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Take a look at the FTSE Small Cap Index, battered down to 1845.33 against a rosier 2617.36 a year ago (the FTSE has fallen from 5166 to 3945.6). That suggests a swathe of struggling companies, but the reality is far more mixed, indeed, promising for small cap bottom fishers. Savvy investors will find a tremendous amount of value among the smaller company ranks, a case outlined by positive news from a number of ventures in January.

Solid support

For instance, there was a raft of upbeat 'New Year' news emanating from the support services sector. Both Watermark and 4imprint said final figures due in March would hit market expectations.

Air travel marketing support services stock Watermark issued a bullish, pre-close update ahead of figures for calendar 2002, expected in March. Analyst Paul Jones at Numis expects profits before tax and goodwill of £2.9 million for 2002 followed by £3.7 million and 10.2p for 2003. Watermark also said it would look to pay higher dividends in the future, and the shares soared by 5p to 86.5p.

As well as affirming on full year numbers, promotional products distributor 4imprint flagged up a contract with Cessna to supply and manage Cessna's on-site store in Kansas. A division of Fortune 500 outfit Textron, Cessna makes light and mid-size business jets. At 42.5p, 4imprint's shares have been marked down from a year's high of 133p.

Daring deals

Mouchel clinched a structures examination contract with Network Rail worth £30 million over ten years. The stock moved 7p to 120p, but has eased back to 116.5p since.

A high-profile deal involved logistics concern Wincanton. It completed its £152.5 million cash acquisition of P&O Trans European, consolidating its position as the second largest UK logistics company and opening up new continental European markets for the group. Finance man Gerard Connell says the deal should be earnings enhancing before reorganisation and goodwill costs in the first full year of ownership. Negative sentiment has surrounded the shares as investors have short-sightedly focused on the risks of the deal. At the current 181p, the shares are off a 233.5p peak over the past year.

Casualties

Inevitably there were casualties. Corporate Services, the recruitment agency ten per cent owned by Tory peer Lord Ashcroft, announced a deeply discounted proposed £25 million fundraising. The two-for-one placing and open offer is at just 5p-a-share, against a 52-week high of 42p. At the current 5.25p, the business is valued at only £14.4 million.

Also in the mire was engineer McLeod Russel. At 40p, the shares are just 3.5p off a 12-month low. The price came under pressure after it slashed the dividend to 1.65p (4.5p) and warned of slower first quarter sales. September-end final figures showed lower profits of £2.5 million (£3.7 million) as volatile markets bit. Turnover was lower at £79.9 million (£88.9 million).

Rage receives knock-out blow

Games publisher SCi Entertainment gained 4.5p at 51p on a bullish update for the key period to 31 December. CEO Jane Cavanagh says products sold well, particularly the hit Conflict: Desert Storm, and despite price competition between games retailers, margins have been unaffected. Since year-end SCi has returned to a positive cash position and secured a facility of up to £1.5 million from new banker Barclays. In December, SCi reported record pre-tax profits and turnover for the year to September. Sales rocketed up 766 per cent to £17.7 million and pre-tax losses of £10.5 million swung into a £2.2 million profit.

But Rage struggled for survival as banks withdrew its overdraft facility and pushed it into receivership. Based on Merseyside, the developer and publisher met its fate despite having one of its most successful titles for years, the smash hit 'Rocky' boxing game based on the Sly Stallone vehicle.

Baby blues

Finally, struggling baby-wear retailer Mothercare warned for the fourth time in a year that profits would miss City hopes, and the shares slipped to an all-time low of 82.5p, before firming to 86.5p. The company, bossed by new chief executive Ben Gordon, warned that a 1.1 per cent fall in like-for-like third-quarter sales would drag back current year figures and brokers doubled their forecast annual losses to £12 million.

Looking forward

Construction brands group Morgan Sindall unveils preliminary numbers to December on 11 February. Turning over £515 million (£407 million) in the half to June, profits were hit by a disappointing performance at its regional construction division and waded in lower at £5.87 million (£10.1 million). However, analysts at broker HSBC Securities suggest £18.5 million of pre-tax profit and earnings of 32p a share for 2002, followed by £25 million and 42p for 2003. Marked down to 220p from a 531.5p year's high, the shares look cheap on 6.9 times earnings, falling to 5.2 for 2003.