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Wickes is shining brightly and it's all thanks to Mr Grimsey.

Bill Grimsey is to be congratulated for the way he has turned around Wickes. On the face of it a flat profit performance is not a brilliant result, but set against Wickes's background it is in fact remarkable.

The company has come back from near-ruin after the accounting debacle of three years ago to robust health.

Profits were flat in the first half, but the group has been investing heavily in a new format for its DIY and builders merchants chain.

The idea behind the revamp is a relatively simple one. But it is effective and already showing signs of paying off.

What Mr Grimsey is doing is to maintain the chain's appeal to builders and enhance the DIY offering by extending the range and strength of its decorating and home improvement products.

At a time when house prices are booming, this is so obviously a good market to be in. Not only is it growing fast, but it is a much higher margin business than basic building materials.

Despite higher levels of expenditure on store revamps - capital expenditure of pounds 24.6 million was substantially more than at this point last year - Wickes has improved its cash generation and ended the period with pounds 34 million in the bank.

The shares have rebounded in line with profits. This time last year they stood at just over 210p, putting them on a rating of 7.9 times.

At that point they clearly had some way to go. The shares have had that improvement now, however. At the current level of 410p they trade on a prospective p/e of 16.2 times and look to have gone far enough for the moment.

Uno

It is a little hard to know what to make of Uno. Recent retail sales figures ought to augur well for non-food specialists like this furniture group.

But profits in the year to April slumped and chairman Mr Paul Rosenblatt warned darkly of a decline in like-for-like sales in the first 12 weeks of the current year.

This is probably not as bad as it sounds - the company went into the economic downturn much later than rivals and so the comparative figures are set against a relatively strong performance a year ago.

That said, the absolute performance is clearly disappointing - it is taking longer to come out of the doldrums and this is certainly worrying the City where Uno shares languish at just over 40p - two years ago they traded at more than 300p.

So what can investors hope for? Analysts, including Mr Richard Ratner of Seymour Pierce, are holding out some hope for the company's ongoing revamp of its eponymous stores. The revamped stores are already reporting small signs of a preliminary uplift in business, but it could do with being rather greater.

The sale and leaseback of two freehold properties brings in a welcome pounds 3.6 million and the concession deal with Hart Furniture will also produce another pounds 1 million or so in rental income.

These are good signs, but there is still a way to go. The shares are a potential recovery stock, but would-be investors are advised to tread warily for a while yet.

Epwin Group

A major advantage of companies not quoted on the stock market is that they can put the squeeze on listed rivals often constrained by the City's demands.

Quoted firms must always think about their next set of figures - while the private sector can afford to take a longer term view.

This is the problem facing Epwin Group, the PVCu windows and doors specialist.

With raw material suppliers forcing up prices Epwin would like to protect its profit margins.

But it is not able to pass on the extra costs to the customer because smaller rivals are slashing prices. The private businesses have chosen to react to the difficulties by pushing volumes and trying to build market share.

Most manufacturers in the sector have been spending heavily to upgrade plant and machinery and therefore have plenty of spare capacity to push for growth.

The industry is fragmented, with the biggest players, Epwin and Heywood Williams, holding only around 30 per cent. So there is no chance of building cosy cartels as the PVC suppliers appear to be doing.

Still Epwin is more than coping and expects to raise profits by 15 per cent this year.

That would produce earnings of around 22p per share. Epwin's resilience helped push the shares higher yesterday, despite a cautious outlook.

Even for a dull sector, however, they remain desperately cheap. At 137p they trade at more than six times forecast earnings, compared with a sector average of about 15 times. Epwin looks seriously undervalued.
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Publication:The Birmingham Post (England)
Date:Aug 6, 1999
Words:784
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