Jessops shares tumble on market debut

The photography retailer Jessops made an unconvincing stock market debut yesterday after its shares tumbled despite an 11th hour decision to slash its valuation.

The photography retailer Jessops made an unconvincing stock market debut yesterday after its shares tumbled despite an 11th hour decision to slash its valuation.

In an attempt to avoid an embarrassing repeat of its pulled flotation in 2000, the group cut its listing price to 155p - down from an indicated range of 185p to 210p. Shares in the company fell 5p to 150p yesterday, giving it a market capitalisation of just £154m, compared with a potential £216m it had listed at the top of its indicated price band.

ABN Amro Capital, the Dutch bank's private equity arm that acquired Jessops in a £116m secondary buyout two years ago, had wanted to sell down its holding in the group entirely but weak demand forced it to retain an 18 per cent stake.

Jessops joins a string of companies, such as Umbro, Virgin Mobile and Premier Foods, which have had a lacklustre start to life in the public arena.

Although the digital photography market is expected to expand from £2.2bn to £2.7bn by 2008, competition from rival camera sellers is intense, analysts said.

Existing shareholders in Jessops, including Tim Brookes, who was part of the original management team that bought out the Jessops family in 1996, raised £23.2m from the share sale. ABN Amro Capital is understood to have raised about £13m from the sale.

Derek Hine, the chief executive, is thought to have cashed in some of his stake, worth up to £2m, but the management team have retained the "vast majority" of their shareholding, leaving them with a 6 per cent stake in Jessops, a company spokeswoman said. Mr Hine said that despite "uncertain stock market conditions for IPOs" he felt investors shared the company's views on the potential for the future of digital photography.

"As a publicly quoted company, we look forward to building on our position as the UK's No 1 specialist photographic retailer," he added.

Jessops had to issue 8 million extra shares to raise the £96.8m it required to pay off its debt once it had covered its flotation expenses. It sold 77.3 million shares under the offer, raising £120m. About 75 per cent of its 102.8 million outstanding shares following the offer would be in public hands, it said.

The company made underlying profits of £19.5m in its last financial year on sales of £319m. Its shares are on a price/earnings ratio of about 11 times, analysts estimated - a slight discount to the sector.