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Thursday, November 8, 2012

FTSE falters again on US and eurozone woes, while ENRC, Land Securities and Tate results disappoint

Leading index fails to recover following Wednesday sell-off on a heavy day for corporate news

Amid a plethora of corporate updates, leading shares failed to regain any ground after Wednesday's sell-off.

The FTSE 100 finished 15.58 points lower at 5776.05 as worries about America's forthcoming fiscal cliff - tax rises and spending cuts- as well as eurozone woes continued to trouble investors. There was little help from the Bank of England or European Central Bank, which both left interest rates on hold, while late reports of another delay in granting Greece its latest tranche of bailout money also dampened enthusiasm.

A number of companies disappointed investors with their trading news, including Eurasian Natural Resources Corporation, down 10.4p at 284.6p as lower metal prices sent its nine month revenues sharply lower, Land Securities, 16.5p lower at 794.5p, Tate and Lyle, off 4p at 730p, and Morrisons, down 4p at 263.5p.

Balfour Beatty was a major casualty, down 55.9p at 250.1p as the infrastructure group issued a profit warning.

But pharmaceutical group BTG jumped 24.8p to 352.4p after it confirmed a previous update that it had seen strong demand for its snake anti-venom and cancer drugs. Half year revenues climbed 30% to £143.4m, with profit up 44% to £18.3m.

SuperGroup, the fashion retailer behind the Superdry brand, added 6.8p to 146p after its second quarter sales jumped 20.3%, helped by cooler weather. The company said it was well positioned ahead of the peak Christmas trading period, and was on track to meet City expectations for the full year. Panmure Gordon analyst Jean Roche said:

Following a strong second quarter (August-October) trading statement and fresh evidence that new additions to the management team are having a significant positive effect on the operating performance of the company, we are upgrading Supergroup to buy from hold and raising our price target to 750p from 662p.

Jonathan Pritchard at Oriel Securities kept his hold recommendation, saying:

The second quarter saw solid retail like for like sales growth and represents another step towards rebuilding management credibility. Clearance of old and third party stock means lower gross margins in the second quarter, so there's no change to forecasts. The shares are up with events after their strong run.

Cable & Wireless Communications, which is in the process of selling a number of its businesses, closed 2.07p higher at 38p after first half earnings inched up around 2%. Will Draper at Espirito Santo said:

As we expected CWC's first half results show slight operational weakness, particularly in Panama, although a pension credit has supported the company's full year EBITDA guidance which has been reiterated. CWC has confirmed discussions to sell Monaco & Islands and Macau are still "ongoing" but there is no further detail at this stage. Disappointingly a change in Panama tax legislation results in $45m additional cash outflow this year and so net debt is higher than expected. As we still believe CWC's assets are significantly undervalued compared with the value implied by the current share price, we reiterate our buy rating and fair value of 45p.

Back with the FTSE 100, G4S dropped 8.4p to 259.2p as the security group paid the price for its failure to provide enough staff for the London Olympics. It has missed out on a number of UK prison contracts, and has been told HMP Wolds which it manages, will be returned to the public sector.

But Burberry added 15p to £12.14 as it recovered some of Wednesday's fall following its latest update.

Defence group Chemring lost 15.2p to 242.8p after Wednesday's news that US private equity predator Carlyle was not planning to bid. Analyst Rami Myerson at UBS said:

We had assumed there was a low probability for a bid following two profit warnings and a surprise change in [Chemring's] chief executive. Following US elections yesterday we believe there is now a higher probability of a US sequestration [cuts in defence spending] in 2013. The short cycle nature of Chemring's business means that Chemring could be one of the hardest hit defence companies in a sequestration scenario, in our opinion.

We believe the market is interested in clarity on two key issues: (1) What is the current underlying operating profit run rate of Chemring's businesses and whether this is sustainable in the longer term? (2) What is the sensitivity of Chemring's revenues and profits to an extended continuing resolution or US sequestration?

Lower down the market, Speedy Hire rose 1.25p to 34.25p on vague talk of a possible 60p a share bid, with US groups United Rentals and UPS mentioned as well as, yes, private equity.

Finally Mears added 3p to 293.75p as the company paid £24m for Morrison Facilities Services, part of Anglian Water. Analyst Andrew Gibb at the company's broker Investec said:

This looks a very sensible deal at a fair price, which strengthens not only the order book but also its ability to target larger contracts. The group has also issued a trading statement which is very much in line with expectations. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds