WH Smith won't be left on the shelf

MERGER fever may have gripped the stock market, but it seems to have passed by the retail sector, with the exception of the Unichem bid for Lloyds Chemists, now kicked into touch by the OFT.

Stores guru Nick Bubb, at Dutch stockbroker Mees Pierson, has been working out the relative attractions to a bidder of two of the sector's big disappointments, WH Smith and Sears. WH Smith, he believes, wins hands down as the more attractive of the two.

Both groups own plum assets - Selfridges in the case of Sears, and Virgin, Our Price and Waterstones for the newsagent. Both also have problem areas - Do-It-All for W H Smith, British Shoe Corporation at Sears.

But WH Smith probably offers a bidder more in terms of brand strength, market share and complementary businesses.

Smith, says Mr Bubb, is a buy and Sears, at 99.5p, a sell. The latter is likely to see profits decline further to pounds 100m in 1995 to 1996, to leave the shares on an overdemanding p/e ratio of 20.

Recovery at W H Smith, however, could lift the shares, at 421p, in any case, while a radical review to be unveiled in May could provide another fillip.

GUINNESS reports preliminary figures for 1995 this week and the market expects a good performance, despite a renewed bout of exceptional items that will hold profits back somewhat.

As a result, forecasts Dermott Carr of Nikko Europe, pre-tax profits will fall to pounds 896m from pounds 915m in 1994. However, that will leave the shares on an attractive 4.1 per cent yield.

There is also a growing belief that the company, still spinning off cash, will buy back its shares, or attempt in some way to return cash to shareholders. The shares, on 4671/2p, trade at around 13 times 1996's estimated pre- tax profit of pounds 1bn. Buy for the long term.

WHEN we tipped Flomeric here last December at 205p, its shares had only just been floated on the Alternative Investment Market at 130p. They have not moved since.

Management concerns of a slowdown in profit growth at the software supplier for fluid flow and heat transfer control proved misplaced. A pre-tax profit of pounds 415,565 was well ahead of the pounds 400,000 forecast at the time of flotation.

Sales also continued their impressive growth, up 33 per cent to pounds 4.147m. The company is paying its first dividend, 2.6p, and the cash surplus grew slightly to pounds 664,238.

The directors remain confident they can maintain the gross margins of around 90 per cent, which are not uncommon to software firms, and see a rosy future. Buy.

CORTECS (269p), the biotech start-up, continues to make significant progress on the research and development front, as its interim figures last week demonstrated.

For those of us who are able to withstand the nervous tension of possessing high-risk shares, the outlook remains promising.

Research and development of pounds 2.5m was the same as the previous six months, but growing sales for its diagnostic product, Helisal, reduced the cash burn to pounds 1.6m from pounds 2.2m.

Chairman Glen Travers hopes to launch a "one-step" blood test as well as a saliva test for Helicobacter pylori - the bacteria which is associated with stomach ulcers. The company is also collaborating on an oral treatment for eradicating H pylori.

Its osteoporosis diagnostic Osteosal should be launched on the European market some time later this year.

The company also has a product on the books that could lead to an oral version of insulin for diabetics. The shares remain a buy.

WHAT IS up at Signet, the jewellery group, once the fiefdom of Gerald Ratner?

In the past week, the shares have risen sharply to 231/2p. Volumes, by normal standards, have been heavy.

A buyer could be just around the corner for the group's British businesses, H Samuel and Ernest Jones. An information memorandum recently sent out to interested parties may have prompted the recent gains. Some comfort to long-suffering shareholders, perhaps, but there is little incentive to invest at this time.

If a deal goes through, it will leave a peculiar beast: most of the business will be in the US, while the shares are listed over here - another problem that will have to be rectified in due course. The shares are best left alone. Avoid.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

£50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

Recruitment Genius: Security Officer

£16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

Ashdown Group: Business Analyst - City, London

£50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

Day In a Page

The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

The saffron censorship that governs India

Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
Prince Charles' 'black spider' letters to be published 'within weeks'

Prince Charles' 'black spider' letters to be published 'within weeks'

Supreme Court rules Dominic Grieve's ministerial veto was invalid
Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

How did fandom get so dark?

Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
The galaxy collisions that shed light on unseen parallel Universe

The cosmic collisions that have shed light on unseen parallel Universe

Dark matter study gives scientists insight into mystery of space
The Swedes are adding a gender-neutral pronoun to their dictionary

Swedes introduce gender-neutral pronoun

Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

Disney's mega money-making formula

'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

Lobster has gone mainstream

Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
Easter 2015: 14 best decorations

14 best Easter decorations

Get into the Easter spirit with our pick of accessories, ornaments and tableware
Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

Paul Scholes column

Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

The future of GM

The greenhouses where Monsanto 'plays God' with the future of the planet
Britain's mild winters could be numbered: why global warming is leaving UK chillier

Britain's mild winters could be numbered

Gulf Stream is slowing down faster than ever, scientists say
Government gives £250,000 to Independent appeal

Government gives £250,000 to Independent appeal

Donation brings total raised by Homeless Veterans campaign to at least £1.25m
Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

The most borrowed book at Bank of England library? Oh dear

The book's fifth edition is used for Edexcel exams
Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

Cowslips vs honeysuckle

It's the hunt for UK’s favourite wildflower
Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

Did a botched blackmail attempt help Cyril Smith escape justice?

A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss