CITY WATCH

Despite pre-tax losses of over 22m, the City believes there is light at the end of the tunnel for Cordiant. George Pitcher, joint managing director of Luther Pendragon

The City is a cold and unforgiving place, so we could have expected a fairly jaundiced response to last week’s announcement from Cordiant of pre-tax losses of 22.6m for 1995. As it turned out, the shares jumped 11p to 116p and stockbroker Panmure Gordon is confident enough of recovery to place a target of 146p on the shares for this year. By the end of the week, Cordiant’s shares had hit 121p, before profit-taking took them back to close the week at 117p.

The consensus is that Cordiant is now through the worst – the luvvies have departed to M&C Saatchi, the business that was going to go with them has gone and Cordiant can look to the future. That future is, for the time being, debt free after the 127m rights issue last year. Client defections amounted to some 40m in annual revenues, but this has been replaced by new business, according to Cordiant.

The losses contrasted with profits of 32.4m for the previous year and included 20.3m of exceptional operating costs, some 4m of bank fees and a 30m net loss on disposals. Excluding these items, Cordiant would have made pre-tax profits of 32m. This is what the City appreciates and it accounts for the bullish support for the shares.

Elsewhere, shares in cable companies were buoyant after positive results from General Cable, the UK franchise subsidiary of French utility conglomerate Generale des Eaux. Its shares hit 183p, before settling to close the week at 172p. General Cable is still weak in consumer penetration but at the operating level is looking good – cashflow, for example, recovered in the second half of the year.

Shares in Nynex CableComms have been well supported following speculation that a merger was on the cards with TeleWest Communications, the cable operator jointly owned by US West and TCI. But the City remains sceptical on the grounds that a merged group would account for more than 25 per cent of the UK cable market – a case for the competition authorities.

The competition authorities are no stranger to the more traditional telecoms operators, BT and Cable & Wireless, which were said to have been in merger talks themselves. Talk of takeover bids for C&W from the likes of AT&T and Deutsche Telekom have largely been discounted by the market, but there is always the possibility that the talks with BT might resume. So C&W’s shares were supported to within a penny or two of their 482p peak. By the end of the week, C&W’s shares traded at 475p, from 447p before the BT story broke. For its part, BT’s shares opened ahead of this week’s Oftel document on pricing.

There was heavy turnover in Mirror Group’s shares towards the end of last week and the shares gained 11p to finish at 225p. This was partly to do with top-flight results and a 2p increase in the Mirror’s cover price, which should add some 11m to this year’s profits, but attention is also turning to Mirror Group’s broadcast opportunities.

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