Loss of momentum makes GUS one to avoid

It's a strange beast, GUS. The group comprises Argos, the low-brow retailer, Experian, a credit checking and marketing business, and (77 per cent of) Burberry, the luxury goods chain.

Despite the anachronistic conglomerate structure, its shares had done pretty well over the past couple of years, at least until the start of this summer. No matter how poor the returns from the group's investment in Experian (and they have been poor), Argos has taken care of it.

This time last year, sales at Argos were showing 12 per cent year-on-year growth. Yesterday, a trading update from the group showed the extent to which things have deteriorated. Like-for-like sales growth was 5 per cent in the three months to 30 June.

The decline shouldn't be a surprise, although it spooked the market. Argos is still growing faster than retail spending as a whole, and with the addition of new stores taking the division's sales growth to 10 per cent, the figures are actually pretty robust. But the trend is in the wrong direction, and there is every chance the UK consumer could be about to have a crisis of confidence and cut back on spending.

In the long-term, new store openings (about 35 a year) should underpin growth, but there may be trouble ahead.

Experian in the US has been little but trouble since GUS acquired it back in 1996, and there was more disappointment yesterday. While the credit checking parts of the division are doing well, the direct mail side is still losing sales, in part because a big contract from a car firm was not repeated this year. In dollar terms, like-for-like sales were down 4 per cent across Experian North America, and the company said the falling dollar could lop £10m from profits this year, assuming it does not rebound.

Burberry continues to trade well, while its flotation should attract a higher market valuation. And at 11 times this year's projected earnings, GUS shares are not expensive. But these positives are not enough. The group is clearly losing momentum, and there should be a better time to buy.

Provident Financial unattractive

UK Consumers are, by common consent, indebted beyond their eyeballs. With unemployment at record lows, more people have been able to take on credit, and more and more is being put on the plastic.

In these circumstances, it is to Provident Financial's credit that it is able to increase its lending in the UK at all. The company's door-to-door salesmen lend to people otherwise unable to get credit, of which there are fewer, but it was still able to grow lending by 1.4 per cent in the first six months of the year. Profitability rose more slowly, though, since bad debts were up from 8.2 per cent to 8.9 per cent, nudging the top of the company's promised range. The fear is that the company has been forced to go down-market towards customers less willing or able to repay.

The results, overall, were good, though, if you ignore a £10.7m one-off loss from the sale of an insurance brokerage. Profit was up 6.2 per cent to £74.6m. The main driver of growth now is the international division, which takes in nascent businesses in Poland and the Czech Republic. The company has also decided to move into Hungary and Slovakia. Profits are growing strongly, but bad debts are also worryingly high, suggesting the company is yet to get to grips with the dynamics of its new markets. With start-up losses in the two new markets set to continue for up to four years, the overseas strategy is as risky as ever.

Meanwhile, the group's sideline in motor insurance is past its peak, amid increasing competition in premiums. Provident Financial shares, off 24p at 574p, are unattractive.

Time to eat some Domino's profits

Domino's Pizza knows a thing or two about speedy delivery. Which is why it surprised no one the takeaway pizza kings managed to knock up a 46 per cent rise in half-year profits to £1.72m.

The group owns the franchise to operate US-owned Domino's outlets in the UK and Ireland. And time-poor, cash-rich pizza-loving consumers are chomping their way through more Mighty Meatys and Pepperoni Passions than ever before, enticed by Domino's first national television ad campaign and a rapidly expanding chain of outlets.

Tasty plans to double its stores to 500 over four years should allow extra pizza sales to feed straight to the bottom line. The group has built enough dough-making facilities to make bases until 2006.

There should be little holding Domino's back from growing its earnings by 25 per cent this year and 15 per cent next year. Like-for-like sales rose 16 per cent in the first half and system sales (sales from all the group's stores, both corporate and franchised) grew 25 per cent to £57.8m.

The shares have risen faster than a fresh dough base since this column advised readers to buy last year. Up 1p yesterday to 88.5p, this looks a good time to digest some profits. But save some of the shares for snacking on later.

Imagination's success rests on deals

Imagination Technologies' long-suffering shareholders couldn't contain their excitement yesterday when the US chip making giant Intel was unveiled as the company's latest licencee. The shares jumped 4.5p to 28.5p.

Imagination's 3D graphics technology will be combined with Intel kit and sold on for use in handheld gadgets, mobiles and other consumer devices. While the agreement, including the financials, are top secret it looks like Imagination will get an upfront licence payment and royalties further down the line.

But we have been down this path before. The deal Imagination signed with Sega, to use its graphics technology in its Dreamcast computer games console, looked to be its making some years ago. Sega has since pulled out of the market and the company had no other significant deals in the bag to make up the shortfall.

This time is slightly different. This is the second big name to license the kit after Hitachi and other deals are in the pipeline But the delay between signing customers and royalties flowing in – up to two years – explains why analysts predict Imagination will make a £2m loss this year.

The company's success is dependent on it signing up more big names and on its technology being incorporated into best-selling consumer gadgets. There is still time to see how that will pan out.