FTSE in-depth: Sparks to fly at Kesa Electricals
One way or another, sparks could soon be about to fly at Kesa Electricals.
Eye on the market: The Footsie retreated 34 points to 5,942.69 although Wall Street rose 35 points.
Shares of the third largest UK electrical retailer were chased up to 147.5p on revived talk of a private equity bid, and then blew a small fuse when late gossip suggested that tomorrow's pre- close trading statement could contain another profits warning.
Profit-taking left the close still 1.9p better at 139.1p.
Kesa has been a target of activist investor Knight Vinke - once the scourge of HSBC and Royal Dutch Shell - for almost a year.
It has amassed an 18% stake and is said to be hell-bent on instigating widespread changes at the struggling group or flush out a bidder.
Kesa last updated the market in mid-January when it stated that pre-tax profits were expected to be ahead of last year, but towards the end of prevailing market expectations of £98-£119m. Comet sales were down 7.3% like-for-like over the 11 weeks to January 18 and margins were down 140 basis points.
Sector analysts believe that Comet in the UK, which accounts for 30% of revenues, has proved difficult to turn around and trade has probably deteriorated further due to the increasingly tight competitive environment.
Broker Shore Capital says Comet is expected to post a loss for the year and it fears that the strategy of store improvements is not delivering the expected returns. Comet's managing director Hugh Harvey recently left the company to 'pursue other interests' to be replaced by commercial director Bob Darke.
By contrast, Darty of France, which represents almost 50% of group revenues, could prove to be the saviour for Kesa. Trading across the Channel has apparently proved resilient with sales and margins having largely been held.
Rival Dixons Retail, which reports a day later, edged up 0.33p to 15.585p. It has already confirmed that profits will be below the previous year and so dealers are hopeful that this time there will be no nasty surprises.
On the other side of the High Street, baby retailer Mothercare rose 8.7p to 425.7p. A weekend report suggested that the group has issued a list of 121 UK stores - including 31 high priority loss-making stores - which could possibly be sold as part of its store portfolio restructuring strategy.
Mothercare recently issued a profits warning and broker Seymour Pierce says it now remains concerned that its UK business is under structural pressure from the supermarkets and management action so far has failed to alleviate both sales and gross margin-pressure. As the spectre of eurozone debt raised its ugly head again with credit rating agency Standard & Poors downgrading Greece's debt rating from BB to B on fears of an imminent restructuring, dealers took some money off the table.
The Footsie retreated 34 points to 5,942.69 although Wall Street rose 35 points in early trading.
Software and computer services group Misys stood out with a gain of 26.5p to 343.35p. A Credit Suisse buy recommendation prompted early buying and then vague rumours of a bid approach sent hungry punters piling into the stock. Privately-owned hedge fund ValueAct Capital is the major shareholder with 20.2%.
After Numis upgraded to add from reduce and lifted its target price to 1765p from 1290p, Autonomy climbed 63p to 1675.5p. The broker is confident that the group is well positioned to deliver an earnings upgrade on a 12-month view.
Buying on hopes that Thursday's full-year results will contain good news on the telecom giant's pension deficit helped BT buzz 2.2p higher to 196.8p.
Namakwa Diamonds sparkled at 46.13p, up 3p, after announcing its Kao operation is due to commence commercial production in September. Charles Stanley Securities' analyst Kieron Hodgson says it will be a strong catalyst for the shares as output is expected to increase tenfold by 2014. The target price is 75p.
Reflecting a return to profitability at the half-way stage, broker XCap Securities added 0.25p at 4.88p. Market making contributed £1.9m of the £2.1m profit before unallocated costs.
Mediterranean Oil & Gas improved 1p to 11.88p following completion of a £1.9m financing at a deeply-discounted 6p a share, which pays off the Bank of Scotland and meets operational expenditures.
New investors include Och-Ziff and Blueglod, experienced investors in the oil and gas sector. Andrew Cochran, chief executive of Dominion Petroleum and co-founder of Salamander Energy, will be new chairman.
JSJS Designs firmed 0.13p to 0.9p after signing a deal that sees Siemens sell JSJS products through its consumer electronics division, Electrium.
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