Check yourself - and focus on the reality

ANOTHER weekend, another bout of jitters for investment bankers and their advisers as they try to work out ever more ingenious ways of persuading investors to part with their cash and put it into companies launching on the stock market.

It is always hard to feel compassion for City folk who make such magnificent sums of money for providing counsel to the great commercial ventures of the land. But, for once, let us try to show what softies we really are and consider what a stressful business it must be to be charged with selling a company in the current market.

Everything seems to be going smoothly, then a string of scandals breaks in the US, suggesting that corporate America must be on the fiddle. Government figures seem to show that the British economy is becalmed. Then a new set of numbers gives the clear message that we are blithely submerged in a sea of debt and must be forced to rein in our spending by having the cost of borrowing raised.

Events, dear boy, events - they contrive to make the lives of investment bankers (as well as prime ministers) far more challenging than they might choose. And with that in mind, let us turn our attention to two new issues coming soon to a stockbroker near you. Both are retailers but there the similarity ends. One is posh, the other is not. One is international, the other British. One is run by a slick woman from the Bronx, the other by an Englishman with an affection for Blackburn.

Have you got it yet? Yes, we're talking about Focus Wickes (that's the British, un-posh, run-by-a-bloke one) and Burberry (as classy as you could want, proudly international and headed by the wonderfully named Rose Marie Bravo).

Bravo is interesting. Small, whippet-thin, dark and with eyes reflecting her Italian heritage. Cool, careful and possessed of a studied charm, she was recruited to run Burberry in 1998 and help its owner GUS turn it into something saleable.

She succeeded. GUS hopes that the flotation will value Burberry at something around £1.2bn. In Burberry's prospectus, the figures appear to paint a convincing picture. Sales have more than doubled in two years. Operating profits are up more than five-fold.

The accounts are crystal-clear and accurate. (They have to be accurate, unless you are Enron, WorldCom, Xerox or...). But the picture they paint covers a strikingly short period. Certainly, Burberry's fortunes have improved over the past three years. But the improvement represents a recovery after a long decline. The nadir was 1997, the year before Bravo arrived. Profits then were just one-sixth of their level in the early Nineties.

This is significant. Burberry has restored its reputation, desirability and profitability. But no one, absolutely no one, can assume that, once restored, a reputation is secure. It is not. Fashion is cyclical and fickle. It takes only 12 months for something ohsodesirable to become so last year.

But Focus? Surely plasterboard isn't going to go out of fashion. No it's not. But investors should not assume that a market that is growing today will continue growing in a straight line until kingdom come. Bear in mind, also, a small, fascinating piece of history. This is not the first occasion that Bill Archer (the bloke with a fondness for Blackburn) has considered selling

Focus. Almost a decade ago, he made tentative inquiries about finding a buyer. He even asked City advisers what they thought. Focus was making a profit, after all. Well, a sort of profit. The bulk of it was accounted for (pun intended) by crediting gains from trading leases on shops, not by selling tins of paint and wallpaper. The practice was legal and the detail was fully disclosed in the accounts. But it illustrated that accounts of even apparently transparent companies have to be scrutinised carefully.

And the lesson of this? Nothing is without risk. Companies that float find buyers on the basis of performance. No one can guarantee the future.

Death of James Capel?

Finally a brief word on the discomforting sight of the shrinking of HSBC's London equities business. Some of the bank's best equities analysts have left; it has lost Patrick Houston, head of specialist sales.

The UK sales desk, once staffed by big-hitters, now has only two people of seniority and stature left. Other analysts are expected to go. Matthew Lloyd on support services? Shai Hill who heads the drinks team? We'll see.

Within the past week, I have heard two people - independently of one another - say: 'The old James Capel [the broker swallowed by HSBC in the Nineties] is being allowed to die.' HSBC naturally denies it. It is a denial that is hard to swallow.