Market report: Tuesday close

By Mickey Clark for MailOnline
Updated: 12:28 EDT, 4 March 2008

The forced sale of the bulk of BSkyB's near-18% stake continues to hang over ITV like the Sword of Damocles.

Shares in the independent television broadcaster moved off record lows today with a rise of a 1.1p to 66.5p. But that compares with the 123p a share Goldman Sachs and Apax Partners were prepared to pay in a proposed takeover bid almost two years ago.

Dresdner Kleinwort says the paranoia surrounding ITV has been overdone, and accuses the City of becoming obsessed about short-term advertising revenue when, in fact, it should be taking a much wider view of prospects for the company.

In a report to clients entitled Not Pushing Up Daisies Yet, the broker calculates that at the current share price, ITV's non-broadcasting activities are thrown in for nothing.

The Government last month told BSkyB, 5p cheaper at 550p, to reduce its stake in ITV to below 7.5%. That did not go down well with the satellite broadcaster, which had paid £940m, or 120p a share, and faced a huge loss from any disposal. It is appealing the decision.

Dresdner Kleinwort says that if BSkyB sells its stake to a single buyer, talk of a break-up bid is bound to be revived.

Shares generally lost an early lead as investors' thoughts again turned to the ailing US economy. The FTSE 100 index fell 50.9 points to 5767.7 in another day of thin trading. High-yielding banks go ex their dividends tomorrow, which could be the equivalent of wiping 30 points of the Footsie 100. Dealers say the size of some of the yields have proved too tempting for income funds, which have been snapping up the shares. But this may be followed by a sell-off tomorrow.

Prices were softer for choice today with Lloyds TSB, down 4¼p at 440¼p, yielding almost 8% while Royal Bank of Scotland (8.7%) shed 2p to 367¼p, and Barclays (6.93%) slipped 3p to 459p. Alliance & Leicester was the biggest faller, losing 12½p at 513p, where its shares yield more than 10%.

Asset manager Schroders was the best-performer among blue-chips after better-than-expected full-year results, climbing 36p to 962½p. Annual profits rose 35% to £392.5m. Cazenove has repeated its outperform rating.

Sanford Bernstein has upgraded pharmaceuticals group Shire, down 3p at 978p, from underperform to market perform and raised its target from 920p to 1000p. It attributes the move to a moderating consensus on attention deficit disorder drug Vyvanse and on the back of the company's recent fourth-quarter results.

The broker estimates consensus on 2008 sales of Vyvanse is now about $350m (£175m). That compares with previous estimates of between $440m and $480m. Sanford Bernstein says it has raised its net income estimate for Shire from $500m to $524m for 2008 but dropped it from $549m to $544m in 2009.

City speculators are continuing to nibble away at FKI, ½p firmer at 73¾p, with almost 2m shares changing hands. The engineer is already the subject of a cash-and-shares offer worth 70p a share from investment group Melrose, down 1p at 152p, which values the business at £412m. But there is talk a private-equity bidder is waiting in the wings and may be prepared to drive the offer up to 80p.

HSBC has begun coverage of bombed out Woolworths with an overweight rating and a 16p target. That compares with the current share price of 11¼p, up ½p. It says the ailing retailer has the potential to realise shareholder value by way of disposals and the fact that it is a strong recovery candidate.

TOMORROW'S AGENDA

• Ahead of the opening of Heathrow's Terminal 5 at the end of the month, British Airways unveils February's traffic figures. Analysts expect it to report that the number of customers flying first and business class have continued to rise after jumping 8.8% in January. But the City will be scrutinising the data amid concerns the airline is failing to attract long-haul economy and short-haul premium travellers.

• Garfunkel's and Chiquito owner The Restaurant Group delivers full-year results. Investors will be looking for reassurance after it admitted in January that falling consumer confidence had sharply slowed sales growth.

• February's shop price index is expected to fuel fears that inflationary pressures are growing. The British Retail Consortium survey last month indicated prices were 1.2% higher than a year earlier.