Signet still tarnished by US reliance

Forecast cloudy but Holidaybreak still a buy; MMT Computing is one IT boy to avoid

Signet shares lost a little of their sparkle yesterday when the jewellery retailer reported a first-quarter sales performance that was very much a tale of two halves.

Signet shares lost a little of their sparkle yesterday when the jewellery retailer reported a first-quarter sales performance that was very much a tale of two halves.

The US business, which accounts for 70 per cent of the group, was slightly disappointing with like-for-like sales in the three months to 3 May up just 1.1 per cent. It was the UK business that shone like a polished diamond with underlying sales up a till-ringing 5.4 per cent.

That gave a total underlying sales figure of plus 2.2 per cent, which was slightly below several analysts' expectations. In fairness, the US market has been affected by the war with Iraq and what Signet describes as "inclement weather" in late February and early March. It is also worth pointing out that Signet's Kay's and Jared businesses in the US have outperformed rivals. For example Zales, one of the big daddies of the US jewellery sector, reported flat underlying sales while Whitehall Jewellers showed a fall of 8.7 per cent.

The worry is that even with the Iraqi war making interpreting trends difficult, Signet says there has been some evidence of weaker consumer demand in the US. It is being even stricter on costs and insists its sales growth has not been bought with aggressive discounting.

In the UK, the business looks like it is outperforming the market and the company is continuing to increase higher margin diamond sales within the business, with "diamond participation", as the group puts it, up by another 1 per cent in the sales mix. It is also seeing positive trends from its new format stores in the UK which do away with the traditional shop window sales displays in favour of a more open look. It has 17 so far in H Samuel and Ernest Jones with plans to extend it to more outlets later this year.

Analysts left their full-year profit forecasts unchanged at £205m putting the shares, down 3.75p at 82p yesterday, on a forward price-earnings ratio of just under 11. Not expensive but the shares have underperformed the sector in the past year and the reliance on the somewhat wobbly US market means Signet may not be an investor's best friend at the moment.

Forecast cloudy but Holidaybreak still a buy

The profile of Holidaybreak is about to take off. The accession of Bob Ayling, the controversial former British Airways boss, to the chairman's cockpit next month is certain to boost demand for the group's financial updates if not for its unsold holidays. The camping specialists, who also offer hotel breaks and adventure holidays, echoed the forecast for cloudy skies that its giant rival TUI made earlier this week.

It said year-to-date sales in its flagship camping division, which includes the Eurocamp, Keycamp and Eurosites brands, were running 9 per cent behind last year's levels. War-inspired qualms have put families off booking their summer holiday early, which means the company has achieved just 80 per cent of its targeted year-end sales for the division. Its adventure arm, which caters for the growing number of more intrepid travellers, has suffered because the company has had to cancel holidays to certain Sars-afflicted countries.

One ray of sunshine did slip through in the form of "encouraging" booking trends. Demand for camping trips soared by almost one-third last week compared with a year earlier. Meanwhile, its hotel arm, which was boosted by the acquisition of the Bridge short-breaks business from MyTravel in March, had gone from strength to strength.

Interim results to end-March showed a pre-tax loss of £9.8m, up from £6.7m a year earlier. This was on sales ahead by one-fifth to £52.4m. The wider loss was in line with expectations and reflected the business's seasonal nature and the £30m acquisition of Eurosites, also from MyTravel, last autumn.

Analysts like the group's management team as well as its double-digit earnings track record. It is well positioned to meet the increasing demand for tailor-made holidays, which should stand it in good stead longer term even if the immediate outlook is less hot.

Its shares, down 7p at 498p, have performed well since this column tipped them just over a year ago. One to tuck away.

MMT Computing is one IT boy to avoid

MMT Computing, a software and services company, is suffering from the same sickness dogging the rest of the IT sector. Customers are cutting back on spending on IT, while buying cycles are lengthening.

Yesterday's figures for the first half to 28 February didn't make particularly inspiring reading. The company made a pre-tax loss of £266,000 compared with a profit of £93,000 a year before and sales fell to £12.5m from £14.6m.

The good news is the company's results are more weighted to the second half of the year and MMT Computing estimates it has already got about 60 per cent of those revenues in the bag. That gives it a reasonable degree of confidence it can make analysts' forecasts for the year of a pretax profit of just more than £1m. It also has some £6m of cash on the balance sheet.

The bad news is that the IT sector is not yet showing any signs of a revival and MMT, in common with others in the sector, does not have a massive degree of visibility. Deals are taking longer to close across the board. The shares, down 2.5p at 119p, on a forward p/e of 18, don't look appetizing. Sell.