Kwik Save may have been left on the shelf too long

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The Independent Online
Shares of Kwik Save, the nation's largest food discounter, collapsed 25p to 341.5p, their lowest since 1988.

Paul Smiddy, the retail analyst at Credit Lyonnais Laing, did the damage. With the stock market already uneasy about the chain's prospects, his view that Kwik Save could be forced to reposition itself as a neighbourhood stores operation touched a raw nerve.

Such a development would prompt an upheaval. Many stores would have to be closed, decimating profits for the year just ended.

Difficult trading has encouraged Mr Smiddy to cut his forecast for the year ended last month to pounds 81m, down pounds 5m. But he frets about exceptional costs from any round of closures. If Kwik Save does bite the bullet he reckons it could cost pounds 65m. For this year he is looking for pounds 74m.

It is all a far cry from Kwik Save's halcyon days when the shares nudged 850p and profits topped pounds 135m.

Then the market was tantalised by bid stories. Would one of the Continental groups which have arrived in this country strike or would Dairy Farm, the Hong Kong group with nearly 30 per cent of the capital, decide to bid for full ownership?

Nowadays the market would no doubt be prepared to accept an offer at, say 400p, with open arms. After its dismal record the company is friendless with many of its institutional shareholders hanging on hoping, without too much conviction, trading will improve.

Kwik Save's operations are caught between the growing power of the superstores, with their budget ranges, and the increasing strength of the Continental invaders.

For a long while the possibility Dairy Farm would look upon Kwik Save as its exit from Hong Kong buoyed the shares. But Dairy Farm has pointedly refused to keep the pressure on the group and would appear to be content to soldier on under the Chinese yoke.

The rest of the market enjoyed a swift upturn as fears of higher interest rates receded following the US decision to leave rates unchanged.

The FT-SE 100 index rose 25.2 points to 3,935.7 with P&O, after its reverse on Monday following fears of Brussels interference in its container ship merger with Nedlloyd, the Dutch group, leading the way. Stockbroker Panmure Gordon, encouraged by the Dutch link, hoisted a 676p year-end target price on the shares. The price rose 18p to 595p.

Panmure Gordon also took a shine to British Aerospace, up 13.5p to 1,051p. and Royal Bank of Scotland, where a projection of a 520p target lifted the shares 12.5p to 484p.

Great Universal Stores enjoyed ABN Amro Hoare Govett support, gaining 10.5p to 635.5p. The securities house is encouraged by the arrival of Lord Wolfson of Sunningdale as chairman and point to a sum of the parts valuation of 770p.

Imperial Chemical Industries was ruffled by a profit warning from a US chemical group, falling 8p to 820.5p.

Vodafone, off 3p at 219p, was the subject of heavy trading with Barclays de Zoete Wedd said to have undertaken a 19 million institutional deal at 215p, realising a 3p a share profit.

Granada, after its presentation and more expressions of interest in its trophy hotels, fell a further 12p to 858.5p.

Insurances remained active with Legal & General pushing ahead a further 9p to 794p on hopes of corporate action. BT fell 5p to 362.5p on reports it planned to mop up the Cellnet stake owned by Securicor, up 5.5p to 270p.

Hanson fell 4p to 152.25p, a 12-month low. New York grey market trading in its Millennium Chemical hive-off made a poor start.

Chiroscience, with talk of a Glaxo Wellcome bid, rose 13p to 370.5p. Senior Engineering, said to be a possible target for TI Group, improved 5.5p to 115p, a 12-month high.

BTG gave way to profit taking, falling 50p to 2,175p and Matthew Clark, the hard-pressed cider maker, lost a further 13p to 330.5p.

The arrival of John Towers, ex-Rover Group, as chief executive, pushed Concentric, the engineer, 27.5p higher to 197p.

Courtyard Leisure, a London wine bar business which has failed to sparkle since Roderick Sutherland, an ex-stockbroker, and Richard Capper acquired nearly 30 per cent, put on 1.25p to 13.25p. Messrs Sutherland and Capper run the Drum and Monkey bar/ bistro chain. They intend to change the company's name to Pemberton Group, move its shares to AIM and, it is thought, eventually pump the Drum and Monkey operation into the business.

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