Fool's Eye View

[ November 21, 2000 ]

Comment: Airtours, Redstone Telecom

By Stuart Watson (TMFTiger)

Airtours

Airtours (LSE: AIR) reported an 18% increase in full-year turnover to £4.4b. However pre-tax profits before exceptional items fell 23% to £101m due to well-publicised booking problems at its recent German acquisition Fti. Bookings for this winter are 5% ahead of last year and summer 2001 is 4% ahead. The final dividend was 7.2p, making 9p for the whole year which is an increase of 9%. No net debt was published.

The Fool Says

Up until last year Airtours had a solid record of growth, both organically and via acquisitions. In the last six months the shares have fallen by a third after it failed to spot booking problems at a recent acquisition. This problem looks both isolated and short-term in nature. However, Airtours has its work cut out to reassure the market that this is the case. Its growth path should resume but as it is operating in a highly competitive industry further shocks are possible.

More on this story
• Airtours discussion board
• Latest share price

Redstone Telecom

Redstone Telecom (LSE: RED) delivered a 178% increase in half-turnover to £40m. Although much of this growth came from recent acquisitions organic growth was still 95%. Operating losses continued to increase however, coming in at £11.3m. Although there was good news on gross margins where Redstone saw an increase from 8.3% to 13.8%, virtually all of this came from acquisitions. Redstone has net cash of £33m, having raised £123m in the nick of time, back in March of this year. Since then it has spent £90m on six separate acquisitions. Redstone is waiting for the unbundling of the local loop, which will allow it to offer high-speed services across British Telecom's network (LSE: BT.A).

The Fool Says

Redstone is growing very quickly and is hungry for further expansion. However it admits that, with the current depressed sentiment regarding telecom stocks, the necessary cash could be hard to come by. Even though it has net cash it only has enough for about 18 months at its current rate of losses. It has shown itself to be one of the nimblest players in the market place, by concentrating on a low-cost approach to building its own infrastructure. But there are still question marks as to whether this will be enough to counter the continuing downtrend in industry prices.

More on this story
• Redstone discussion board
• Redstone would like more cash - AFX
• Redstone falls despite growth - FTMarketwatch
• Latest share price