Blacks
38.75p +1.5p
Severn Trent
1,120p -20pSHAREHOLDERS in outdoor goods retailer Blacks Leisure will now be even more disappointed that the group's talks with an unnamed suitor withered on the vine in March.
Blac
ks Leisure revealed yesterday that it dived further into the red in its latest trading year (having said that, the group did not exactly have a vertiginous pre- exceptional profit "diving board" to plunge from in the previous year).
The company, whose leading brands include Blacks, Millets, Freespirit, and O'Neill, has reported an underlying pre-tax loss of £6.8 million in the year to end-February. That compared with an underlying profit of just £300,000 in the previous year.
It was even worse at the statutory pre-tax level, where losses deepened to £14.4m from a £9.3m loss last time. The final dividend, unsurprisingly, is passed.
Quite apart from the adverse trading, Blacks admits it is asking its bank (Lloyds Banking Group) for a big (unspecified) injection of debt at a time when credit from the banking sector is still highly constrained.
The group says it is asking for more than the current £35m banking facility it has with Lloyds, which is subject to a three-month standstill agreement until the end of August.
On the trading front, Blacks says its surfwear business continues to be under the cosh, and it is still looking for a way to exit from it.
Worse, the group is pinning its hopes on a good camping season and strong sales of summer clothing this year to boost its fortunes.
Given the last two washout summers in Britain, this does seem a little like clutching a torn and frayed canvas.
All of which is of little consolation to shareholders, including "Geordie Nation" Newcastle FC owner Michael Ashley's Sports Direct International group, with a holding of 29.9 per cent.
Shares in Blacks have shed three-quarters of their value in the past 12 months, valuing the company at a meagre £16m.
That was still too rich for the mystery suitor a couple of months ago, however. Maybe it had a bit to do with the way football results were going. But it does show how unloved the company is.
Blacks' hail-fellow-well-met section of the clothing market – a brisk trudge down the mountain before a half-pint of Old Brain Bolter in the snug bar – is a sister sector to sportswear retailers (hence Ashley's paternalistic interest in its fortunes).
And we know how difficult a time the likes of Sports Direct and JJB Sports have been having recently.
Without the beefed-up banking facilities, Blacks faces a difficult future. These talks with Lloyds, after yesterday's deepening losses, have a pivotal feel about them for the retailer's prospects.
GEO-POLITICAL factors may be entering the stock market equation for the first time since the Iraq war.
Equities' analysts believe North Korea's alarming nuclear behaviour has the potential to be a disturbing undercurrent for investor sentiment.
The US, the UK – and not least North Korea's Asian neighbours such as Japan – have expressed concern about Monday's nuclear test and follow-up missile launches from the impoverished siege-mentality state of Kim Jong-il.
Much of North Korea's bellicose language has turned out to be hot air in recent years. But it is clear any military hostilities in the region would send Asian stock markets plunging.
That could not help spread alarm to Wall Street and Europe, and would certainly be a setback for the semi-formed optimism about recovery that has helped support share prices recently.
UTILITIES are looked on as one of the main defensive plays on the stock market in difficult times. The thinking is that people cannot do without power, water or sanitation, whatever the economic background.
But resilience is not the same thing as being ring-fenced from recession.
Utilities are exposed to commercial as well as normal consumer consumption, so if businesses are going through a rough time, there is likely to be a knock-on effect for the utilities they use.
Water company Severn Trent highlighted this point yesterday, with annual profits down 6 per cent after it upped bad debt charges by £6.6m to £34m – or 2.3 per cent of its turnover.
Lower commercial consumption also cost Severn £20.8m in lost income, the company said.
Severn said it is currently seeing demand from business customers down 5 per cent, although it says this is stabilising.
That is still not a level of declining demand the company will be comfortable with, however.
