It might not have been the Russian deal that Inchcape investors had been awaiting, but it was welcome all the same.

Shares in the £1.9 billion car distributor ticked up nearly 7 per cent after it said that it was buying out the remaining 24.9 per cent of its Audi and Peugeot joint venture in St Petersburg 18 months ahead of plan. Given that Olimp, its local partner, would have had to fund its share of Inchcape’s expansion elsewhere in Russia’s second-biggest city – it is relocating its Toyota showroom and building a Lexus facility – it is seeking an exit ahead of time.

That appears reasonable and should have no adverse effect on Inchcape’s profitability. Indeed, that Inchcape will now be able to book all of its post-tax profits from St Petersburg – an implied £10 million – itself will offset the effect of higher borrowing costs, so that the £28 million deal will modestly boost earnings in the next two years.

The bigger prize lies ahead. Inchcape admitted last month that it was in talks to buy Musa Motors, which sells the likes of Jaguar, Land Rover and Volvo cars throughout the Moscow region, imports Chrysler’s Jeep in Latvia and is estimated to have a turnover of $550 million to $600 million (£300 million) a year.

With Russia’s foreign branded car market growing by 64 per cent last year, Inchcape is keen to gain scale quickly in one of the two key emerging markets it has identified to date (the other being China).

The only concern is what price it might pay: a rumoured tag of up to $450 million for Musa would entail a dilution of short-term earnings. At a time when Pendragon and Lookers have demonstrated the perils of dependence on a poor UK market, Inchcape, deriving only a quarter of operating profits from its domestic market, has much to recommend it, not least a strong balance sheet. But neither should Inchcape’s emerging markets allure – it is due to identify its two other target countries before the end of 2008 – be overstated. Next to Britain, continental Europe and Australia are its biggest territories: in contrast, emerging markets, albeit growing strongly, accounted for only 10 per cent of last year’s profits.

Meanwhile, Inchcape must contend with the drag of Singapore, once its biggest market, now next to Australia in importance, which is mature and where new car sales remain subject to its government’s quota system.

That exposure partly explains why Inchcape’s earnings growth has been modest: about 3 per cent last year and a forecast 6 per cent in 2008. That pedestrian pace suggests that at 405p, or 10.4 times 2008 earnings, and yielding 4 per cent, the shares are no more than fair value.

RM

Like a schoolchild late with its homework, yesterday’s first-half trading update from RM was long on excuses.

The provider of computers for schools conceded that full-year profits would be more heavily skewed towards the second half of its financial year – the six months to September 30, when most school purchasing decisions are made – than in recent years. Not only is it taking longer than expected to convert orders for its new schools intranet into sales, but also sales of school supplies are behind plan, while first-half bid costs for the Government’s Building Schools for the Future (BSF) programme will be higher than expected in the first half.

That its shares fell less than 3 per cent suggests that RM has been spared the stock market equivalent of detention. The company’s first-half performance has little bearing on the year as a whole – last year it accounted for less than 10 per cent of operating profits – and RM says that it is on track to meet full-year forecasts. The bigger comfort is that it is securing more BSF contracts than any of its peers (Serco has not won any), picking up three of the four it bid for in the past six months.

Although profits from BSF will not filter through until 2011, that record is encouraging, given that 2008 should prove critical for contract awards, and indicates that local authorities value RM’s ability to provide a one-stop shop for hardware, software and IT services.

Meanwhile, the nonBSF business is highly defensive, underpinned by long-term government commitments. At 200p, or 14 times next year’s earnings, RM is worth tucking away for the long term.

Western & Oriental

According to the big tour operators, the economic gloom has failed to dent our determination to take a holiday. Indeed, Peter Long, the TUI Travel chief executive, reckons that consumers would rather put off home improvements or buying a new car or furniture than miss out on their main annual holiday.

Those assertions were backed up by yesterday’s trading update from Western & Oriental, a specialist travel group that operates at the top end of the market, selling tailor-made holidays to some of the world’s most exotic destinations. Ignoring acquisitions, it reported organic growth of 7 per cent. Even its conference and incentive business, which might have been expected to show some stress given its long lead times, is performing strongly.

Management, led by the former First Choice Holidays and Lastminute.com director David Howell, have also shown a sure hand when integrating the 12 businesses acquired over the past 18 months, and there are further cost efficiencies to come. After last year’s fundraising, the group is in a strong financial position to pursue further consolidation. The shares, up ¼p at 11p, were trading at 15¾p a year ago and could easily return to such levels. Hold on.

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