Airlines, Air UK, Airtours,
Britannia, and United.
Chief executive Paul Harrison is confident of the long-term prospects
for air travel, pointing to general estimates of growth of at least 4%
annually for the foreseeable future.
In Scotland, the company services about 50 clients, including multiple
customers such as BA at Glasgow, Edinburgh, Aberdeen and Inverness
airports with an overall capacity of 14,000 meals a day.
UK market share is about 48% but with further growth prospects
limited, future expansion will be with overseas airlines. There is a
significant presence at JFK airport in New York and at Schipol in
Holland where the Dutch Government is investing heavily on another
terminal. A secondary market is Portugal.
Mr Harrison said that in-flight catering is an important part of an
airline's identity with menus specifically designed to meet each
carrier's individual requirements.
The retail side operates through BAA concessions in 27 duty and
tax-free outlets as well as Books Plus, Drug Store, Teddy's Toy Chest
and two Swatch shops together totalling 61 units.
BAA is intending to increase retail space at its airports by 70% by
the year 2000 although it is emphasising the major chains such as W.H.
Smith and Boots. However, Alpha's profit-sharing arrangement with BAA is
now beginning to develop considerable momentum.
Hamilton-born finance director Richard Gold said that gearing after
the flotation would be above 90% and would then fall to just over 60% by
the end of next year. More important, interest cover is around 12 times
-- which is more than healthy.
Unlike with management buy-outs, Alpha directors seem unlikely to be
on any substantial gravy chain with their options being based on the
flotation price.
The shares seem likely to be offered at around 15 times earnings for
the year ending this month and so stand at a slight discount to the
Compass catering group which is reasonably comparable.
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