Signet takes the shine off profits:The Investment Column

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You had to feel a little bit sorry for Jurek Piasecki, head of the Goldsmiths jewellery chain, yesterday. There he was, unveiling a sparking set of results, including the company's first interim profit as a public company, and all anyone wanted to talk about was Signet.

The sale of Signet's two UK chains, H Samuel and Ernest Jones, is imminent and it is possible that, under a rather complicated deal, Goldsmiths could end up controlling the Ernest Jones chain. This is the more upmarket group and a nice fit with Goldsmith's Walker Hall division.

The point for shareholders is how do they stand to fare if this deal does or doesn't go ahead? Investors have had an excellent run in the last couple of years, with the shares rising from a low of 113p last year to 332p yesterday. Some may be concerned that Goldsmiths is about to jeopardise that performance with an over-ambitious leap.

If Goldsmiths does get Ernest Jones there would be some scope for rationalisation, the closure of one head office and the introduction of Goldsmiths's better technology systems. It would also benefit from far larger economies of scale.

If the deal founders, yesterday's figures show that Goldsmiths is doing very nicely on its own. Half-year profits of pounds 54,000 in the six months to July compare with a pounds 489,000 loss last time. With a business heavily skewed towards Christmas and the second half, an interim loss is normal. Like-for-like sales are 12 per cent ahead and new openings should run at 10-15 a year for the next five years. A loyalty card is being rolled out. And there are new initiatives such as computerised engraving of jewellery.

With full year profits of pounds 5.8m forecast, the shares are on a forward price-earnings ratio of 17. Hardly a bargain, but worth holding.