There was frantic activity in furniture retailer MFI yesterday as speculators pounced on continued jitters over its trading performance to drive shares to a five-year low.
Rumours ranging from an emergency board meeting to a fall-off in post-Christmas sales captivated traders as shares fell as much as 29 per cent soon after the market opened.
Investors then seized the opportunity to buy back shares with the impetus picking up when MFI released a statement mid-morning.
The stock eventually closed down by 8p at 691/2p.
The trading statement made no mention of any problems and instead detailed a settlement with HM Revenue & Customs in the UK over a VAT dispute.
But 32 million shares changed hands in little more than two hours of trading - far beyond the average daily trade of 7.4 million.
Concerns over the cash flow of MFI were eased by the settlement with authorities over the VAT bill, which should see £21.8 million being repaid by the middle of next month.
Investors had feared a dispute that could have taken years to resolve. However, MFI has agreed to write off £38.7 million in its accounts for 2005 after taking the view that continuing the lawsuit was too risky and costly.
The dispute dates back more than four years when MFI introduced an optional insurance-backed warranty on some items of furniture sold in its UK retail stores. The cost of insurance was given as a dis-count on the price of the furniture, which led MFI to believe that it had been paying too much VAT.
Details emerged as retail analysts flagged fears trading has been poor after Christmas.
Nick Bubb, an analyst with Evolution Securities, said his forecasts of a recovery from a small loss during the year to December 24 to pretax profits of £20 million in 2006 already appeared optimistic. ..SUPL: