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London's Small Cap index has now dropped to 1728.95 against 2486.35 a year ago – as a barometer the FTSE 100 has fallen from 5153.9 to 3616.1 over the same period. However, many analysts suggest the smaller shares market has been oversold, with many recruitment ventures, in particular, looking badly undervalued. Generally speaking, these outfits are regarded as bellwethers for the first stirrings of economic recovery.

Nice earnings at Spring and Northern

When the economy will turn is anyone's guess, but a number of recruiters rose on positive announcements this month. IT and general recruitment play Spring Group sprang up a penny and a half to 46p on a £15 million, three-year, managed services deal. The temporary staff contract was awarded by Cogent Defence and Security Networks, the UK division of aerospace outfit EADS, which is the world's second biggest aerospace and defence group. Now traded up to 49p, the business is worth £73.9 million.

Northern Recruitment's capabilities in the public and not-for-profit sectors steered the Newcastle-based venture to strong first-half profits. The shares ramped up 18 per cent to 39.5p on the day of its figures to December, which showed pre-tax profits 168 per cent ahead at £0.6 million and earnings per share up 175 per cent to 2.2p. Chief executive Lorna Moran flagged up strong cash generation and some good growth in the permanent recruitment area. At the present price, the shares are trading against year's peaks and troughs of 49.5p and 27.5p.

The battered shares of 'global resource solutions' group Harvey Nash, marked down from a 143p 52-week peak, received a brief tonic on a pre-close update from chief executive David Higgins. He says annual profits to January 2003 before taxation, goodwill and exceptional items will hit forecasts. For an idea of what to expect, Numis analyst Paul Jones has losses of £300,000 pencilled in, with a £400,000 profit shaded in for 2004. Though some City analysts see Harvey Nash as a definite recovery play, its debts of £9.3 million (at the interim stage) are causing others concern.

In the construction and building sector, Countryside Properties perked up 8p to 173.5p on a bullish AGM statement. The house builder and 'leading developer of sustainable communities' revealed that forward sales of new homes are currently running 10 per cent ahead of the same time last year. In the year to September, the group posted a £34.3 million pre-tax profit. Analysts expect around £37 million in pre-tax profit this year, and earnings are set to come in at 34.2p. At 173.5p, the shares look attractive on a mere 5 times predicted earnings.

Over in the retail sector Homestyle Group ramped up 17.5p to 161p on a debut share buy-back – it has permission to repurchase up to 5 per cent of its stock, or 3.4 million shares. It recently bought back 250,000 for cancellation at £1.40-a-pop.

Chemical balance and imbalance

Victrex, the chemicals play that makes an advanced plastic resistant to heat and chemicals, has been doing its level best to attract investors attention. Shares in the business firmed 2p to 245.5p on an agreeable AGM statement from chairman Peter Warry. He says the increased sales volumes flagged up at the full year stage have been sustained during the first half to March – if current rates continue, volumes should hit 700 tonnes. This compares to the 557 and 648 figures achieved in last year's first and second half respectively. The interim numbers are out in early April.

Heading in the opposite direction was fledgling firm Scapa, the maker of technical tapes for the cabling, printing, automotive and construction industries. The shares shed 15 per cent to a new low of 18.5p on the group's third profit warning in as many years. Apparently pre-tax profits before exceptional items and goodwill for the year to March will be £2 million less than market expectations. Before the news, analysts had £6.9 million pencilled in for the year. Scapa has suffered from tough trading in its European and UK markets, and the weakening of the US dollar against the pound will cut operating profits at its North American operations on translation.

Restructured Alumasc has yield attractions

Engineer Alumasc raised underlying sales and profits in the half to December, with continuing profits perking up by 57.6 per cent to £3.8 million and earnings up 57.4 per cent to 7.4p a share. These numbers excluded Alumasc Grundy, the closed beer barrel manufacturing and repair operation and Leonardo Internet, a recently sold web design business.

For the year, Williams de Broe analyst Steve Medlicott envisages profits of £7.5 million before goodwill, giving earnings of 14.9p and an 8.5p dividend. So at 120p, the shares are trading on 8 times forward earnings, looking good value and yield an attractive 7 per cent. You should buy-in ahead of the full-year figures.