Yesterday's trading: Braced for BT's results
Dealers are bracing themselves for a significant reaction to tomorrow's full-year results from BT. As they stare a huge dividend cut in the face, the telecoms giant's army of 1.4m long-suffering shareholders must be keeping all digits crossed that the shares will move in a positive direction.
Geoff Foster: It's been a terrible 12 months for everyone connected with BT.
• BT's 2009 results: 15,000 jobs cuts and a £134m loss
It's been a terrible 12 months for everyone connected with BT as persisting problems at its Global Services division and ongoing worries about the dividend and burgeoning pension deficit have seen the stock halve in value this year, to a low of 71p.
The overall market's recovery since March has lifted spirits and BT yesterday rose a further 2.1p to 95.6p. But tomorrow's figures will obviously be make or break.
Broker Cazenove believes BT is close to 'clearing the decks' in terms of recent problems at Global Services and is ready to make a fresh start.
Caz expects it to present the results of its latest triennial review and forecasts a gross pension fund deficit of £5bn-£10bn. BT will be under pressure to balance the need to reward its shareholders with the need to fund a pensions deficit, the investment requirements of the business and a highly geared balance sheet. It expects a 56% dividend cut.
On the subject of pension deficits, perhaps BT could take a leaf out of Babcock International's book. Shares at the support services group soared 68p to 480p, following not only excellent figures, including a 90% leap in the order book to £5.7bn, but after announcing a novel longevity swap pension scheme that insures against members living longer. Apparently the company will pay an outside firm an agreed stream of cash to pay its pensions.
Buying ahead of Tuesday's full year results lifted mobile phone giant Vodafone 3.85p to 123½p. Goldman Sachs says buy and expects a re-rating as investors gain confidence in earnings forecasts.
Wall Street's overnight fall of 155 points made for a drab start in London. The Footsie soon lost a 21 point gain to trade 38 lower and close 9.96 points off at 4,425.54. The Dow performed in a similar manner as it lost an early 62 point improvement on continuing fears that more US banks will sell shares to repay government bailout funds.
Credit Suisse analyst Jonathan Pierce took the view that the rally in the major UK banks had gone far enough and advised clients to take profits. Lloyds Banking led the retreat with a fall of 10.2p at 89.1p, while Barclays lost 18½p to 268½p and Royal Bank of Scotland 2.6p to 43½p.
Clouds above travel group Thomas Cook, 10¾p lower at 252¼p, after Investec downgraded to sell from hold. The broker is particularly concerned about its exposure to the weak Scandinavian markets and the potential disposal of a large slice of Arcandor's 52% stake.
Fund managers filled their trolleys with grocers after the British Retail Consortium April retail sales monitor showed food had a good month with underlying sales ahead by 5.3% year-on-year. William Morrison advanced 9¾p to 245¾p, Tesco 12½p to 352½p. Ahead of today's results, Sainsbury edged 1¼p to 340¼p.
A Numis recommendation in the wake of a positive first-quarter trading statement, which showed strong premium income growth, helped Brit Insurance climb 19½p to 204¾p. Logistics group Stobart accelerated 9¾p to 107p after saying its exposure to the food and drinks sector meant it was riding out the recession in better shape than its rivals.
After a strong start to the year, support services-group Serco added 13½p at 394p. This year it has signed contracts worth £1bn and has been appointed preferred bidder for contracts worth a further £250m. Oriel says buy.
Centamin Egypt, which owns the Sukari gold mine which starts producing next month, attracted heavy buying following an analyst roadshow in London. The close was 4¼p better at 66p on turnover of 2.7m shares.
KBC Peel Hunt has a price target of 100p on Spice, 2¾p dearer at 59½p, after the company that provides support services within the utilities sector said that trading is in line with expectations. Cash performance has been strong and net debt is now well on the way to dropping below £100m.
Still excited by its bid from ZCI, punters continued to pile into African Copper, sending shares of the exploration development company up a further 4¾p for a two-day leap of 8½p at 13p. Turnover swelled to 37.6m.
Northern Petroleum gushed 2½p to 126½p on hearing it has been awarded two Italian permits off Calabria in the Ionian Sea.
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