Ramsden's is growing rapidly: The Investment Column

Harry Ramsden's is arguably Britain's best-known small company. Almost 75 per cent of the population is now aware of the brand and the executive chairman, John Barnes, works hard to keep it that way, even though the next five new outlets this year will all be franchise operations, the two joint ventures with Granada are at motorway sites and the two with Compass are at airports.

The business, which was floated in 1988, is still expanding rapidly from its original base near Leeds. It now operates across the UK and as far afield as Hong Kong, with Singapore and maybe Beijing in the pipeline.

The best-selling location at the moment is Cardiff and the Glasgow Airport outlet opened just five weeks ago won an award from Egon Ronay yesterday.

Ramsden's remains committed to rapid growth. A year ago there were 15 outlets, at the end of 1996 there were 19 and there are now 23, of which four are overseas. The current year will add a further eight and numbers should have doubled by 1999.

Franchise operations have the advantage that they start contributing to profits straightaway whereas company outlets are a drain on finances for around nine months. So taking the franchise route has allowed the company to combine faster expansion of the business with steady growth in profits and earnings.

Turnover rose by 13 per cent in the year to September to pounds 4.9m, profit before tax by 15 per cent to pounds 1.34m, and earnings per share by 15 per cent to 9.8p. The dividend is unchanged at 5p but the City liked the figures and the share price rose 17.5p to 362.5p. Earnings per share are now forecast to reach 11.3p for the current year and 15p in 1998.

That represents quite an impressive growth rate, but on a forward price/earnings ratio of 24 the share price is really dependent on the rumoured bid from a food and leisure giant such as Whitbread. High enough.