One for the share jockeys to avoid; The Investment Column

First Leisure is as close as you get to a boring, defensive stock in its sector and, after raising profits through boom and bust, the owner of many of Blackpool's biggest attractions deserves to stand out in an otherwise volatile industry. Yesterday's full-year results were more of the same with the only two underperforming divisions, the Riva bingo halls and two West End theatres, relatively insignificant in group terms. The key operations in nightclubs, sports and resorts are firing on all cylinders.

Pre-tax profits of pounds 43.7m were 9 per cent higher than last year and slightly above expectations. Earnings per share of 19.3p were up by a similar margin and the dividend rose in line to 8.44p. The shares, which initially edged higher on the news, closed 8.5p lower at 336p as the market focused on marginally cautious comments on post- Christmas trading which was hit by the cold snap.

The chief executive, John Conlan, is happy for First Leisure to be seen as the sector's safe but dull play, describing the stock as one for real asset managers, not for what he calls "share jockeys". He plays a long game and would rather invest for the future than chase short-term and possibly unsustainable gains.

That philosophy was borne out by First Leisure's plans, announced yesterday, to spend pounds 100m over the next 18 months or so expanding the key areas of nightclubs, where six are planned, health and fitness clubs, where eight are in the pipeline, and Brannigans music bars. It is also running out the successful Snowdome indoor skiing concept from one site at Tamworth to two more this year and possibly eight more eventually.

First Leisure likes to draw a distinction between itself and other leisure giants, such as Whitbread, which are unafraid to pay over the odds to secure a position in a growing market. First Leisure walked away from David Lloyd Leisure last year, leaving the sports clubs to Whitbread and taking the organic route of building its own chain from scratch. Only time will tell which avenue is most fruitful, but the Conlan approach is certainly lower risk.

The key to his success will be the return generated on that capital and, while previous targets of 20 per cent are proving challenging in a low- inflation environment, in real terms the company is still using its cash well. With gearing of only 19 per cent and the interest bill covered 12 times by earnings, First Leisure is in a strong position to capitalise on the steady recovery in consumer confidence.

Assuming profits before tax in the year to October of around pounds 47m, the shares currently trade on a price-earnings ratio of 16. That is a small premium to the market but rightly so given the prospects and solid record. After underperforming for a year or so the shares look good value again.