Not quite home base yet

SCRUTINEER

HRG
264p +21.2p

STAN LIFE
250.5p +2.75p

PERHAPS unsurprisingly good annual trading results from Home Retail Group yesterday provided some welcome relief for its lacklustre shares.

A major part of the business is showroom catalogue business Argos, and in the current tight times for consumers that operation's value-centric offering would be expected to hit the right buttons.

HRG said Argos had achieved record profits in the year on like-for-like sales up 0.7 per cent, helping drive group profits to £433m from £376m last time.

HRG's Homebase DIY business, like its rival B&Q, saw tougher times, with like-for-like sales off 4 per cent.

There is unlikely to be any early rebound for Homebase given that DIY sales are often driven by a healthy homebuying market, and the UK's housebuilders are very glum about prospects in the short-term.

HRG went a little further, and said same-floorspace sales and profits in both its main businesses were likely to fall in the current year as consumers reined in discretionary spending.

The market preferred to look on the bright side of Argos's good defensive characteristics, however, and marked the company's shares up 8 per cent.

This was welcome for a stock that has underperformed the UK general retailers' index by 6 per cent in the past 12 months.

HRG was intoning the mantra of most retailers in these more challenging times by saying it was focusing on cost and margin control.

Gross margins, before tax, rose about 50 basis points at Argos and 250 points at Homebase in the recent financial year.

HRG will also be hoping for better weather this summer to help Homebase, which, like all DIY businesses, suffered heavily from last summer's poor weather.

Shareholders get a decent 13 per cent rise in the divi as well as the rare fillip to the share price yesterday.

But, even with its defensive characteristics, HRG is in the wrong sector at a very difficult time for consumer confidence.

As such, the shares are "hold" at best.



IT IS fair to say a little bit of the glitter has come off Standard Life's 2006 flotation.

But not enough to say the ditching of mutuality was a bad thing in the end. It must make investors a little unsure of how loyal to be from here on.

We have had embarrassing boardroom bloodletting at the Edinburgh life assurer, plus the failure of its takeover bid for rival Resolution Life.

But at the same time organic sales growth in a largely revamped organisation has been pretty consistently impressive since flotation to soften that embarrassment.

That decent organic performance continued yesterday as Standard Life beat forecasts with an 8 per cent rise in first-quarter sales.

That is not to be sniffed at. Even though insurers have been nowhere near as badly affected by the credit crunch as the banks, it is still far from an ideal market in which to be selling stock market-linked products.

However, in line with the piebald nature of Standard's revelations in recent times, the gloss of the latest sales figures was slightly tarnished by news that its flagship Sipps (self-invested personal pensions) product appears to be coming off the boil.

Standard's individual Sipps' sales were down 14 per cent, and insured Sipps and related products were off 40 per cent.

As Sipps have become symptomatic of Standard's recasting of itself as a high-margin, lower-volume business that fall-off is a bit disappointing.

Cazenove said in a research note yesterday: "Standard Life's Sipp-driven top-line growth story appears to be over. Talk of strong growth in the Sipp market has been replaced by expectations of a 'more mature and seasonal market'."

Standard's first trading quarter is traditionally the strongest, and analysts were not slow in marking down new business profit estimates for Sipps going forward by up to 10 per cent.

Meanwhile, Canada is performing better for the company, while Europe looks tough. All mixed signals.

At the same time Standard, like its peers, is facing challenges from tax changes on bonds and continued volatility.

Since being floated at 230p, shares in the company have gone to not far off four pounds and as low as 185p in the past year. They closed last night at 250.5p, above the float price but well off their best.

You can see why shareholders might be confused about what to do.