Luminar falls to new low on rights issue fears

Shares in Luminar, the nightclub operator, reached a new low yesterday of 32p following fears that Simon Douglas, the newly appointed chief executive, would have to launch a fresh rights issue.

Luminar stalled by 1.25p by the end of the day after the group confirmed that founder Stephen Thomas was to step down after 22 years at the helm and said the ex-Zavvi chief executive was to be appointed.

Last year Luminar raised £37.5m via a share placing and most analysts believe that the group will have to undertake the process again in order to bolster its balance sheet.

Yesterday, City analyst Nigel Parson, of Evolution Securities, admitted new man Douglas, the former chief executive of Zavvi would "have plenty to do".

In a note he added that Douglas' music retail background could be helpful in developing a recently mooted link up for the nightclub group with HMV.

He also suggested that Luminar has a target price of 40p but warned: "The structural issues facing the company are challenging: the core client base of 18-24s have been hit particularly hard by this recession.

"However the one thing that a recession brings is that it means more people are receptive to change — and that is what Luminar needs to do."

Parson has a neutral rating on Luminar with a target price of 40p.

Greg Feehely, City analyst with Altium, also welcomed the new appointment.

He said: "Whilst concerns surrounding headroom and the balance sheet remain, it is quite clear that a market recovery is required before Luminar can bounce back, specifically that will require an improvement in the unemployment level currently within the core 18-24 year age group.

"However this appointment could be the first in a number of steps forward for the group and as such we feel the shares are likely to react positively today."

Another analyst, who asked not to be named, said: "They need a kitchen sink review of the company. Last year's rights issue was about survival and if they consider another one it will be for the same reason — to survive."