Smaller companies spotlight

EACH week, former Fleet Street City Editor

Celebrating in festive spirit

IT HAS been a good start to the year for small caps with the FTSE SmallCap index rising at one stage to 2,663.9 as the main FTSE 100 was on the slide. Sentiment was helped by a report from stockbroker Numis Securities headed 'Key Buys for 2002.' It said: 'We believe the environment for the UK small and mid-cap investor is likely to be relatively favourable in 2002, given the domestic focus of most companies. Interest rates are low, inflation appears to be under control and many companies have been aggressive in removing costs.'

There have also been some bullish statements about Christmas trading from some of the smaller companies that have been overlooked while some bigger names were being chased.

Take, for example, Majestic Wine, where like-for-like sales in the eight weeks to 31 December showed an 11.3% rise which had a delighted chief executive, Tim How, saying: 'Nearly all of our strong like-for-like sales increase has been achieved by an increase in transactions. We now have 264,000 customers on the mailing list who have made purchases in the last 12 months, up by 11% from this time last year.'

Food, drink and entertainment group, SFI, reported net sales in the three weeks to 31 December were up more than 30% at £12.7m. 'There was exceptionally strong New Year‘s Eve trading in Central London,' said chairman Tony Hill.

Another in the leisure field is clubs and pubs group Po Na Na. Although like-for-like sales were up just over 3%, it was enough to allow the board to re-affirm its comments made at the interim results last month that operating profits across the group‘s estate will continue to improve and be supplemented both by new openings and the utilisation of the Po Na Na brand.

On the other hand, Laura Ashley, a group for whom great things had been expected this year, disappointed with sales in the six weeks to 5 January only level. Pre-tax profits for the 2000/01 year, which had expected to be up to around £11m are now expected to show little change at around £8.5m.

Back to the happier tales though, with Arcadia reporting a 9.4% rise in like-for-like sales and toy group, Hamleys showing a good recovery with like-for-like up 12.1%.

Well away from the retail scene, however, there was an even more positive update from Big Yellow Group, the self storage company. Turnover in the final quarter last year at £2.3m, was 15% higher than the third quarter and 92% better than in the corresponding quarter of 2000. Nicholas Vetch, chief executive, said 'the growth in trading activity for the final quarter of 2001 has been in line with that seen for the same quarter last year and, consequently, we believe the seasonal upturn which we have experienced in previous years will be seen over the next few weeks'.

Follow the leader

THIS column has always believed in following the lead of directors who put their own cash into their companies. Therefore, the reverse should follow. I am therefore indebted to Andrew Barrett, analyst at brokers Peel Hunt, who believes the time has come to take profits at software and computer services group AIT.

He notes that chief operating officer Tom Crawford has exercised and sold all of his 40,000 £2.30 options at a price of £8.60, the first trading day after they matured. 'This adds to the three directors‘ sales (two after exercise of options) at £7.02 on 7 December, and two further directors‘ sales in August (one after exercise of options) at £7.02 and £7.10. In the same period only two purchases have been made totaling 6,000 shares,' he said.

Although Barrett believes AIT will continue to show strong operational progress over the coming year, he believes this is now factored into the price and that the shares 'now offer no margin for safety'. He believes it would be 'prudent to follow management and bank at least some of the recent gains'.