London mid-morning: Footsie retreats

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Date: Friday 04 Jul 2008

  • Market Movers
  • techMARK 1,357.01 -0.86%
  • FTSE 100 5,426.90 -0.91%
  • FTSE 250 8,535.00 -1.40%

LONDON (ShareCast) - London looks set to end the week on a dull note, with brokers lining up to hammer Marks & Spencer, while Bradford & Bingley’s difficulties in raising new capital, so soon after Taylor Woodrow confessed to similar problems, has unsettled investors.

Bradford & Bingley is lower after leading shareholders stepped in and rescued its £400m fund raising after US private equity group Texas Pacific (TPG) walked away. TPG’s decision was triggered by a rating downgrade on Bradford & Bingley’s debt by credit rating agency Moody’s. The shares trade at about one-seventh of the level they were at this time last year.

Marks & Spencer is the worst performer among Footsie stocks on worries over its trading this year. Goldman Sachs yesterday cut its rating on Marks to "neutral" from "buy" after the company reported a fall in first quarter like-for-like sales while today Citigroup left the M&S fan club, changing its recommendation from “buy” to “sell” . Citi also cut its price target from 450p to 205p, and now expects M&S’s pre-tax profit in the year to March 2009 to be £730m, 17% lower than its previous forecast.

In contrast, fashion retailer Next, which often moves in step with Marks & Spencer, is firmer after broker Sanford Bernstein said it preferred the stock at present to M&S.

Also benefiting from broker comment were Lloyds TSB and G4S. Blue-blooded broker Cazenove sees Lloyds TSB as a good buying opportunity ahead of the banking group’s interim results at the end of this month, after the bank underperformed its peers in a slumping banking sector in June.

Security firm G4S also gets the thumbs-up from Cazenove, with the broker upgrading the stock to “out-perform” from “in-line”.

Origin Energy has advised shareholders to reject a $13.1bn bid from BG Group. BG replied that "Origin has not yet addressed the very significant risks for shareholders inherent in any alternative proposals to monetise its gas resources. Nor, in rejecting BG Group's bid, has Origin indicated with any degree of certainty that any of those alternatives could generate higher value for shareholders when compared against BG Group's all-cash offer."

Miner BHP Billiton has reached an agreement with China's Baosteel on the price for iron ore deliveries for the contract year starting 1 April 2008.

Nord Anglia has agreed a bid of 460p per share cash from Baring Asia Private Equity. The offer values the entire issued and to be issued share capital of Nord Anglia at approximately £190m.

Logistics group TDG has agreed a takeover from investment group Laxey Partners on the last day of a put up or shut up deadline issued by the Takeover Panel. Laxey Partners will pay 250p per cash per share, an offer that values TDG in total at £203m. Supply chain solutions company Wincanton , which pulled out of the battle for TDG last month, rises as investors express relief at the confirmation it is not considering a counter-bid to the Laxey offer.

Plumbing supplies distributor BSS Group declines after Citigroup downgraded the stock to “sell” from “hold”. Its considerably larger competitor, Wolseley is again one of the worst performing blue-chips on continued fears over the slump in the US and UK housing market.

Vehicle tracking systems specialist Minorplanet lost ground after it rejected a possible 40p per cash proposal from a third party. The group said it believes the offer "materially undervalues" its position in the telematics market and its prospects.

Also on the downturn is mobile data services provider Zamano after it said its performance in the six months ended 30 June was below forecasts due to several factors including the weakness of sterling and the delayed full integration of Red Circle.

Financial software group Gresham Computing said trading has improved “markedly” in the first six months and expects to report a “significantly improved result” for the period.

Irish dairy firm Glanbia said it had a good first half performance overall, with all divisions performing broadly to expectations, as market conditions remained relatively positive.

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