Kesa Electricals has increased profits thanks to a good performance from its French business Darty, but investors are more interested in what activist investor Knight Vinke plans to do.
The electrical retailer's shares have jumped almost 50% since Knight Vinke declared a stake in June, with traders talking of a possible break-up of the business. Knight Vinke has been gradually raising its shareholding, and now has just below 9%.
But speaking to reporters Kesa chairman David Newlands said the company had a normal relationship with Knight Vinke. He refused to comment on speculation the activist may be pushing for a sale of UK business Comet, which is not exactly setting the world alight at the moment.
The company's half year results - reported for the first time in euros - showed a 16% rise in profits at Darty, but an increase in losses from Comet from €1.8m to €6.4m. Overall, profits rose from €16.4m to €25m at constant currency, pretty much in line with expectations. The company said it had "prepared all its businesses for what we expect to be a competitive peak trading period and will continue to implement self help measures in order to face an increasingly uncertain market environment." In a sell note Ramona Tipnis at Shore Capital said:
We retain forecasts for now and reiterate our sell recommendation as performance across the group has been as expected. The UK accounts for over 25% of sales but is a very small portion of profits and this needs to show a step change.
David Jeary at Investec kept his hold recommendation, saying:
While the underlying results showed some good overall progress at the group level, the divisional performance outside Darty was less than impressive in our view. It is too early to discern any improvement at Comet from its ongoing rebrand exercise. The main driver of the shares in our view has been the steadily increasing share held by activist investor Knight Vinke.
And Philip Dorgan at Altium Securities took a look at the value in Kesa's individual businesses, should Knight Vinke indeed press for a radical restructuring:
We think that Darty is worth around 140p per share and Comet's sales of £1.7bn are perhaps worth 30p. If we value the remainder of the group at 35p, then the sum of the parts is over 200p. We think that the best way to realise shareholder value is to break the group up.
We are therefore maintaining our buy recommendation on the view that the shares are not expensive on fundamentals and have reasonable upside on an alternative scenario.
In the market Kesa shares are virtually unchanged, down 0.1p at 171.8p.
