Yesterday's trading: Jessops picture not pretty

By Geoff Foster for MailOnline
Updated: 02:21 EDT, 15 May 2007

The picture at Jessops suddenly became a lot bleaker as the struggling digital camera retailer confirmed it was delaying its half-year results, which were due today, until the second or third week of June.

Alarm bells rung as dealers took the view that a company which has already hit the market with three profit warnings this year would never ever delay good news. So it appears that long-suffering shareholders should brace themselves next month for yet more depressing details about deteriorating trading and debt levels. The shares retreated from 22p to close ¾p dearer at 20½p.

Paul Rossington, analyst at KBC Peel Hunt, is a seller. He warned in March that unless management could perform the turnaround of the decade, the latest profits warning could potentially prove terminal.

He forecasts a first-half loss of £8.5m and expects debt at the half-year to be significantly higher than the group's full-year forecast of £52m, and will be in excess of £60m. That rules out private equity takeover interest, whilst the declining nature of the group's key underlying market cannot be attractive.

New chairman David Adams, the former boss of House of Fraser, recently attempted to reassure investors. He said that Jessops is not on the brink of collapse adding: 'I wouldn't have joined if it was about to go bust'.

Fine. But its bankers HSBC will definitely not want to throw more good money after bad and could decide to pull the plug on loans. A rescue rights issue could be the only answer, but at what price? It would certainly have to be at a heavy discount to the current price to stand any chance of success.

Jessops has been savaged by the intense competition from online retailers and the growing popularity of mobile phones equipped with cameras.

There were early smiles on the faces of dealers as the Footsie flirted with the magic 6600, but they soon vanished when the premier index lost a 30-point gain on profit-taking ahead of today's key inflation numbers. It traded 35 points lower at one stage before closing 10.2 off at 6555.5. Wall Street advanced a further 57 points at the outset to a record 13,383.6 on hopes that US interest rates have peaked following Friday's benign US inflation data.

Aggregates giant Hanson jumped 20½p to 1057p on whispers that a private equity buyer is sniffing around and will counter any offer tabled by HeidelbergCement. Dealers still await terms from its German admirer.

Financial Times owner Pearson rose 17½p to 908p after UBS upgraded to buy from neutral following rampant takeover activity in the media sector of late. It lifted its target price to 1050p from 875p. Pearson has acquired eCollege, a company that develops online degree programmes for universities, for around £240m.

On the other tack, UBS downgraded Lonmin to neutral from buy. The shares plummeted 135p to 3790p after the broker slashed its current year earnings estimates by 14% and for 2008 by 12% following recent disappointing interim figures, ongoing cost pressures, lower future production forecasts and some continuing operating risks.

On hearing that mining giant Rio Tinto has lined up Morgan Stanley to defend itself against a possible bid, dealers took profits in last week's favourite and the close was 127p lower at 3525p.

Green stocks were all the rage after reports that Gordon Brown wants to raise his green profile and plans to spend £25bn on environmentally friendly projects. Climate Exchange, which runs Europe's main exchange for trading credits for reducing carbon gas emissions, soared 75p to 1625p. Ceres Power, the fuel cell business that develops alternative energy products for global mass markets, rose 8p to 231p.

ITM Power, developer of fuel cell technology, added 10¼p at 145¾p.

Stockbroker Bridgewell lost 6½p to 123½p amid speculation that Teather & Greenwood, believed to now be the only bidder in town, cannot agree a price.

Meanwhile, dealers expect today's £700m flotation of broker Hargreaves Lansdown to go well. Cantor's equity guru David Buick believes the IPO to have been fully underwritten at 160p - the top end of the indicative range. Cantor's grey market spread last night was 165p (to sell) - 168p (to buy).

Relegation from the Premiership and the prospect of £30m in lost revenue next season left Sheffield United sick as a parrot at 13¼p, down 4¾p.

• Dealers expect DiamondTech will give a sparkling performance when dealings commence on AIM today at 12½p.

The firm, in which entrepreneur Andrew Regan holds around 17% via his quoted vehicle Corvus Capital (1p off at 24¾p), is a holding company of a group of firms that own intellectual property rights to the laser recovery unit, an innovative diamond sorting machine.