Investment: Signet gets the balance right

SHARES IN Signet, the jewellery group, have had a rough ride in the last few months in line with most other small and medium-sized retailers. But this should not obscure the sound work being undertaken by Jim McAdam and his team.

After posting its first full-year profit in seven years in 1997, the H Samuel and Ernest Jones retailer has continued its progress. Half- year profits jumped from pounds 1.9m to pounds 12.1m and like-for-like sales rose by a creditable 7 per cent.

Debts are down from pounds 214m to pounds 143m and although there is no half-year dividend, the possible resumption of a buyout will be considered at year- end.

For a business that was once being pushed to sell its American operation, the group's geographic balance now looks like a strength rather than a weakness.

In the UK, trade was affected by higher interest rates and weakening consumer confidence. In the last 18 weeks of the half, same-store sales fell at both the H Samuel and Ernest Jones chains. But the US, which now accounts for two-thirds of group sales, was far more robust: same-store sales there grew by 10 per cent and its large Jared outlets are the market leader in mall stores. Signet is now the market leader in US jewellery with a share of 4.5 per cent.

On full-year profit forecasts of pounds 8.5m, the shares - up 3p to 35.75p yesterday - trade on a forward rating of 10.

There is a danger of the US cycle turning against the company, but the stock still looks good value.