Investors in Mike Ashley's Sports Direct International had another tricky ride yesterday, on fears the company will warn about trading prospects for 2008 when it issues its results next week.
Nick Bubb at Pali International said: "Rumours are growing of another profit warning on the way, given poor trading in the core UK business, but we suspect this will be even worse than the market fears. An update [today] from rival JJB Sports will provide some clues as to the competitive nature of the industry. We still see plenty of downside risk in Sports Direct."
Philip Dorgan at Panmure Gordon advised clients to sell: "The preliminary results due next week will bear close examination. Recent results have featured significant contributions from other factors such as property profits and fair value adjustments. Crucially, we have to hope for less ambiguous language than was used in its last trading statement."
The shares have slumped since their flotation at 300p in February, when Mr Ashley cashed in to the tune of more than £900m. Since then investors have been anxious about its appetite for acquisitions as well as a number of management issues that culminated in the departure of chairman David Richardson at the end of May. On top of that came Ashley's extra-curricular activities, such as buying a stake in Adidas and agreeing to take over Newcastle United, coincidentally one of three football clubs visited by police yesterday as part of an investigation into alleged corruption.
After falling as low as 185p yesterday, Sports Direct's shares ended 0.75p up at 192p. JJB fell 9.75p to 247p ahead of today's statement.
The FTSE 100 fell 19 points to 6697.7, despite Wall Street shaking off worries about the repercussions of the US subprime mortgage problems.
Miners were mainly responsible for the decline. Platinum specialist Lonmin was the biggest faller in the leading index, down 293p to £39.85 after cutting its full-year sales forecast. BHP Billiton fell 18p to £15.09, awaiting news as to whether it would bid for US aluminium group Alcoa, while Xstrata lost 61p to £33.61.
Mobile phone group Vodafone, under pressure from activist investors, was the day's top speculative story. After an early rise thanks to Lehman Brothers setting a 180p target, the shares slipped back on a report the company was considering a $160bn bid for its US partner, Verizon. Despite Vodafone's immediate denial, its shares lost 1p to 162.2p.
BT was 4.5p better at 334.25p after positive noises from Merrill Lynch. "BT's recent under-performance relative to Vodafone and the FTSE provides an opportunity," the bank told clients. "BT has virtually no US dollar exposure and 90% of profits are generated in the UK."
Mortgage bank Alliance & Leicester added 28p to £11.52 ahead of half-year results at the end of the month. There was also continuing speculation of more consolidation in the banking sector.
Speaking of which, a consortium including Royal Bank of Scotland duly raised its offer for ABN Amro to €71.1bn, topping a bid from Barclays. RBS dropped 3.5p to 636.5p, while Barclays was 4p better at 728.5p on the theory that if it lost out in the battle to buy ABN, it could end up a bid target itself.
Plumbing and building materials group Wolseley announced a 5% dip in profits for the first 11 months of the year and warned that the US housing market is likely to remain difficult. But after recent weakness the shares added 15p to £11.70. Citigroup said the trading statement was much as expected and maintained its buy recommendation with a £16.80 target.
Pharmaceutical business GlaxoSmithKline rose 21p to £13.10 after JP Morgan upgraded to neutral from underweight. While not offering a ringing endorsement, the bank said the shares had reached fair value after a recent sell-off.
The publisher Pearson profited from a recommendation from Bear Stearns, adding 9p to 834p. Reed Elsevier rose 11p to 675p. After the market closed it announced the $4bn sale of its US education business to Houghton Mifflin Riverdeep. Emap edged down 1p to 836p after it sold its Irish radio stations for £135m to Communicorp Group.
Medical group Northwest Biotherapeutics lost 25p to 195p. Its shares jumped last week when it announced Swiss "authorisation for use" approval for its vaccine for brain cancer. Yesterday it revealed that the "authorisation" did not involve the Swiss authorities actually evaluating the safety or efficacy of the treatment, and an application for this process would not be made until the end of the year.
Finally, support services company Carter & Carter recovered 10.75p to 62.75p after Friday's plunge in the wake of its second profit warning in two weeks, with retail investors said to be keen buyers. But in a note UBS said: "The [profit warning] is clearly very disappointing coming so soon after the last one. In particular, we believe the market will have been surprised by the fact the warning largely comes from [the apprenticeships business], where we have been led to believe visibility was reasonably good."
Shower power
Norcros, the consumer products group best known for its Triton showers, made a successful return to the stock market yesterday after a seven-year absence. Dealers said there were a few last-minute jitters, mainly due to worries about the effects of a consumer slowdown on the company's business. But its private equity owner Bridgepoint, which backed a £171m management buyout in 2000, put these concerns aside and pressed ahead with the float. About 128m shares were placed with institutions at 78p each, giving Norcros a market capitalisation of £116m. They immediately went to a premium, closing 9.5p higher at 87.5p. Norcros believes it can develop the showers business and also sees good prospects for its tiles and South African operations.
