The Market Report: Toy maker plays the excuses game
Won't somebody think of the children? In these uncertain economic times, even sales of toys and games are not escaping the pain on the High Street – and apparently the Queen is to blame.
Not just Her Majesty, actually, but also the world's greatest sportsmen and women, according to Character Group. The Aim-listed toy maker issued a profits warning yesterday which it blamed on a lost list of excuses, with the Diamond Jubilee, Euro 2012 and the Olympics - plus of course the weather and eurozone crisis - all apparently conspiring to hit trading and mean its bosses no longer expect to meet their forecasts for the year.
Character specialises in products based on kids' favourites such as Doctor Who and Rastamouse, but even its Bob the Builder action figures have not been able to fix its woes as shops cut prices and push back orders.
The initial response of Merchant Securities' Amisha Chohan was to advise investors to sell the stock, with the analyst saying the company was struggling partly because of a shift within the toy market towards high-tech products.
However, with Character's share price dropping about 15 per cent during trading, Ms Chohan decided to reinstate her "hold" recommendation, pointing to its decent dividend. Meanwhile, traders were highlighting the company's ongoing buyback programme – yesterday it snapped up £93,000 worth of shares – and by the bell it had achieved a recovery of sorts, albeit still closing 10p weaker at 126p.
Overall, the FTSE 100 managed its second strong day in a row, rising 54.05 points to 5,627.21 after having added nearly 75 points on Thursday. A lack of bad news from the United States' latest GDP data helped, as did continuing hopes that central banks in the States and Europe may introduce further stimulus measures.
Barclays finished at the top of the leaderboard, soaring 13.4p to 167p after its first-half figures came in ahead of forecasts – Shore Capital's Gary Greenwood was advising investors to "use recent share price weakness to close underweight and short positions".
One of the stocks in the red was Anglo American, which retreated 70p to 1,894p as its interim results missed expectations. The heavyweight miner also admitted its Minas Rio iron ore project in Brazil will now not start production until the second half of 2014 at the earliest, at least a year later than first thought.
Despite Homeserve denying last month it was, and had not been, involved in takeover talks after reports claiming it had received a number of private equity approaches, Morgan Stanley's analysts were running the rule over the emergency call-out insurer's bid potential.
In an analysis of "hypothetical transaction scenarios", they said private equity firms could "see a rationale for making an offer" and could achieve an internal rate of return of 20 per cent from a deal, even if they paid up to 350p a share. However, they also reiterated their "equalweight" rating, warning that the Financial Services Authority's investigation into allegations of possible mis-selling by Homeserve "could be an overhang lasting 9–18 months", although it still advanced 8.4p to 203.2p on the FTSE 250. At the same time, Invensys was having its bid potential played down. Analysts from Barclays Capital downgraded their advice on the engineer to "equal-weight", arguing its "current pension structure reduces the likelihood" of M&A activity.
Electronics retailer Dixons charged up 1p to 16.02p after John Lewis' weekly trading figures once again impressed, with the department store revealing sales of TVs in the run-up to the Olympics were up 19 per cent year-on-year.
Thomas Cook dipped 0.5p to 16p on the small-cap index amid caution ahead of its upcoming third-quarter results, with scribblers from Citigroup predicting "another weak quarterly performance" and cutting their earnings forecasts.
On Aim, ENK surged up 3.88p to 17.62p after revealing it had received an approach from an unnamed suitor which it said could lead to an offer being made. However, the nickel miner warned that a "significant premium" would be required.
UBM 652.5p (up 45.5p, 7.5 per cent) The City applauds media group's results, which show a 13 per cent jump in operating profits over the first-half, while bosses say it could sell its data services business.
William Hill 311.1p (up 20.7p, 7.13 per cent) Bookie finishes the session near the top of the mid-tier index's leaderboard after saying its profits for the first six months of the year had risen by 13 per cent.
New World Resources 300.7p (down 11p, 3.53 per cent) Czech coal miner ends up clutching the wooden spoon despite saying it remains on course to meet its production and sales targets for the year.
AG Barr 425p (down 5.7p, 1.32 per cent) Irn Bru-owner falls after admitting its profits for the first-half of the year will be just below what it managed over the same period twelve months previously.
Lloyds 30.21p (up 1.07p, 3.67 per cent) Bank given a push higher by analysts from RBC reiterating their "outperform" recommendation, although they do trim their price target to 44p from 50p.
ITV 78.2p (up 2.35p, 3.1 per cent) Broadcaster continues to advance following its interim results on Thursday, despite Berenberg keeping its "sell" advice and cutting its target price to 79p.
Pearson 1,230p (down 64p, 4.95 per cent) Publisher is left in last place on the top-tier index after revealing its operating profit for the first-half of the year dropped 10 per cent.
Rolls-Royce 875.5p (down 9.5p, 1.07 per cent) Engineering giant eases back despite scribes from both Natixis and Barclays raising their target price on the stock to 950p and 935p respectively.
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