Mecom is the European newspaper group run on the theory that it is possible to turn titles on the Continent into a mirror of those managed by Johnston Press. Run by David Montgomery, the idea is to strip out inefficient practices and boost margins, from single digits in some countries to more like 20 per cent. But unlike Johnston Press (perhaps not the best role model, given this year’s travails), the mix of titles owned across five countries includes both national and regional and the group as a whole is not so dependent on highly cyclical advertising. This accounts for just over half of revenues, whereas it amounts to more like 80 per cent at Johnston, or any other British regional publisher.

The problem is that the transition is not easy. Mr Montgomery, not fondly remembered by journalists from his cost-cutting days at Mirror Group Newspapers, is unpopular in some countries, particularly Germany, where change has been resisted. So far margins have not advanced – 11.8 per cent at a group level, down from 12 per cent a year ago – largely because the present global economic weakness, particularly in Denmark, the company’s No 2 market, has offset all the gains made. Underlying earnings there were down 36 per cent to £9 million in the first half, even though several millions of savings were achieved. Denmark will recover eventually, but the worry is that it will do so at a point when another territory, such as Norway, Poland or the Netherlands, turns down.

There are also concerns over net debt, but at £546 million the burden was lower than expected. It sits at just over three times underlying earnings and analysts think that the company is able to trade within its limit of 3.75 times even if earnings ease off this year and next. If there was pressure, Mecom could offload its Norwegian business, which has attracted outside interest, although to do so undermines the purpose of the group.

Worries about the near-term outlook pushed the shares down 16 per cent to 18½p. That leaves Mecom trading at five times earnings, cheap for newspapers by historic standards but still at a premium to Trinity Mirror and Johnston. There is still merit in the model that European papers can be run more efficiently, but the British groups should recover faster in an upturn. Avoid.

H&T Group

Given what it does, H&T Group, the AIM-listed pawnbroker, is not the sort of company that might be expected to weight its first-half figures with caveats. But besides serving as an alternative lender, H&T is also a retailer – selling jewellery accounted for a quarter of last year’s second-half profits – and it is as susceptible to a consumer downturn as the rest of the high street. That explains why John Nichols, the chief executive, cited caution ahead of the important Christmas period.

Mr Nichols also emphasised that H&T has felt no benefit from the credit crunch, so far: most people who use pawnbrokers have never had access to the unsecured lending on which the banks have clamped down, he contends.

Yet H&T seems to be faring well all the same. Pawn service charges were up 19 per cent (it lends at rates of 8 per cent per month), retail like-for-like sales rose 14 per cent and earnings per share were 25 per cent ahead. As in recent years, growth continues to be driven by a steady store opening programme: H&T should have 100 sites by the end of the year.

If there is a concern, it is that the rise in gold prices that also helped first-half profits (uncollected jewellery is scrapped or resold) has begun to unwind. For that reason, H&T has decided, for the first time, to start hedging gold two years forward. The company is also finding it harder to make acquisitions than it envisaged when it issued new equity for that purpose last year: a high gold price has given potential vendors “unrealistic” expectations, it says.

At 177½p, H&T, which carries £34 million of debt, sits at eight times 2009 earnings, which, given the company’s own circumspection, feels about right. Pass.

Dignity Group

Shares in Dignity Group, Britain’s only quoted undertaker, are not known for moving fast or far. The predictability of its niche makes it one of the stock market’s more defensive investments, such that its trading pattern is more utility than retailer – the sector in which it sits. But its 3 per cent advance yesterday had nothing to do with a potential change in profitability. Rather, it was driven by takeover activity elsewhere – specifically, this week’s purchase by 3i of a 75 per cent stake in Mémora Inversiones Funerarias (MIF), a Spanish rival. First, the price paid by the British private equity house – 15 times operating profits – made Dignity look relatively cheap (it trades at 11 times).

Secondly, given that 3i has previously made similar investments at home, Dignity might now be considered a takeover target. Yet to buy Dignity on hopes of a leveraged buyout would be brave. Although it is larger than MIF – it has an enterprise value of more than £700 million – Dignity has emerged only recently from private equity ownership and carries £240 million of debt. This means that the attraction must sit with its safe-haven status, near-term growth prospects or ability to return cash to shareholders.

Progress on the outsourcing of local authority crematoriums remains painfully slow and, on most estimates, Dignity’s next special dividend is not due until 2010. In the meantime, rising costs and a slowing death rate could put pressure on earnings. That suggests that yesterday’s 740p, or nearly 18 times next year’s earnings and yielding less than 2 per cent, is a good point to take profits.

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