A False Dawn for Markets as Patisserie Valerie Rescue Gets Underway

Friday, October 12: An overnight relief rally in Asia provided Europe with the impetus to open in the green with the FTSE 100 led higher by a raft of mining, industrial and consumer stocks. However, the relief rally proved short lived as European pared small gains in late trade to close down.

Carclo(-5.81%) was one of a few stocks to fall on stock specific news as the Group announced that it had failed to meet half year expectations due to underperformance in the Technical Plastics unit. In the six months ended September Technical Plastics saw three programmes delayed by customers, though management noted that a stronger H2 performance is expected after all programmes entered production “successfully” towards the end of the first six months. The LED division saw solid production levels in the first half, though manufacturing costs were higher than anticipated as all of the current year’s planned new vehicle production programmes launched in H1. On the bright side, margins are expected to grind higher as production accelerates and start-up inefficiencies are eliminated and the Aerospace division posted a performance that was slightly ahead of expectations. Despite the setback, full year guidance remains unchanged.

In further drama for Patisserie Valerie shareholders, it hit the wire shortly after the open that suspended Finance Boss Chris Marsh had been arrested and released on bail following the discovery of “significant and potentially fraudulent” accounting irregularities. The Group yesterday warned that it would not be able to continue trading without a cash injection, reported to be no less than £20m to avoid administration. Shortly before the London close Patisserie holdings declared that it hopes to raise £15m with the issuance of 30 million new shares at £0.50 per share. This fundraise, alongside the imminent agreement of a £10m bridging loan from Executive Chairman Luke Johnson is expected to allow the business to repay immediate liabilities in full but investor confidence will surely be at its lowest ebb.

At the close European equities were lower with the FTSE 100 -0.16%, the CAC 40 -0.20% and the DAX 30 -0.13%.

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