The FTSE 100 was on good form yesterday, up 38.6 points at 5932.2, buoyed by good results at Reed Elsevier and a strong performance by the miners.
Such were the strong performers that the index of 100 leading shares was not disturbed by Alliance & Leicester, which was still suffering from its poor full-year results on Wednesday.
Analysts yesterday savaged the company. Goldman Sachs, Morgan Stanley, and Numis Securities, to name but a few, all cut their price targets on the company, downgraded the stock, or both. As a result, A&L fell 12.5p, or 2.5%, to 479.5p - one of the biggest fallers on the FTSE 100. Shares have fallen more than 9% since Wednesday morning.
Morgan Stanley, for example, downgraded the bank from equal-weight to underweight, and cut its price target to 370p from 730p.
Analysts said: "Higher funding costs and intense competition for deposits have impaired the business model of A&L. This, combined with tighter cash flow and capital constraints, lead us to forecast a 50% dividend cut and move off the equal-weight fence."
Analysts at Numis Securities cut their price target to 523p from 573p. "We do not believe A&L holds competitive advantage in any of its markets," they said. "The only business in which we believe A&L is capable of making an economic profit is within unsecured lending. In other areas, we believe A&L lacks the minimum efficient scale to be competitive."
It was a different story for Reed Elsevier. The publishing group announced a 5% rise in its full-year adjusted operating profit to £1.1bn, and also said it was to acquire ChoicePoint, an insurance information business, for £2.1bn. Shares rose 43.5p to 627.5p.
The miners were all up, on higher metal prices and M&A anticipation. Anglo American increased 96p to £32.57 and Kazakhmys rose 34p to £15.22.
Centrica, surprisingly, was the top faller, down 12.7p at 314p despite posting stellar full-year results. Investors were said to be unhappy with the lack of focus on capital returns or comment on margins in 2008.
Scottish & Newcastle reversed Wednesday's gains after rumours that SABMiller was poised to make a rival bid for the company were quashed.
S&N has already agreed to a bid by Heineken and Carlsberg, and a bidding war would have pushed its share price up even more. But SABMiller released a statement saying it had looked at S&N but had decided against making an offer. Shares in S&N were down 20.5p at 787p.
British Airways lost 10p to 272p on news its pilots had voted to strike.
On the FTSE 250, Aricom, the iron ore and ilmenite mining company, delighted investors by moving into profit for the first time. The company posted a net profit of $100,000 for the year, compared with a $2.6m loss in 2006. The company also said it was in talks on M&A options. Shares in the group, which moved from Aim to the FTSE 250 in October, rose 7.5p to 79.5p.
Galliford Try, on the other hand, did not fare so well. The construction company posted a good set of first-half results, with pre-tax profit after exceptionals up 56% at £33.8m, on a 48% rise in sales to £897.9m. But continuing concern about the sector sent its shares down 6p, or 7.5%, to 74p. This was not helped by the group's cautious outlook on the housebuilding market.
Greg Fitzgerald, chief executive, said: "We remain cautious on the outlook for the division, particularly if current market conditions persist throughout the spring selling season."
Further down, Bede, a company that makes tools for the semiconductor industry, saw its shares fall 0.63p, or 38.7%, to 1p. The group said it had received an offer after talks with third parties started in July. But it added the offer was "significantly below" the market value of the company.
Paragon, the buy-to-let mortgage lender, was up 7.25p, or 7%, at 109.25p after its rights issue was successfully completed. The company relies on borrowing money to be able to lend to customers, and has run into trouble due to the credit crunch. It recently resorted to a deeply discounted rescue rights issue to buy time to seek a longer-term solution to its funding crisis. Investors yesterday were relieved this had been successfully completed.
Antisoma bucked the trend in the cash-strapped biotechnology sector. The company, which focuses on developing cancer drugs, moved into the black. It posted a £4.1m pre-tax profit for the six months to end December, compared with a £7.5m loss in the equivalent period in 2006. Shares soared 5.25p, or 21.4%, to 29.75p, as the group indicated it was looking for acquisitions.
On Aim, Imaginatik, a software company, said that Pfizer, the world's largest drug company, had agreed to subscribe up to £500,000 for new shares in the firm. The funding will be used to expand some of its technology. Shares in the firm rose 1.125p to 5.5p.
Miner skirmish
It seems a formal offer for Xstrata, the Anglo-Swiss mining company, will be announced very soon. It is understood that Vale, the Brazilian mining group, has raised its offer informally for the company. Shares in Xstrata yesterday shot up 113p, or nearly 3%, to £40.60 on the news. The price range is still being discussed. Vale was previously thought to value Xstrata at £40 to £42 a share. But Glencore, one of Xstrata's controlling shareholders, is understood to be holding out for at least £45, which would value Xstrata at £44bn. The announcement of the improved offer is imminent, and could come as soon as next week.
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