Yesterday's trading: A good time to put faith in S&N
American knee and hip replacement giant Zimmer was the name in the frame as punters chased Smith & Nephew 13½p higher to 632p on takeover speculation.
Geoff Foster: Daily Mail
No stranger to bid gossip, the stock had already rallied from a July low of 520p on stakebuilding speculation and after chief executive David Illingworth pulled the proverbial rabbit out of the hat and reported better-than-expected second-quarter figures.
S&N does have a history of major disappointments over the past few years and analysts have been cautious about recommending the stock. S&N last 'surprised' the market in May with a disclosure of 'unethical' sales practices at the recently acquired Plus Orthopaedics, which cost £9.8m of lost sales in the second quarter.
Trading at the rest of the group generally surpassed expectations. The biggest revenue source continues to be orthopaedic reconstruction, which includes hip and knee reconstruction. It accounted for £198m in the second quarter, while endoscopy turnover rose 10% to £102m and advanced wound management sales climbed by 9% to £114m.
Zimmer has been sniffing around for years but has become increasingly interested in S&N because it has shown such tremendous progress with its advanced wound therapies. It has launched a successful vacuum based system to treat hard-to-heal wounds such as diabetic ulcers and pressure sores. S&N is believed to be one of only two players in a niche market worth around £800m.
Continued fragility in the US financial system scarred the fragile Footsie, which plummeted 129.8 points to 5,320.4. London once again found itself at the mercy of Wall Street's bears as the Street of Dreams dropped 160.9 points at the outset on fears that the credit crisis is about to enter another damaging and dramatic phase.
Apart from Barrons scary prediction that struggling mortgage giants Fannie Mae and Freddie Mac will have to be bailed out by the government, dealers also had to contend with former IMF boss Professor Kenneth Rogoff's stark warning that the credit crunch could claim another high-profile US banking victim. JPMorgan Chase's forecast that Lehman Bros may write-down a further £2bn in credit-related investments in the third quarter just rubbed salt into the market's gaping wounds.
Plumbing giant Wolseley retreated 36¾p to 389¾p as investors pulled the plug on hearing that housebuilding in the US is at a 17-year low. Dealers still wait in vain for the rumoured US disposal. Selling ahead of tomorrow's half-year figures left housebuilder Persimmon 27p off at 305p. Barratt Developments lost 11¼p to 118p.
Banks took renewed credit crunch jitters on the chin. HBOS slumped 22p to 277½p after WestLB downgraded to add from buy. Lloyds TSB lost 17¾p to 288¼p, Royal Bank of Scotland 13½p to 215p and Barclays 18½p to 324¼p.
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Insurance firms succumbed to the financial malaise. Legal & General declined 7.2p to 95.9p, Prudential 37½p to 512½p, Aviva 33p to 491½p, Standard Life 14¾p to 225¾p and Old Mutual 5.9% to 90.7p.
Mobile satellite communications services provider Inmarsat, which could gain promotion to the Footsie next month, rose 10¼p to 498¼p. It yesterday confirmed the successful launch and acquisition of the third Inmarsat-4 satellite on a Proton Breeze M rocket from the Baikonur Cosmodrome in Kazakhstan.
Profit-taking in the wake of excellent first half results left social housing leader Mears 24p off at 296p. Hungry tracker funds will now pick up cheap stock as the company will enter the FTSE All Share index on September 11.
Mears continues to go from strength to strength. Interim pre-tax profits leapt 25% to £8.7m on turnover 48.5% up at £203.3m. The record order book is a stonking £1.7bn and its social housing division has already secured 100% of the consensus forecast revenues for 2008 and in excess of 85% and 65% of revenues for 2009 and 2010 respectively. Investec says buy and has a target price of 376p.
Reports of a pending cautious circular dragged property group Segro down 19½p to 402¾p.
Aurum Mining lost 42p to 52½p after trading was resumed on AIM on news that the original target of bringing the Andash Zone 1 mine into production by the end of this year will not now be met as a result of litigation. Minmet jumped 1¼p to 5p on news of a bid approach.
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