FTSE in-depth: Diageo figures whet appetites

By Geoff Foster for MailOnline
Updated: 03:54 EDT, 13 August 2010

Thirsty fund managers licked their lips in anticipation of Diageo's full-year figures on August 26.

Geoff Foster: The Footsie regained some composure following Wednesday's sell-off.

Their appetites were whetted after Anheuser-Busch InBev, the world's biggest brewer of Stella Artois and Beck's, rolled out better- than- expected second- quarter profits.

Shares of the Guinness-to-Gordon's Gin giant rose 13p to 1110p on rising hopes that its earnings will please and that shareholders could even enjoy another mouth-watering cash hand-out.

Between 1997 and 2010, Diageo has returned in excess of £22bn to shareholders, more than 50pc in the form of share buy-backs.

Broker Evolution Securities recently lifted its target price to £13 and expects Diageo to progressively increase its returns to shareholders in the coming years. Management should have something further to say on that matter with the figures.

Rival broker Matrix also has a target price of £13. It recently met with Diageo's management who reconfirmed its interest in cognac and champagne group Moet-Hennessy, in which it already owns 34%.

Should LVMH be willing to sell, it would cost around £10.5bn to buy the outstanding 66%, but a deal is not thought to be imminent.

Diageo lacks champagne and cognac brands. It already has the world number one brands in whisky, gin, tequila and liqueurs, so adding Hennessy and Moet & Chandon would make strategic sense.

Dealers also raised their glasses to Peronito-Grolsch brewer SABMiller, 32.5p up at 1898.5p.

The Footsie regained some composure following Wednesday's sell-off, closing 20.85 points higher at 5,266.06. But the Street of Dreams followed the previous day's fall of 262 points with an opening deficit of 68 points on further disappointing economic data.

Americans filing new claims for unemployment benefits unexpectedly rose in the latest week to the highest level for nearly six months, fuelling concerns about the strength of economic recovery.

Centrica added 10.4p to 329.9p after forking out £229m on Suncor Energy's natural gas assets in the Wildcat Hills region of Alberta. The acquisition will enable its North American subsidiary, Direct Energy, to meet around 35% of its customers' gas demand through its own sources of production.

Drugs giant GlaxoSmithKline advanced 30.5p to 1195.5p after the US Food & Drug Administration recommended approval of Potiga, a new epilepsy drug developed with Valeant Pharmaceuticals.

Rumours continue to do the rounds that GSK could possibly be a counter bidder for Durex condom group SSL International, unchanged at 1158p. SSL has agreed a £2.54bn offer from Reckitt Benckiser, 57p up at 3123p.

Reflecting chief executive Paul Polman's purchase of 1,000 shares at 1710p a pop, household goods giant Unilever added 24p at 1732p.

Reports of a pending cautious circular and worries about a faltering US economy left plumbing group Wolseley 61p lower to 1379.8p.

Dividend yield considerations and whispers of a possible share buy-back helped bicycle retailer Halfords climb 16.7p to 470.1p. On the other side of the High Street, Next gained 16p to 1967p on a Liberum Capital recommendation. The broker says the brand is in good shape and the shares still looks cheap.

Small buying lifted life science minnow ValiRx 0.05p to 0.425p. It has concluded a licensing agreement with Cancer Research Technology for the global commercial rights to the promising compound VAL 201 and to develop it into a treatment against hormone resistant prostate cancer.

Tissue Regenix edged up 0.25p more to 15.5p as investors cottoned on to the fact that John Samuel is chairman of the up-and-coming biotech company. He ran MoInIycke Health Care, a global medical products company, and sold it in January 2007 to Investor AB and Morgan Stanley Principle Investment for £2bn-plus. With that track record, TR's shareholders should be in for an exciting ride.

Persistent demand left Beacon Resources 0.5p dearer at 8.25p. The company has been granted a mining lease over its Arthur River magnesite project in Tasmania, the third largest magnesite asset in Australia.

News of positive US Department of Agriculture trials for its PINT technology helped Plant Impact firm 0.25p at 16.5p. PINT helps turf grass retain nitrogen for longer and the company believes that home and gardens and golf courses In the US represent a major potential market for the product.