Bryan Johnston of Brewin Dolphin
ONE TO WATCH
Yule Catto
82p +9.50p
Scotsman says HOLDYULE Catto is a specialist chemical company. Its principal raw material is polymer, used extensively in surface coatings and in paper, PVC and general surface coatings. Its pharmaceutical division produces general and ethical pharmaceutical products with special emphasis on anti-ulcer, anti-bacteria, anti-parasitic and anti-depressants. It also has an impact chemicals division, used in flavouring and fragrance under the divisional brand William Blythe.
Yule Catto has had a torrid time of it over the past couple of years, mirrored in the fall in the share price from 250p at the end of 2007 to current levels. However, they have participated in the market's rally since the spring, moving up from around 45p.
The company's relatively high gearing, which was principally responsible for the suspension of dividend payments, is coming down. This process could be accelerated by the prospective sale of William Blythe, which has been trading well, making it a much more appealing prospect to a prospective investor. To an extent, Yule Catto is something of a bellwether of economic activity generally. If, therefore, international economic prospects begin to pick up into 2010, Yule Catto should reflect this trend.
An investment in Yule Catto is not without risk, especially if the burgeoning, more optimistic views on the economic outlook is compromised. On the other hand, by the time we have confirmation that the global recession is easing, Yule Catto's shares may have anticipated this development.
• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.
• Yesterday's One To Watch column referred to RBC Capital. We would like to clarify that the firm's full name is RBC Capital Markets.
Renewable Energy Holdings buys up solar assets
SMALL BUT BEAUTIFULWIND-FARM developer Renewable Energy Holdings has signed a non-binding deal of intent to buy PVStrom Energy Systems' "photovoltaic" development assets in Sicily for an undisclosed amount.
Renewable Energy and PVStrom plan to create a new company in Italy.
Renewable Energy, which has a market value of about £20 million, will hold 90 per cent of the new company, while PVStrom will hold the rest.
Renewable Energy said: "PVStrom's current development portfolio of projects totals some 18MW (megawatts] of land options granted or land acquired, all in the Sicily region of Italy, with the medium-term target being a developed portfolio of some 50MW, and will be injected into (the new company]."
The company said it expects to enter into a binding agreement by the end of June.
Renewable, which agreed to sell its wave energy patent portfolio – known as CETO – to Australia's Carnegie Corp earlier this month, noted the successful fundraising of A$5.75m (£2.8m) by Carnegie and said this ensures the continued development of CETO as it moves closer to commercialisation.
Dana on rise after crude recovery
SCOTS STOCKSDANA Petroleum shares climbed sharply yesterday as the outlook for crude oil improved and the company found favour among traders.
Shares in the Aberdeen-based explorer had been drifting in recent days after a £56 million share placement and disappointing results from a Norwegian well.
But, after several upgrades from brokers this month, sentiment towards the stock improved yesterday, pushing Dana up 90p or 7.4 per cent to 1,312p, on one of the heaviest days trading in the last 12 months.
Cairn Energy hit a fresh eight-month high on further positive reaction to its progress towards developing major fields in India. Shares rose as high as 2,555p, but closed up 34p at 2,490p.
Stagecoach, the bus and train operator, recovered Thursday's losses, which had been brought on by an OTF investigation into its acquisition of Preston Buses. Shares bounced back to close up 6.3 per cent at 130.5p yesterday.
John Menzies rose in early trading after it announced an improved contract with newspaper publisher Trinity Mirror, along with bullish comments about picking up further contracts. But shares later dropped, closing down 3 per cent at 127p.
On Aim, Lees Foods rose further, after positive comments from the company when it reported its 2008 results earlier this week helped push it to a two-month high. Shares yesterday rose 2.5p to close at 112.5p.
Bowleven, the West Africa- focused oil explorer which is expected to soon announce plans for a major rights issue, eased half a penny to 64.25p.
After trading closed, the firm said that it will release a report into an oil discovery on one of its exploration blocks in offshore Cameroon.
The full article contains 1562 words and appears in The Scotsman newspaper.
