FTSE in-depth: Sainsbury falls over sales fears

By Geoff Foster for MailOnline
Updated: 04:56 EDT, 23 March 2011

Conspiracy theorists would say that the only reason a major company chooses to issue a trading statement of any description on Budget day is to hopefully 'hide' disappointing or bad news.

Foster: The Footsie's rally was halted by profit-taking.

Britain's third biggest grocer J Sainsbury gives a fourth-quarter sales update today which will cover the 10 weeks to March 19, and fears they will not cut the mustard left the shares 3.2p cheaper at 354.35p.

Sainsbury's is the first of the major supermarkets to comment on trading since the end of January.

Broker Shore Capital is cautious and forecasts a slowing of like-for-like sales growth of between 2-2.5%, down from 3.6% in the third-quarter. It retains only a hold recommendation on the stock but admits that the expected yield of 4.2% does look attractive.

Today's trading statement from Sainsbury could possibly prove to be just a sideshow before the main event if rumours circulating within the market prove correct.

Speculation suggests that the Qataris, who still sit on 26% of Sainsbury's equity after walking away from a £10.6bn bid in November 2007, have approached the supermarket's board with a grand plan.

The super-rich Arab investor does not want to revive its offer for the group, but would give its 100% support to Sainsbury's should it launch a £13bn-plus bid for High Street giant Marks & Spencer, 1.5p easier at 340.6p.

The prospect of a possible Sainsbury's/ M&S marriage has been flagged before. Indeed, four years ago Marks & Spencer said it was seriously considering a bid for Sainsbury's. Soon after that declaration it backtracked saying it would not bid at that time but reserved the right to change its mind almost at any time.

Current Sainsbury's boss Justin King joined as chief executive in March 2004 from Marks & Spencer where he was a director with responsibility for its food division.

The Footsie's rally was halted by profit-taking. It dragged the premier index 23.38 points lower to 5,762.71. Worries about instability in Libya and higher UK interest rates following news that inflation had risen to 4.4% in February, its highest annual rate since November 2008, prompted dealers to trouser some profits ahead of today's Budget.

Wall Street lost 12 points in the early stages.

Car components group GKN reversed 7.4p to 189.2p on a French report that it is amongst a number of companies to have submitted a bid for French aerospace equipment maker Latecoere.

Engineers with exposure to Japan's car manufacturing sector blew a gasket after car giant Toyota said that all 12 of its Japanese plants will stay closed until at least Saturday. Japan's car industry has lost 65% of car production in the last two weeks.

Catalytic converter group Johnson Matthey lost 49p to 1836.5p, while major Toyota car dealer Inchcape declined 16.4p to 349.85p.

Gaming group Rank hit the jackpot with a leap of 17.5p or 13% to 147.1p after receiving a cheque for £74.8m from Her Majesty's Revenue and Customs for overpaid VAT. The repayment covers VAT paid on games of bingo from 1973 to 1996 and Rank will receive around £79.5m of interest relating to this claim later in the month. Rank made profits of £51.1m last year.

All Bar One-to-Harvester pub and restaurant group Mitchells & Butlers frothed 6.6p higher to 302.15p on hearing that Irish horseracing tycoons JP McManus and John Magnier had bought a further 4m-plus shares via their investment vehicle, Elpida.

They now own 19.09%. Their purchase follows chief executive Adam Fowle's recent departure and suggests something corporate could be brewing.

Private jet hirer Air Partner nosedived 15.5p to 496p on fears that the imposition in today's Budget of an Air Passenger Duty (APD) could affect business.

But broker Oriel Securities remains a buyer and says that while unhelpful, with only a limited proportion of private jet chartering likely to be affected by an APD, the overall effect on business volumes is likely to be minimal.

Spread betting firm London Capital Group rallied 3.88p to 73p after raising £8m via a placing of up to 13.3m shares at 60p a pop by Cenkos Securities.

Cash raised ensures that the group has sufficient resources to satisfy the FSA's capital adequacy requirements. Directors Simon Denham subscribed for 1.33m, Rachel Woodford 1m and Frank Chapman 500,000 shares in the placing.

Dog of the day was Caza Oil & Gas. Shares of the Houston, Texas-based oil and gas company crashed 16.5p to 36.5p after plugging and abandoning the Marian Baker No 1 well in Louisiana. In December it had said it expected to find multiple, oil-bearing reservoir sections at the site.