Market Report: Kesa feels pressure to pull plug on Italian division

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The Independent Online

Could it be time for Kesa Electricals to bid arrivederci to Italy? Having recently managed to exit the UK by selling its struggling Comet chain for the nominal price of £2, yesterday the retailer was under pressure to get out of another European country.

It was UBS which was pushing the idea, as scribblers from the broker claimed that a closure of Kesa's loss-making Italian business should boost the company's earnings per share by a whopping 25 per cent.

The perilous situation in Europe could prompt Kesa to make such a move, they suggested, arguing that although "any further eurozone crisis will be unhelpful for short-term fundamentals it may act as the catalyst for a potential restructuring of the business".

At the same time, the analysts decided it was time to start snapping up Kesa's shares, changing their advice to "buy". The electricals group has fallen about a third since February, which, they pointed out, meant the stock was not much higher than the freehold value of 48p a share.

Saying this should "provide a fair degree of downside protection", they added that with "a market leading French brand, no liquidity issues and solid cash generation there is scope for both valuation and sentiment to recover." In response, Kesa pushed up 2.25p to 57.65p, although this is still less than half what it was trading at this time last year.

GDP figures may have shown the UK economy is in a double-dip recession, but that didn't stop the FTSE 100 creeping up 9.4 points to 5,718.89 ahead of last night's latest statement from the US Federal Reserve. This was despite a number of stocks trading ex-dividend, including the British Gas owner Centrica and the publisher Reed Elsevier, which slid 12.3p to 310.2p and 13.5p to 512.5p, respectively.

Arm Holdings powered above 557p in early trading, following fantastic figures from its major customer Apple late on Tuesday, with the US technology giant shrugging off Wall Street's concerns to reveal that its net profits in the first quarter had nearly doubled.

Chip designer Arm has been out of favour recently, having closed on Tuesday at an eight-month low after announcing first-quarter results. The fall prompted a number of analysts to pledge their support, including Numis Securities' Nick James, who said it was a "buying opportunity".

Nonetheless, Arm was unable to hold on to all of its gains, closing only 6p ahead at 537.5p, while fellow Apple supplier Imagination Technologies climbed 1p to 687.5p on the FTSE 250.

Vedanta Resources took the gold medal position, advancing 50p to 1,225p following full-year results from its Sterlite business. The miners were strong generally, with Bank of America Merrill Lynch claiming that the surplus capital of a number of the largest blue-chip diggers – including Rio Tinto (up 65p to 3,480p) and Anglo American (up 52p to 2,360p) – meantthey could return a large amount toshareholders.

With reports claiming that the German pharmaceuticals group Bayer is nearing a multi-billion euro acquisition, dealers' minds turned to Shire, which has often been suggested as a possible target. Nonetheless, the drugs maker still ended 10p weaker at 2,002p.

While Kenmare Resources said it could expand its Mozambique heavy sands mine, there was yet more takeover talk surrounding the Irish digger, which has been linked in speculation recently with a possible move from Rio Tinto.

The miner shifted up 2.15p to 51.9p on the FTSE 250 after market gossips suggested Brazil's Vale (which also operates in Mozambique) could be interested as well, although traders treated the vague rumours with a pinch of salt.

The news that Abu Dhabi's National Drilling Company has decided it wants another two rigs alongside four already being built pushed Lamprell higher, with the oil and gas services company ticking up 21p to 343.6p in response.

Premier Oil put on 10.1p to 378.4p after the driller's development plan for its Solan field in the North Sea was given the green light by the Department of Energy and Climate Change.

Meanwhile, fellow explorer Afren slumped 6.1 per cent to 134p as the Africa-focused company admitted its Nunya-1 exploration well off the coast of Ghana had found water.

Fairpoint was celebrating a windfall after the AIM-listed debt advice group revealed it had been refunded £9m in VAT by HMRC. In response, it charged up 7p to 71.5p, with the company also announcing an expansion of its credit facilities.

Elsewhere, Tracsis surged 14.6 per cent to 78.5p as the transport software maker revealed that its full-year profits should beat forecasts – the second time it has said so in little more than two months.