Yesterday's trading: Communisis sell off likely

By Geoff Foster for MailOnline
Updated: 04:01 EDT, 28 August 2009

A 'for sale' sign was effectively hoisted above Communisis as the accident prone Leeds-based specialist printing group announced the unexpected departure of chief executive Steve Vaughan along with a dire set of interim results.

Geoff Foster: Dealers took some profits off the table ahead of the long bank holiday weekend

First-half operating profits crashed 64pc to £2.7m and net debt soared 89% to £24.8m.

The shares eased a penny to 20½p and would have fallen a lot further but the increased chances now of a takeover bid provided a welcome cushion. The year's high was 155¾p.

Major shareholders, which include activists Aberforth, JO Hambro and SVG, have to make do with an unchanged dividend of 0.86p.

They were shocked by news that Vaughan is jumping ship because they had backed him in a big way to turn the company around.

He arrived in a blaze of glory three years ago after masterminding the restructuring of IT group Synstar and its sale to computer giant Hewlett Packard.

Vaughan's early medicine of selling off low-margin businesses to focus on a direct mail marketing campaign worked, but trading performance has fallen away badly during the economic downturn.

July saw yet another profits warning when Vaughan cited a fall in direct mail volumes and large clients delaying spends on its high margin services such as data analysis.

One fund manager said: 'Communisis should have been sold to a bidder for 80p a share a year ago. Now its sale price will be a lot lower, around 30p. Nevertheless, longterm shareholders will probably be happy to take that.'

Trade sources recently suggested that Print manager Webmart was seeking partners to launch a bid for the print management arm of Communisis. A break-up could be the answer. Broker Panmure Gordon is a seller and has a target price of 15p. Analyst Paul Jones remains concerned about 2009's final dividend and that for 2010 as well given the indeterminate outlook.

Hip replacement group Smith & Nephew skipped 23½p higher to 533½p on a revival of the ancient tale that Johnson & Johnson, the giant American medical devices and consumer packaged goods manufacturer, is stalking the group.

Dealers decided to take some profits off the table ahead of the long bank holiday weekend. The Footsie declined 21.23 points to 4,869.35 and the FTSE 250 81.88 points to 8,701.33.

Wall Street lost 80 points despite stronger-than-expected second-quarter gross domestic product data. It showed the world's largest economy in not getting any worse, but that fact has already been well discounted by the market.

A Nomura recommendation, after Kazakhmys reported in-line interims and said it expects to beat full-year output targets, helped the giant copper producer climb 19½p to 937½p.

Keefe, Bruyette & Woods reckons Barclays (5.9p up at 368.95p) remains the most compelling UK domestic bank. Revenues at Barclays Capital continue to impress and, as credit write-downs subside, the broker sees a more meaningful effect at the bottom line. It has lifted its target price to 410p.

All bets were off for online gaming group 888 Holdings as the shares fell 7.6p to 88.8p on disappointing interim results. First-half revenues fell to £72m from £80m and pre-tax profits dipped to £5.9m from £11.7m.

Shares of upmarket estate agents Savills, 30.3p down at 339.4p, were demolished by news that the interim dividend payment had been slashed by 50pc to 3p following a collapse in first-half pre-tax profits to £2.5m from £19.2m. The board cited its diversification strategy for the sharp fall, while chief executive Jeremy Helsby attempted to stop the rot by saying the company was on track to achieve at least £50m of savings by the year's end.

Reflecting an interim profits performance which was well ahead of analysts' expectations, industrial engineer IMI soared 53½p to 431¾p. Trading profits of £97.4m was significantly ahead of consensus estimates of £74m. Full-year forecasts will have to be raised.

Investment manager Henderson cheapened 2¾p to 120.9p after reporting first-half pre-tax profits of £27.1m in line with guidance of £25m-£28m given to the market in July. The dividend was maintained at 1.85p.

Speculative demand fuelled by talk of a Chinese joint venture deal lifted European Nickel 3p to 11p.