Tom Attwood, chief executive of Intermediate Capital, is usually worth listening to. It was Mr Attwood who spent 2006 predicting that buyout markets were riding for a fall, warning that debt-financed deals were becoming too leveraged, too big and too unwieldy.

As is often the case with Cassandras, his timing was slightly awry – he was a good year too early – but that should not detract from the accuracy of his call.

So it will come as little comfort to learn from yesterday’s full-year results from the FTSE 250 mezzanine finance provider that Mr Attwood believes the credit crunch has more than a year to run. “What was a liquidity crisis is likely to lead to a credit crisis,” he says.

Given that the buyouts struck before last August were often overgeared, with little margin for error, he contends that default rates cannot help but rise over the next year or two from what have been historically low levels.

The reassurance for shareholders of Intermediate – which raised £175 million in a rights issue in January and has subsequently secured £500 million of new debt – is that it appears well placed to take advantage of the downturn. Given the travails of private equity and other debt-financed investors, mezzanine houses are one of the few players in the financial markets with capital to deploy: their share of completed deals has soared from 20 per cent in the middle of last year to more than 70 per cent in the first quarter of 2008 In this way, Intermediate has been able to buy into stalled deals – those whose debt has been underwritten by banks but not yet syndicated – at advantageous prices: participating in the refinancing of Alliance Boots, Emap, EMI and Saga-AA in the process.

The flipside to that growth in Intermediate’s loan book is that gains on the disposal of its investments, which have fallen from £197 million to £135 million over the past year, are likely to drop substantially again in the coming year.

Inevitably, the £1 billion of assets that Intermediate took on to its books in the 18 months prior to the credit crunch provide plenty of scope for writedowns, which totalled a less than expected £46 million last year. The caution of Mr Attwood and his team, which should have insulated Intermediate from the worst of the downturn, together with the company’s strong 14-year record of double-digit shareholder returns, underpins the long-term investment case.

However, after yesterday’s 10 per cent surge, triggered by the covering of short positions, Intermediate, at £16.10, or 13 times current-year earnings, have run far enough for now. Hold.

Burberry

This £2.2 billion luxury goods retailer may still be synonymous with its signature trench coat – or a black chevron version in the case of Sarah Jessica Parker in the new Sex and the City film – but it should increasingly mean shoes and children’s wear, too.

At yesterday’s full-year results, Burberry stated its intention to take those two categories to 10 per cent of sales each within five years, against 3 per cent at present. The boldness of that target reassures, not least because it gives scope for sales elsewhere to slacken while still enabling the company to meet longer-term forecasts.

After the cautious tone of January’s third-quarter update, which sent its shares down 16 per cent, the other comfort was that yesterday’s statement was free of caveats. Burberry repeated its plans to increase its retail space by 13 per cent in the current year and achieve underlying growth of 10 per cent in its wholesale division in the first half.

The question remains to what extent Burberry’s like-for-like retail sales growth – of 8 per cent last year – can continue to defy its peers. For now, forecast earnings growth of 20 per cent this year – which makes its forward multiple of 14 times look reasonable – will have to suffice.

However, with the shares, helped by speculation of bid interest from Coach, the US luxury handbag maker, having outperformed the FTSE all-share by 16 per cent over the past three months, there will be better times to buy. Hold.

Electrocomponents

When is a dividend cut not a dividend cut? When the drop in the annual payout is offset by a matching special dividend. That is the somewhat awkward accommodation reached by Electrocomponents which, on yesterday’s expiry of a three-year commitment to pay out 18.4p a year – giving a prospective yield of 10.8 per cent – has agreed to return 11p to shareholders next year plus a one-off 7.4p. In future, the company intends to pay out 65 per cent of its earnings in dividends, against an unsustainable 124 per cent currently, which should see that pared-down 11p steadily rise from 2010.

If there was any relief at that compromise, shares in the electronic components distributor, down 3p at 170p, failed to show it. More concerning was evidence of a recent slowdown in trading, with underlying sales growth falling from 4.5 per cent in the last four months of last year to 2 per cent in April and May. In the UK, sales are going backwards – by a worse than expected 2 per cent.

The rider is that Electrocomponents’s strong international growth means its home market is less important than before: it now accounts for 40 per cent of sales against more than half two years ago. The problem remains that it carries high fixed costs, meaning that faltering demand, especially from R&D customers, would put profits under pressure. Keep away.

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