No rain on Burberry's parade

Management Consulting will do you proud; Game on as switch to publishing pays off for SCi

A wet winter may have left the rest of the high street wondering if it can stay afloat but rain is Burberry's favourite kind of weather. The luxury goods group is still best known for its iconic raincoat, even after the recent transformation that turned the quintessentially British label into a global fashion must-have.

Rose Marie Bravo, the energetic American who heads the group, yesterday again proved worth her weight in handbags, with news of strong trading in the last three months of 2002. Ignoring currency fluctuations and acquisitions, there was an 18 per cent rise in revenues – sales at the group's retail stores, wholesale orders of goods sold in other people's stores and sales in franchised stores, largely in Japan.

The rise was nearly double City analysts' expectations, and there was a particular cheer for the 16 per cent like-for-like sales increase at the group's retail outlets. Breathtaking new stores in New York, London and Barcelona have helped, as have soaring sales of higher margin accessories such as scarves and sunglasses.

This is all part of the strategy that the group outlined last summer when it floated on the London Stock Exchange. Other improvements include Burberry's decision to buy in its franchise operations, such as those in Hong Kong, to improve profitability. And while total wholesale revenues were flat during the quarter, as anticipated, the group also raised its expectations for the 2003 spring-summer season.

While the luxury goods sector remains shrouded in the black cloud of looming war, Burberry's immaturity as a revamped brand counts in its favour. The Yanks, in particular, have shown none of the "check-fatigue" sometimes felt at home and the group is rolling out new US stores.

Fears that GUS will eventually sell down its 77.5 per cent stake will remain a drag on Burberry shares, but they were up 13p to 229p on yesterday's news. A price-earnings ratio of 15 times looks a fair price for a good stock.

Management Consulting will do you proud

Proudfoot, the management consultancy, is an expert on "transformational change", helping its clients turn round their struggling organisations through big restructurings. And yet it took a clear-out at the top of the company to effect any transformational change on Proudfoot itself. A stock market dog in the late Nineties, the new team – imported wholesale from KPMG – has worked something close to a miracle on the company, which has since been renamed The Management Consulting Group.

Now, even though the industry has suffered through the economic downturn, Management Consulting's main business is growing turnover and profits. It was disappointing, then, rather than disastrous that it warned yesterday that profits this year will be below hopes.

The persistent weakness of the dollar will hit reported profits, since more than 80 per cent of them are earned in the US. The sloth of the economic recovery is also a headache, but with the management consultancy industry globally showing annual growth of 2 per cent at present, Management Consulting's expectation of 15 per cent turnover growth in 2003 is still impressive.

The acquisition last year of Parson, a financial management specialist, has not been handled flawlessly, and Management Consulting had to admit yesterday that it will take a couple of months longer than anticipated to cap the losses in that business. But it should benefit soon from US legislation that will prevent companies using their own auditors for a range of additional financial advice services. Clients should be driven from the global giants into the arms of Parson and its rivals.

Management Consulting shares, down 6.75p to 45.75p, trade on a miserly seven times this year's new earnings forecasts. That gives too little credit for the performance to date and is too pessimistic on the outlook for the industry. Buy.

Game on as switch to publishing pays off for SCi

News that Rage's bankers declared Game Over yesterday was a reminder, if any were needed, that the computer games sector has not been a fun place for investors to play.

SCi Entertainment, which had rather better news, has also had its fair share of disaster, but it has taken the remedial action Rage never quite managed. Having outsourced product development, SCi is now a pure publisher, which means it is a much less risky business than it once was. Obviously it still has to go out on a financial limb to launch a new game (there was a worrying cash outflow last autumn as it prepared to release Conflict: Desert Storm, which has since become a lucrative million-seller). But now it can cherry pick the best developers and can punish others for any damaging delays.

It is building a decent release schedule and this year will launch a game based on the movie The Great Escape and a sequel to Desert Storm – which, worried investors were told yesterday, does not depend on there actually being a second conflict in the Gulf.

SCi is one of the few profitable games group. As the new generation of consoles spark an upswing in sales, SCi is so undervalued it could attract a bid if it is not rerated. Up 4.5p to 51p, the shares are a buy.