Market report: Wednesday close

 

Another 16½p melted off sugar king Tate & Lyle today as it warned its long-suffering shareholders that profits for the current year would be lower than it had thought just two months ago.

Citing continued difficulties in its main European sugar and ethanol businesses, the company tried to sweeten an otherwise less-than-palatable trading update with the promise of a £275m share buyback programme. It reported flat first-quarter profits, and confessed that the strong pound is hampering results. The shares, worth 775p six months ago, were changing hands at 578½p today.

However, the company confirmed it hopes to get €310m (£209m) for the 50% stake in its European starch and sweeteners business that it is selling to French group Tereos.

Evidence that the current cycle of takeovers is not over went some way to counter interest-rate fears. But despite an enthusiastic response to an £11bn takeover by Imperial Tobacco, up 34p to 2235p, and a more muted reaction to a new bid approach for Sainsbury's, 5p ahead at 590½p, the FTSE 100 index was down 92 at 6567.1.

Traders said investors were holding back ahead of US Federal Reserve boss Ben Bernanke's key speech to Congress this afternoon. Problems in the US subprime market, oil and the floundering dollar are likely to dominate.

Wm Morrison, down ½p at 315¾p, was in demand in the morning on the back of the Qatari interest-in Sainsbury's. Analysts say Morrisons exudes a similar appeal to that rival - an undervalued property portfolio that, when calculated along the same criteria that see a 610p bid for Sainsbury's, suggests a value of 416p.

JD Wetherspoons' refreshingly robust trading update on summer drinking at the dawn of the smoke-free pub had a favourable effect on all the quoted landlords and beermakers. Mitchells & Butlers climbed 16p to 892p while Punch Taverns edged up 7p to 1307p and there was a rise of 4½p to 721p for Enterprise Inns. Scottish & Newcastle was 8½p stronger at 632p while SABMiller rose 21p to 1310p.

Wetherspoons itself was up 64p at 619p while fellow mid-tier pubs owner Marston's added 7¾p to 424¾p. Numis is advising clients to switch out of M&B in favour of Wetherspoons, and has lifted its call to buy from hold.

WS Atkins jumped 68p to 1113p as investors celebrated the end of the Metronet mess. Atkins has been severely punished in recent weeks, dropping more than £2 from an alltime-high of 1227p in May. Metronet's descent into administration means there will be no further cash calls on Atkins, the company confirmed today. It has already taken a charge of £121m.

Balfour Beatty, which also has a 20% stake, slipped 6p to 442¼p. Balfour has made a £100m provision but this should not set alarm bells ringing, according to Panmure Gordon analyst Andy Brown. He says this 'sounds very much like Balfour's conservatism', and he is retaining his buy recommendation.

'We expect Balfour still to use Tube upgrades as a potential source of work but on much more favourable terms to the group,' Brown said.

Logica's first-half results gave investors plenty to get their teeth into. While revenue was up and the search for a new chief executive is said to be going well, the IT services group confirmed that UK sales are struggling. It blamed first-half weakness in the commercial sector for a 9% drop in UK revenues. The shares were 5½p ahead at 154¾p - mostly on relief that things have not got any worse.

Premier Oil climbed 7p to 1146p as it predicted it would exceed its target of 50,000 barrels a day. But there was bad news for Venture Productions which, unlike Premier whose operations are global, is solely based in the North Sea. Venture dipped 11½p to 758p as it revealed that terrible weather had hampered production.

BANKING & FINANCE
Credit Suisse has raised its rating on BlueBay Asset Management from neutral to outperform. The broker says the City seems to be systematically underestimating the asset management sector's ability to generate value. A significant proportion of the sector's market capitalisation is attributable to assets already on the books.

BUILDING & PROPERTY
HBOS has bought 404,554 shares in Quintain Estates at 882¾p apiece, raising its stake to 17.93m. or 13.84%. Last week, HBOS subsidiary Quill Securities told Quintain that it had agreed to buy Rock Investment's 11.89% stake. Quill is now evaluating its options, including the possibility of making a full bid.

