Market report: Monday Close
Tate & Lyle left a sour taste with investors today after warning that the going is getting tougher for the sugar giant, with margins under increasing pressure.
Tate & Lyle shares slid 45p to 775frac12;p, making it a big casualty among the top 100 companies. The group said ethanol margins would be substantially lower next year because of rising corn costs and lower gasoline prices. It also said it was unlikely sugar costs would recover in 2007 because of oversupply concerns.
Overall, it expects total margins for artificial sweeteners next year to be better than anticipated, and has forecast higher total net margins on value added food and industrial ingredients. It is now looking forward to the next round of pricing for food and industrial ingredients. Satisfactory progress is being made to recover higher raw materials and energy costs.
Cairn Energy retreated 53p to 1861p after the pricing of its proposed Cairn India subsidiary failed to live up to expectations. The shares have been priced at 160 rupees, valuing the business at 282bn rupees (£3.2bn). Cairn plans to issue 538.47m shares, raising around £1bn, which fell shy of some City expectations.
Share prices generally traded within a narrow range as investors' thoughts turned to more festive matters. Dealers said many had already chosen to make an early start to the Christmas holiday and that meant a sharp drop in turnover. The FTSE 100 index fell 12.6 to 6247.50.
Prudential rose 4p to 714.½1p despite growing speculation that Britain's biggest life assurer is poised to redistribute £2.5bn of so-called orphan assets that have built up over the decades in its with-profits funds to its shareholders. The total worth of the Pru's orphan assets is reckoned to worth in the region of £10bn.
Artificial joints maker Smith & Nephew jumped 39¼p to 521¾p. For weeks, it has been tipped as the likely bidder for rival Biomet, but the absence of any fresh news suggests it may have got cold feet and that private equity bidder may win the day. Broker Merrill Lynch has raised the shares from neutral to buy, and set a target of 580p. It says S&N may become the target of a bidder itself.
Gallaher eased 3½p to 1155p as hopes of a counterbid receded. Japan Tobacco last week launched an offer of 1140p a share, valuing the tobacco producer at £7.5bn. Market gossip insists rival BAT may open up the situation with a bid of its own.
Petrofac traded at record levels, rising 18p to 395¾p on the back of a better-than-expected trading update and news it had acquired a 60% interest in block 211/18a in the North Sea.
Royal ratcatcher Rentokil Initial, ½p better at 167½p, has snapped up Australian pest control firm Campbell Brothers for £19.2m cash.
Wichford, the Government-offices landlord that floated on Aim in August last year, boosted full-year pre-tax profits to £9.9m from £2.4m last time after buying 18 buildings during the year. Today it bought two more, in Nottingham and Oldham, for £10.8m. The final dividend rises 0.5p to 9.5p. The shares advanced 3½p to 222½p.
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BANKING AND FINANCE
Euronext shareholders meet tomorrow to approve its $14bn (£7.1bn) merger with the New York Stock Exchange. The hedge funds, which own the vast majority of the stock, are expected to back the deal.
BUILDING AND PROPERTY
Builder Persimmon has a trading update on Thursday but investors will be wondering if it is going to take a pop at Wilson Bowden. Persimmon kept a polite distance during the first round of bidding but may decide to step in now.
CONSUMER
The DIY sector is struggling on both sides of the Atlantic, with Black & Decker the latest casualty in the fight against a consumer slowdown. It has warned for the third time that it will miss its annual earnings targets.
ECONOMICS
The minutes of the December meeting of the Bank of England's monetary policy committee, which are published on Wednesday, are expected to show a unanimous vote to keep interest rates at 5%. Rachel Lomax and David Blanchflower voted against November's rise.
ENGINEERING
Dresdner Kleinwort has upped its estimates for mining services engineering company Bateman on the back of its recent $531m (£270m) Alrosa contract. Dresdner has raised its 2008 revenue estimate by 10.8% to $503m.
BLOG: Time for another share crash
HEALTH
Broker Collins Stewart thinks 2007 could be a good year for GlaxoSmithKline, with the launch of potential blockbusters Tykerb for breast cancer and Cervarix for cervical cancer. It has Glaxo stock on buy with a 2307p target, against its current 1344p.
INDUSTRIALS
Cigarette filters manufacturer Filtrona is on course to keep up the 8% rate of organic growth seen in the first half of the year. Numis has responded by tweaking its full-year profit forecast by 1% to £55m.
MEDIA
Rank is still worth buying. That's the word from Investec, which says investors should not be put off by the below-estimate sale of Hard Rock. Now a focused gaming company, Rank should benefit from further deregulation in bingo and casino machines.
Media space buyer Aegis is due to update the market on Wednesday, with brokers expecting guidance that full-year profits will be about £114m. French investor Vincent Bolloré has been seeking a voice on the board.
NATURAL RESOURCES
Britain's dependency on imported natural gas will be greater than previously expected by the end of the decade. According to National Grid, the UK will be importing 53% of its gas by 2010-11, ahead of the 46% the company had estimated.
RETAILING
About three in 10 shoppers are unhappy with the service they receive in London stores at Christmas. A survey by HR group SHL says temporary staff are a major factor, as they take their jobs far less seriously than permanent staff.
SUPPORT SERVICES
Beware of Communisis, the print management group which last week issued a full-year profit warning. Broker Panmure Gordon cut its stance to hold from buy and slashed its target price by 25% to 75p. It expects full-year profits of £12.1m compared with £14.1m.
TECHNOLOGY
Software supplier Misys left Collins Stewart analyst Christopher Seilern less than impressed after last week's trading update. He is telling clients: 'In the absence of a structure-changing transaction, we see little reason to own the shares.'
TELECOMS
Telefonica's sale of Airwave, the emergency services radio system business that came with the Spanish firm's purchase of British mobile phone group O2 last year, could fetch up to £2bn. JPMorgan Cazenove is handling the sale.
TRANSPORT
Inchcape is likely to sweep up more smaller dealerships in the consolidation of UK car dealerships, says broker Numis. It believes the £260m acquisition of European Motor Holdings gives it a good geographic fit for the North of England.
UTILITIES
Expect plenty of sellers of British Energy today. The quarterly FTSE 100 shuffle sees the UK's largest nuclear power generator drop out of the leading index to be replaced by Whitbread. British Energy has lost almost a third of its value since the summer.
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