Hopes of a takeover offer for ITV have been the driving force behind its stock in recent months, but Citigroup is believes that the group is in long-term decline and this hit investor sentiment.
According to the US broker's analysis, the main problem at ITV is that although it is doing well in its battle to cut costs, these are unlikely to be enough to offset the declining revenues at the group. It points out that ITV has been losing audience share since 1990 and the broker fears this trend will continue for the next few years.
Citigroup believes investors would do well to switch into satellite broadcaster BSkyB, steady at 552p. Unlike ITV, its revenues are growing fast and the broker is convinced that there is nothing to get in the way of this in the near future.
Over the next five years, Citigroup expects to see BSkyB's profits margin rise from 60 to 65 per cent while it forecasts ITV to experience a decline.
O2 also found itself on traders' sell lists as a combined offer for the company from Deutsche Telekom and Holland's KPN was said to have been aborted at the last minute.
Shares in the group closed 3p weaker at 146.5p, as punters scaled back their bull positions in the stock but stopped short of closing them outright. The dominant view in City dealing rooms is that O2 is very much "in play" and that an offer for the company will emerge soon. The FTSE 100 fell 1.6 points to 5,344.2.
Collins Stewart gave up 11.25p to 622p after Credit Suisse First Boston downgraded the stock to "underperform" from "neutral". The move comes after Friday's announcement that Collins Stewart had received several bid approaches.
Credit Suisse told its clients that an offer for the group is unlikely to come in at current levels. The Swiss broker added that it would be surprised if a fellow inter-dealer firm acquired Collins Stewart, pointing out that stock exchanges such as Deutsche Börse would be put off from paying top dollar for the company because of the limited synergies between the two businesses.
Investec Securities had a stark warning for those holding JJB Sports stock. It believes that sales of replica sports clothing plummeted in May and June and warned that this, coupled with unseasonal weather and weak consumer sentiment, spells very bad news for JJB.
The broker calculates that first-half like-for-like sales could fall as much as 9 per cent, which is likely to prompt a slide in profits. Investec Securities said: "The sharp decline in sales washes straight through to the bottom line in the absence of any major actions on costs."
As a result, the South African broker has slashed its full-year profits forecast for JJB by 6 per cent to £49m.
Meanwhile, the retailer is up against stiff competition. Its rival Sport & Soccer has been winning customers from JJB by running a so-called closing down sale.
Allsports is also reported to be heading for a period of heavy discounting of its stock. The prospect of more discounted replica football shirts flowing on to the market will only prolong the woes at JJB, Investec warned.
Among smaller companies, United Clearing rose 9p to 130p after unveiling a contract win from Hutchison 3G Ireland.
The group will provide the mobile network provider with financial clearing and settlement services. International Greetings, which makes gift wrap, added 12p to 450p on talk the group has enjoyed strong trading over the spring and summer. Gossips reckon sales during these months are well ahead of budget.
Regent Inns rose 4p to 85p as it emerged that the bars operator had lost out in its bid to acquire rival Urbium, 105p higher at 1,010p. The group's offer for Urbium was trumped by the private-equity group Electra and analysts believe Regent Inns is now vulnerable to takeover.
Altium Securities said: "The rationale behind Regent's bid for Urbium was clear to all, but its failure will in our view increase the likelihood that the company is now more prey than predator." The broker calculates that Regent could attract a take-out price of up to 100p a share.
Finally, Harrier Group added 1p to 16.25p as the former IT services group confirmed it had sold its operating subsidiaries, transforming it into a cash shell. Harrier has £4.4m in the bank and hopes to execute a reverse takeover. A source close to the group said an acquisition is on the cards.Reuse content