If there are some corners of retail that are said to benefit from warm weather, home furnishings is not one of them: bedding, curtains and cushions are usually sold from out-of-town retail parks where traffic dwindles when the temperature climbs. The nature of such products, typically used to keep warm and comfortable rather than to stay cool, also explains why autumn and winter are usually that sector’s busiest seasons.

So there was some relief yesterday when Dunelm, the mid-cap homewares chain, reported sales that were stronger than expected after a June that was hotter than average. Having been ahead 2.3 per cent in the first 17 weeks of its second-half trading period, like-for-like sales in the six months to July 4 were up 5 per cent, implying underlying growth of 10 per cent as its financial year drew to a close.

Just as reassuring, gross margins have also improved (they are up 1.2 percentage points on the year), implying that Dunelm is not “buying” an improvement in sales at the expense of profitability. With next year’s profit forecasts on the rise, the shares, which had already nearly doubled on the year, gained 12 per cent in response.

The clear implication is that Dunelm continues to take market share: it continues to grow in a niche where overall sales are estimated to have fallen by at least 4 per cent. On that front, the demise of Woolworths and Rosebys will clearly have helped.

But Dunelm has also displayed the sort of tactical agility that befits its market-stall roots. It has boosted sales through “special buy” promotions and taken advantage of weaker media rates to increase its spend on radio and local newspaper advertising.

Dunelm has a small-ticket spend (an average transaction size under £30) and a subdued housing market in its favour (which arguably encourages homeowners to make affordable changes to their immediate surroundings). But the bigger attraction is its roll-out potential, which, given £21 million of net cash and its stepped-up plans to open ten stores in its new financial year, remains firmly intact.

At 235½p, or 14 times earnings, hold on.

LMS Capital

Robbie Rayne has more reason than most small-cap chief executives to follow Centrica’s pursuit of Venture Production. LMS Capital, the investment company that he runs, has the bulk of its holdings in unquoted companies — but a significant minority in quoted stocks, one of which is the North Sea oil and gas explorer.

However, LMS, which bought into Venture four years ago at less than 500p a share, shows little enthusiasm for the 845p proffered by Centrica over the weekend. Yesterday Mr Rayne echoed Venture’s bigger backers in suggesting that the shares were worth “somewhere north of £10”.

LMS Capital, once the industrial division of London Merchant Securities (the property developer that is now part of Derwent London), has form as a stockpicker: previous profitable holdings include BSkyB, First Leisure and Interwoven, the Californian software company since acquired by Autonomy. However, it was the unquoted side of LMS’s portfolio that was the subject of yesterday’s stock exchange announcement: its acquisition of a majority stake in Updata Infrastructure, which installs and manages broadband networks for local authorities.

The deal, although small — LMS is injecting £6.3 million — is typical of its approach to technology investing. It has a preference for later-stage companies with solid margins and secured revenues.

LMS is best considered a miniature 3i, another Venture backer, without the balance sheet baggage. It has no direct debt and virtually no debt in its investee companies. It also brings a diverse geographic and sectoral exposure that private investors might struggle to replicate themselves.

The only drawback is the absence of a regular dividend. It has returned cash through one-off payments in the past. However, at 44¼p, a 50 per cent discount to net asset value per share, the scope for capital growth is sufficient compensation. Buy.

Low & Bonar

Resilience is a common trait of Low & Bonar’s products, such as the PVC-like material that covers the O2 and the Mound Stand at Lord’s, the artificial grass used on football training grounds and the toughened tarpaulins that line the sides of 40-tonne lorries.

But it is also a characteristic found in the company’s figures. Despite a 25 per cent fall in underlying sales volumes in the six months to May 31, L&B managed to keep operating margins and normalised profits nearly flat at £5.1 million, against £5.9 million last year. True, the company has changed. Since selling its contract flooring business to Forbo, of Switzerland, last September for £123 million, it has focused solely on so-called technical textiles.

Those numbers are also testimony to the speed with which L&B has responded to downturn. It has cut fixed costs by £15 million, its workforce by 12 per cent and, through a presence in Belgium and Germany, has been able to take advantage of state subsidies for short-time working. More recently, it has benefited from the lower price of oil-derived raw materials.

The short-term encouragement is that L&B has felt a pronounced pick-up in demand over the past three months. The longer-term draw is L&B’s status as one of the biggest and financially strongest players (it raised £30 million in February) in a highly fragmented sector whose diverse end-markets should provide a degree of protection. It also has a growing presence in China and the Middle East. At 24½p, or less than six times earnings, and dividend payments set to resume next year, tuck away.

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