Now is not the best time to shop at Boots

Was that the sound of a U-turn being performed by Boots's chief executive Steve Russell yesterday? Boots wouldn't admit as much, of course. But the decision to place less emphasis on the fancy high margin services such as dentistry and aromatherapy and more on the retail basics is a welcome change of direction.

The move to address the main Boots the Chemists store portfolio is particularly important as some branches had been so neglected that they have started to look tatty.

Boots has finally grasped the nettle with a plan to invest £170m in upgrading the stores over the next four years. The question is whether sales growth will be sufficient to cover the costs. Boots reckons it will need sales uplifts of about 3 per cent to make it pay. The company has seen sales grow by 10 per cent in its 23 trial stores. But the rest of the chain will have nowhere near the same amount spent on them, so it is far from clear if this target will be met.

Boots' retail execution still remains questionable. It had stock availability problems in the run-up to Christmas and its pledge to have 98 per cent availability on the top 200 lines only makes you wonder about all the others.

There are other outstanding questions. Can Boots make the soulless and loss-making Pure Beauty cosmetics stores work? And which of the Wellbeing services are going to stand the test of time?

Boots shares have been quite strong recently and will be under-pinned in the short term by the share buyback programme which started yesterday. Cost-savings should also shore up the bottom line.

But while moves such as the disposal of Halfords are welcome, the key to this company will always be the performance of the main high street chain. This is still weak with like-for-like sales growth of just 1.3 per cent last year, with 3.3 per cent in the core health and beauty ranges. Customer transactions numbers are down by almost 5 per cent in the year, always a worrying indicator for a retailer.

SG Securities is forecasting profits of £672m this year putting the shares on a forward p/e of 12. This is undemanding but with so many uncertainties this is no time to buy.

William Hill's stock market float next month is worth a gamble

William Hill is under starters orders for a £940m stock market float next month. Private investors have two weeks to place their bets on the UK's second-largest bookmaker, which is due to see its shares start trading on 17 June. But is this pure betting play worth a flutter? Or should punters stick to risking their luck on the 2.30 at Sandown Park?

After the recent stretching valuations for new issues such as HMV, the music retailer, and Punch Taverns, the pubs group, shares in William Hill look reasonably priced.

At the mid-price of the indicative range of 190p to 240p, the shares will trade on a forward price-earnings multiple of about 12. This is a discount to its nearest rivals such as Hilton, which owns the nation's biggest bookmakers Ladbrokes, and Stanley Leisure, which sports betting shops alongside its regional casinos.

The world of betting has seen something of a revolution in recent years, what with the abolition of betting tax, the birth of internet gambling and improved relations with horseracing.

The Government's move to embrace gaming will offer further upside from 2004-05 when bookies can double the number of jackpot machines per shop to four and advertise freely.

For now, William Hill sees growth from expanding its 1,536-strong retail estate and adding two new platforms: mobile telephones and interactive TV. The group's £9.6m trading profit from its internet operations shows it can make the most of new opportunities. And longer term, deregulation could tempt the group to dabble in casinos and bingo.

The highly cash-generative business, which includes a profitable internet arm and a telephone operation, has clocked up a steady track record of increasing operating profits by 22 per cent a year by extending opening hours and adding product. Analysts expect 13 per cent compound growth going forward.

The main downside to the business is its volatility. Although the World Cup should provide a fillip, bookies took a big hit from the European football Championships in 2000 when all the favourites won.

But the shares are fairly priced and are backed by a 4 per cent yield. Worth a gamble.

Brewin Dolphin on track for a sound recovery

Brewin Dolphin has hardly had a serene time in the past year, and nor have its shareholders. The stock broker warned a couple of months ago that it had been battered by the dramatic downturn in the stock market, which would lead to a decline in profits.

Yesterday the company unveiled the loss – a 32 per cent drop in profit to £7m in the six months to 30 March – and a fall in funds under management from £17bn to £16.8bn.

But yesterday's results were not as bad as some had feared, indicating that the aggressive cost cutting it did last year was effective. And Brewin Dolphin has performed better than some of its rivals in difficult markets.

Operating profits are beginning to rise, showing that the fall-off in business in the past couple of years is starting to be reversed. These factors helped the shares climb 1.5p to 94p yesterday.

Encouragingly, Brewin Dolphin also increased the funds under management where it takes all investment decisions, and, therefore earns higher margins. This is an area that the broker wants to expand, and is concentrating on building up a research department that is more sophisticated than that of many small and medium-sized houses.

Projected to make pre-tax profits of £12.5m this year, Brewin Dolphin is on a demanding forward p/e of 21. But the company appears to be on track for a sound recovery. Buy.