Market Report: French Connection clicks with Evolution

Click to follow
The Independent Online
French Connection was flavour of the day among City punters yesterday thanks to some punchy comments from Evolution Securities. Nick Bubb, the retail guru at the broker, thinks the retailer will either get its act together in the spring or its chairman Stephen Marks will make a bid to take the group private. Such talk left FC stock 20.5p better on the at 260p.

French Connection was flavour of the day among City punters yesterday thanks to some punchy comments from Evolution Securities. Nick Bubb, the retail guru at the broker, thinks the retailer will either get its act together in the spring or its chairman Stephen Marks will make a bid to take the group private. Such talk left FC stock 20.5p better on the at 260p.

"French Connection is our each way bet for 2005. Either Stephen Marks will get the spring range right to drive recovery or he will take the company private," Mr Bubb said. He believes the group's chairman, a major shareholder, will have little trouble raising the cash required for such a move from private equity firms, given FC's strong cash flows, and could easily afford up to 300p a share to clinch the deal.

According to the Evolution analyst, early indications suggest that FC's spring range will not disappoint. Should this prove to be correct, the company will easily be able to top the £33m of profit he currently forecasts it to achieve for this year and next.

Elsewhere in the retail arena, Marks & Spencer fell 6p to 338p amid rumours that the retailer will have to bring forward its post-Christmas trading statement to warn of disappointing sales over the festive season. However, sources close to M&S tried to play down this speculation. As it stands, M&S is expected to issue its update to the market next Wednesday.

WH Smith, 7.75p higher to 317.75p, was supported by talk that the group's upcoming trading statement, expected to be on 27 January, will boast of improving profit margins. Seymour Pierce believes that if this proves to be true, the retailer should meet the City's profit forecasts despite flagging sales. This will disappoint bears of the stock who in the run-up to Christmas seemed convinced that a profits warning at Smiths was inevitable.

Meanwhile, Brown & Jackson dropped 1p to 61.5p, with traders betting that the value retailer is likely to have had a poor Christmas. They pointed to Tuesday's disappointing news from Woolworths, which is in a similar segment of the retail world as B&J, as the main reason for this stance.

There was brisk trade in Reuters, down 7.75p 364.25p. Dealers reported the build-up of a large short position in the information provider before next week's trading update from the group. However, this bear stance goes against recent analyst comment on the company. At the end of last month, Credit Suisse First Boston tipped Reuters' forthcoming statement as very likely to impress investors, while yesterday JP Morgan raised its price target to 430p from 400p along with its earnings forecasts.

SSL International, which at the start of the session changed hands at just 313p, rallied in the afternoon to close 5p higher on the day at 324p. Bid speculation has surrounded the condom maker since the middle of December and, according to yesterday's talk, news of an offer for the group could be imminent. Those interested in buying the company are said to include German's Biersdorf, Reckitt Benckiser and Energizer of America.

Meggitt, down 5.5p to 256p, came under selling pressure after UBS slashed its earnings forecasts to take account of the weak dollar.

Charles Stanley added 7p to 271.5p, with the stock brokerage said to be benefiting greatly from the recent bull run in equities. The number of trades executed through the broker is said to be well up on the year. Ennstone added 1p to 38.25p on whispers the integration of its Johnston Group acquisition is going well. Gossips reckon the deal may well generate higher cost savings than originally thought.

Bear raiders once again dug their claws into Jarvis, down 0.24p to 29.01p. They are convinced that a debt-for-equity swap is inevitable at the support services group and the current price of Jarvis debt certainly supports this view. Bankers report that it currently changes hands at between 50p and 60p in the pound.

Bulgarian Property Developments enjoyed a strong performance on its second day of trading on AIM, rising 18p to 98.5p. The recently formed company raised £4.5m at 50p and will use the cash to finance various property development projects in the former Soviet bloc country.

Bulgaria's economy has enjoyed an amazing transformation over the past decade, leaving the country on course to join the European Union in 2007. Yet its property prices remain remarkably low. In the capital, Sofia, residential property sells at roughly £67 to £82 per square foot compared with £1,000 per square foot in some parts of London.

Finally, word has it Internet Music & Media, steady at 47.5p, is close to securing a reverse takeover which will see a private business rolled into the cash shell. Brokers reckon a deal is imminent.

Comments