Market Report: Carphone profits expected to impress City

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Carphone Warehouse was on most traders' buy lists yesterday as word spread across the Square Mile that tomorrow's full-year results from the mobile phone retailer to fixed line operator are set to impress. Carphone finished the day as the top FTSE 250 performer, up 7.5p to 145.5p, as traders scrambled to get their hands on the stock.

Carphone Warehouse was on most traders' buy lists yesterday as word spread across the Square Mile that tomorrow's full-year results from the mobile phone retailer to fixed line operator are set to impress. Carphone finished the day as the top FTSE 250 performer, up 7.5p to 145.5p, as traders scrambled to get their hands on the stock.

So what can investors expect from the group tomorrow? Well, a sharp jump in profits for one. At the pre-tax level, analysts expect a profit of £75m, up from £57m last year. Carphone is now the UK's largest carrier pre-select operator (CPS), with a market share of around 12 per cent. The group's results should see it boast that this figure continues to rise as its CPS business TalkTalk scoops extra new customers. Meanwhile, the division will be enjoying falling costs after BT reduced the amount it charges rivals for the use of its exchanges.

Analysts believe the UK CPS market is far from mature, leaving plenty of room for further growth at the business in the years ahead. And Carphone has already started to move into the fixed line telecom market abroad. It is looking to export a variant of its TalkTalk formula in Spain and recently secured the acquisition of a fixed-line operator in Switzerland. On the retail side, investors can expect continued growth from Carphone as consumers continue to rush to its stores to get their hands on the latest mobile handsets.

Elsewhere among second liners, HHG rose 1.75p to 44.75p as UBS moved its best clients into the insurer. Setting a 54p price target on the stock, the Swiss broker argued that HHG should be able to add value by stabilising its life business and noted that the group's fund management operations should be benefiting from the recovery in global markets over the past 12 months.

Short sellers, traders who profit from a fall in a company's share price, moved in on Regus, down 3.5p to 58p. They believe that Robert Bonnier, the former Scoot.com boss, will have to so reduce his 8 per cent holding in the office space group after sustaining heavy losses from his share deals in Eidos. Short sellers were yesterday not quite as bold with their attack on Regus as they have been in the past. Back in 2002, they moved in on the company en masse, at a time when Regus looked to be on its last legs, but sustained heavily losses after the group secured extra funding.

Geest dropped 20p to 565p after new shareholder Bakkavor formally said it was not looking to launch a takeover of the food group. Bakkavor, a fellow chilled foods specialist, picked up a 10 per cent holding in Geest last week. The Icelandic group says its stake represented a "long-term strategic investment". Brokers believe that Bakkavor's declaration makes a bid for Geest unlikely within the next six months.

In the FTSE 100, ICI gained 2.75p to 221.5p after UBS upgraded its recommendation on the chemicals giant to "buy" from "neutral". The broker was upbeat about ICI's prospects with John McAdam as its chief executive. "McAdam's hands-on management style and wide experience should help improve the performance of the company", the Swiss broker argued. UBS believes concerns over costs at ICI, because of its exposure to the oil price, have been overdone and so it set a 260p price target on the stock. The wider blue-chip FTSE 100 index finished the day 8 points lower at 4,422.7.

Filtronic, the telecom equipment specialist, was hit by a downgrade from Goldman Sachs and closed 9p weaker at 292p. The heavyweight US broker believes Filtronic shares are unlikely to excite in the run up to August's full-year figures from the group.

Lower down the pecking order, something of a buzz surrounded Speedy Hire, steady at 405p, ahead of tomorrow's full-year results. Gossips reckon the figures will be a bullish affair and could well beat City expectations. Positive talk also surrounded Christie Group, 3p better to 102.5p. All three of the company's divisions are said to be performing strongly.

3DMWorldwide dropped 12p to 107p as investors took the view that shares in the plastics developer are greatly overvalued. They may have a point. Even after yesterday's drop, 3DMWorldwide is valued at £70m. However, according to its last set of annual results, the company has sales of just £400,000 and is loss making. Texas Oil & Gas was unchanged at 21.5p despite talk of positive news from the explorer in the coming weeks.

And finally, Jack Petchey, the veteran property investor, looks set to cash in a profit of almost £4m after Estates & General, the South-east offices group, unveiled a 255p a share offer from Winten, the trading arm of Leo Noe, which owns St Katherine's Dock in London. Mr Petchey owns a 15 per cent stake in the group, which he acquired over the past six months at a price of between 145p and 170p. The offer values the company at £71m and Mr Petchey's stake at more than £10m.

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