SmallCap Report

London's SmallCap Index is thriving. It continues to trade higher, standing at 2443.07 against 1875.5 a year ago and mirroring the impressive performance from the blue chips of the FTSE 100, which nosed above 4,300 on upbeat domestic economic data and Wall Street gains on 18 September. The retail sector has flown into focus of late following some stronger-than- expected August retail sales. This is reflected in the FTSE Actuaries Industry Sectors' general retailers' index, which has surged ahead from 1609.47 a year ago to almost 2,000.

One curious incident in the sector involved House of Fraser, embarrassed into releasing its numbers for the half to 26 July a week early (the original publication date was set for the 24th). This followed a sneak preview by the Dow Jones Newswires service. Despite the blip, the department store's numbers were encouraging, with losses down from £11.7 million to £7.7 million and average debt 11 per cent below last year. Furthermore, the company has opened a new store in the City and refurbished its biggest outlet, which is in Birmingham. The shares rose 2.75p to 98.5p on the figures.

Cox climbs

Insurers also shared the spotlight, with Britain's biggest motorcycle insurer Cox Insurance climbing 4.5p to 84p on solid first half results to June. Its growing business underwriting motorcyclists and other specialist niches of the insurance market helped profits soar 211 per cent to £28.3 million. 'We've laid firm foundations for continued success in 2003 and beyond,' remarked chairman Peter Owen – he reportedly spurned a takeover bid from a consortium headed by Direct Line founder Peter Wood at the tail end of last year.

Sadly, sector sister Goshawk headed in the opposite direction on a surprise profit warning – the Lloyds underwriter says half time figures to June are likely to be 'materially' below market expectations. Furthermore, its need to strengthen its reserves could force it to breach banking covenants. Goshawk's wings were clipped by a massive 36.5p to 36p.

Elsewhere S&U, the consumer credit and car finance company, raced ahead 32.5p to 445p. The board sees a turnaround in profitability in the current year with current trading pointing to a strong second half. For the six months to July, pre-tax profits fell to £4.2 million from £4.5 million, as sales dropped to £16.3 million from £17.5 million.

Soccer clubs provided more drama for the die-hards, with North London outfit Tottenham Hotspur red carding aloof coach Glenn Hoddle after heavy speculation. Daniel Levy, chairman, cited two seasons of disappointing results and the club's worst ever start to a Premiership campaign, despite heavy investment in the summer, for the club's swift early season decision. Spurs shares trade at 23p, against 52-week highs and lows of 27p and 17p, giving a market value of £23 million.

Aston Villa has vied for attention in recent months, with the shares shooting up to 205.5p, a hefty premium to the 110p 52-week low. The company confirmed possible offer talks have been held with intermediaries representing a potential suitor, but the board is treating the interest as 'highly speculative'. Press speculation has centred on a Venezuelan billionaire with a fortune supposedly greater than that of Roman Abramovich.

WSP wanders higher

In the support services sector, property and construction consultant WSP moved five per cent higher to 147p, against 52-week highs and lows of 145.5p and 36.5p, on well-received interim figures. Pre-tax profits slipped from £3.96 million to £3.5 million in the first half to June, yet the market liked news the dividend was held at 2p-a-share. However, one concern was net debt, which remains a sizeable £51.3 million.

Looking Forward

Merseyside-based support service venture Johnson Service fell 13p to 323p on interim figures showing the effects of tough conditions in its uniform rental business. Underlying profits waned from £12.8 million to £11.2 million and hefty goodwill hits caused a pre-tax loss of £5 million versus a £9.2 million profit last time out. However, the core dry cleaning side is doing better with profits and margins slightly ahead. Paul Jones, analyst at Numis Securities, has set a 414p target price for the shares, which have traded between peaks and troughs of 352.5p and 253.5p over the past year. 'Having had his feet under the desk for 12 months now, we believe CEO Stuart Graham has put enough building blocks in place to give us confidence in the progress over the medium term, explains Jones. For the current calendar year, earnings per share should improve from 26.6p to 27.4p and the dividend should stay at 17.6p. This gives an undemanding forward rating of 11.8 times, and a juicy 5.4 per cent yield.