CONSUMER
Strong dairy commodity prices and stability in the milk market have led Panmure Gordon to upgrade Dairy Crest from a hold to buy. The broker has also raised the price target by 75p to 775p. The chilled dairy food supplier is home to Utterly Butterly, Cathedral City cheese and Petits Filous.

ENGINEERING
Medical devices maker Gyrus got a cautious thumbs-up from broker KBC Peel Hunt, which was encouraged by the group's underlying progress during the first half and has repeated its hold rating. The broker says that unless the dollar weakens substantially, secondhalf profits should exceed the first six months.

HEALTH
Bridgewell has repeated its buy rating on Acambis following the bio-technology specialist's announcement that phase one clinical trials of its universal infuenza vaccine have started. The analyst predicts that, providing the trials go well, sales could reach £150m within five years of the vaccine's launch.

INDUSTRIALS
Panmure Gordon has increased its rating for Tate & Lyle to buy from hold with a price target of 645p. The food manufacturer is predicted to have a better-than-expected cash return, with estimates put at £280m against an initial forecast of £200m. The sale of the Amylum unit remains on target.

LEISURE
Charles Stanley has cut Domino's Pizza from buy to add, but raised its share-price target from 275p to 335p, with the broker pining its hopes on a strong set of first-half results when the company reports on Monday. It bases its optimism on the sales performance reported at the time of the company's AGM statement.

MEDIA
ABN Amro says Reed Elsevier's disposal of its US Schools education business for £2bn could produce a re-rating of the shares. The broker says the sale was equal to 20.8 times earnings. If the same rating was applied to the rest of the group, its enterprise value would rise to £25bn - or 975p a share after debt.

NATURAL RESOURCES
Aim-listed Caspian Holdings produced the equivalent of 11,000 barrels of oil in the quarter to the end of June, in line with the previous quarter. The oil and gas explorer expects to resume exports during the third quarter, having suffered a temporary suspension of its export licence. The shares are hovering just above their low of 5.25p.

RETAIL
Palli International has met Galiform, which used to own the MFI Furniture retailer. These days Galiform consists of Howden joinery, open to trade customers. Palli's Nick Bubb says Galiform provides a good service to small builders. The shares look expensive but the broker is forecasting profits of £70m this year.

SUPPORT SERVICES
John Wood Group has signed a £44m contract with the New York Power Authority to provide parts, repairs, field services and risk management for its two gas turbines located in the Astoria district of Queens. The contract has a lifespan of 16 years. Wood Group says it has been tailored to meet the power authority's needs.

TECHNOLOGY
Dillistone Group has won a contract to supply its Filefinder software to Excellent Match, a Danish search and selection company. The Aim-listed supplier of recruitment software said the new implementation will be for 60 users but will be rolled out across the business. Executive Match undertook an extensive trial of the system.

TELECOMS
Ofcom has announced proposals for a swift and simple process to make it easier for customers to transfer their mobile numbers to alternative suppliers. The move will enable transferred numbers to be up and running on customers' new networks within two hours. The proposals will be introduced in the next two years.

TRANSPORT
Trafficmaster has won a £3m. 3½-year contract to supply the Department for Transport with journey-time information. Trafficmaster will supply a combination of real road-speed data, collected from its 50,000 intelligent vehicle probes. Journey time and traffic flow rates will be collected through its fixed-sensor networks.

UTILITIES
UBS has cut Kelda, the old Yorkshire Water, from neutral to reduce, saying the stock is now expensive. The broker has also repeated its reduce rating and 685p share-price target on United Utilities as part its UK water sector review. Among the second-liners, UBS has raised Northumbrian Water from neutral to buy.

{"status":"error","code":"499","payload":"Asset id not found: readcomments comments with assetId=1612134, assetTypeId=1"}