The FTSE 250 index yesterday temporarily passed the 10,000 milestone, marking yet another record high. The mid cap index, heavy in leisure and support services stocks, is now about 50% ahead of highs recorded in the bull market of 2000. It has substantially outperformed the FTSE 100 and small cap indices, both of which have rallied strongly but are only now touching peaks of six years ago.
The FTSE 250 rose 21% in 2004, 26% last year, and for the first four months of 2006, has added 1,370.8 points, or 16% - yesterday closing up 30.7 at 9997.6. The top performing index constituents have included oil explorers and mineral groups, with domestic consumer related stocks among disappointments.
What has put a rocket under the mid caps, helping them to leave behind other FTSE indices, has been an unprecedented wave of corporate activities. With market capitalisations of just the size to appeal to the cash-rich appetites of private equity suitors, 19 mid cap firms completed deals worth a total of £17.5bn last year, according to Oriel Securities. Analysts said the index needed to maintain high levels of bid activity to stay at its current levels.
The FTSE 100 closed up 17.7 at 6104.3.
Among the blue chips, Amvescap easily topped the leader board yesterday, closing up 50p at 624p, after the fund management group announced first quarter results comfortably ahead of City expectations. Earnings per share were up by 44% at 13 US cents, compared to a consensus range of 9 to 11.8 cents. Some analysts suggested the figures were flattered by $33m (£18.5m) of institutional performance fees, which may not be repeated. Others, including Citigroup, said the underlying performance was also strong.
Shire Pharmaceuticals dropped 16.5p to 851p after Evolution Securities switched to a sell recommendation, noting the drugs firm's shares had gained 15% this year and appeared to reflect only the best possible outcome concerning a number of hurdles facing the group. The threat of competition to Shire's best-selling attention deficit hyperactivity disorder drug Adderall XR from generic drug group Barr Laboratories may have eased, but other challenges loom. Evolution analysts noted Shire's mixed record on drug launches, and observed that operating profits are expected to fall for 2006, the second year running, with more uncertainty thereafter. The question is how successful Shire will be in migrating existing Adderall users to the successor product NRP-104 before generic copies of Adderall gain a stranglehold on the market.
London Clubs International closed up 9.5p at £12.45 on speculation that a bidder, possibly Ladbrokes, might be about to emerge with an offer. Ladbrokes, which split off from the Hilton international hotels business in February, has been talked of as a possible bidder for bingo and casino operator Rank Group. A more likely tie-up for LCI is thought to be Stanley Leisure. Stanley's major shareholder and strategic partner, Malaysian gaming group Genting, has a 25% holding in LCI.
Rank Group, up 0.5p at 226p, said attendance at its casinos had risen 14% for the 16 weeks to April 16 following a relaxation in admission rules last October. Revenues were flat as new customers were mostly modest spenders.
JD Wetherspoon closed up 12.75p at 395.75p after like-for-like sales for the 13 weeks to April 23 rose 3.2%, from 0.3% the previous quarter. Signs from its pubs in Scotland following the introduction of a smoking ban were positive.
iSoft, which earlier this week was rumoured to be a possible takeover target for Misys, had another busy day's trading, closing down 1.75p at 145.25p after reaching 165p earlier in the day. Shares eased back as Misys announced it had bought back 500,000 of its own shares and had cancelled 2m shares held in treasury. Dealers say this would have been prohibited if there was any weight in speculation that Misys was marshalling an approach for Isoft.
Northern Foods retreated 0.5p to 90.25p after Goldman Sachs analysts downgraded their rating on the stock from outperform to in line. Analysts said they had become increasingly cautious on Northern Foods after two profit warnings this year and the promise of yet another strategic review, the results of which are to be published next month. The investment bank believes the company may take some time to recover, possibly burdened with further restructuring costs. The prospect of asset disposals was held out as the most likely hort term support for shares.
Phytopharm rose 11.75p to 67p after it finally announced it had found a replacement for Cannacord, which resigned as broker to the biotech firm in June last year. Cannacord had stepped down after the Animal Liberation Front claimed it was responsible for a firebomb attack on a Cannacord director's car. The ALF claimed Phytopharm had links to Huntingdon Life Sciences, though the company has said this is no longer the case.
Shares in Hanson closed down 14.5p at 748.5p after an uninspiring trading update from the building materials firm at its annual general meeting. Analysts at Citigroup said there was little to take from the statement and while prospects may be good in the US, Hanson had had a slow start to 2006 in Britain.
Losing bet
City Index, the spread-betting firm owned by Icap's chief executive, Michael Spencer, has revealed that it approached its quoted rival IFX with a takeover offer on March 23 - and that the approach was rejected. In a statement thought to have been made at the behest of the takeover panel, City Index said it was "currently evaluating whether or not to make a further approach". IFX shares closed up 4.5p at 160.5p, having already strengthened considerably from 123.5p, the price at which they closed on the day of City Index's initial approach. IFX issued a short statement yesterday making clear that it was not in takeover talks with anyone. The unsuccessful City Index approach is believed to have valued IFX at below the March share price.