Kesa debut fails to set market alight

Shares in Kesa, the electricals retailer spun out of Kingfisher, received a muted welcome from investors on their first day of trading as an independent company.

Shares in Kesa, the electricals retailer spun out of Kingfisher, received a muted welcome from investors on their first day of trading as an independent company.

The demerged stock opened at 192p per share, after a one-for-five share consolidation, towards the top end of City expectations. The shares soared briefly to 202p in early trade but later fell back to close up 0.5p at 192.5p. That gives the company a market valuation of £1.1bn and a place in the FTSE 250.

About one in 10 Kesa shares changed hands in what analysts said was lighter than anticipated trading. Nick Bubb, at Evolution Beeson Gregory, said: "People are holding on to them either because of takeover rumours or they are not switching into Dixons because of extended warranty fears." Goldman Sachs said that while the company was "unlikely to get a premium rating ... not owning Kesa risks missing a cyclical upswing, or an opportunistic bid".

Kesa, which owns Comet in the UK and Darty in France, has been cast adrift in a tough market for electrical retailers. In the UK it is awaiting the outcome of a competition investigation into extended warranties, the cornerstone of Comet's profits, while in France both Darty and BUT, a furniture chain, have been plagued by weak consumer demand.

Underlying sales at Kesa fell in the first quarter, while retail profit slumped 16 per cent.

Kingfisher's shares climbed 5 per cent to 284p after HSBC and JP Morgan upgraded the slimmed down group. Analysts' share price targets for Kesa spanned a range from Evolution Beeson Gregory's 165p per share to CSFB's 240p.