Market Report: Kelda climbs on revived takeover speculation

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Takeover talk bolstered the water sector yesterday, after the re-emergence of interest in Southern Water, with Kelda Group the best perfomer.

Credit Suisse said Kelda had significantly underperformed its peers since June, after the credit market turbulence had caused M&A speculation in water companies to dry up. Should takeover activity once more target the sector, Kelda was the most likely to be snapped up, it added. Its stock closed up 1.55 per cent at 852p.

The Swiss broker added: "Given the forthcoming flow of catalysts, we believe there is further potential within the sector over the coming months."

Reports over the weekend said Scottish & Southern Energy was set to join the consortium fronted by Goldman Sachs bidding for Southern Water. S&S was up 8p to close at 1386p.

Investors tuned in to send ITV to the top of the leaderboard. It was also bolstered by broker support as the market stumbled once more. ABN Amro upped its target price on the stock from 100p to 110p as the group prepares to deliver a strategic update tomorrow. The Dutch broker said it expected a more focused emphasis on key strengths, while operational outlook for the second half of the year has improved.

After months of speculation, it seems Scottish & Newcastle finally wants something done about the continuous takeover whispers surrounding the stock. Yesterday, the UK brewer was reportedly set to tell Carlsberg, consistently linked to a bid, to put up or shut up. It later denied speculation that it was in talks with a white knight bidder. The shares closed up 4p 616p.

The FTSE 100 zig-zagged in early morning trading as it waited for direction from the US. It initially rose as the Dow rallied off Friday's falls, but was unable to maintain the strength, closing 57.1 points down at 6,134.1.

Associated British Foods was the worst performer for much of the day, after a trading update. Despite maintaining that full-year earnings would be in line, it disclosed a £19m currency hit over the weakness of the dollar. AB closed down 3.41 per cent at 808.5p.

Traders remained wary of the real estate investment trusts, which suffered as a sector, with British Land finishing the worst performer, down 3.10 per cent at 1187p.

On the second tier, cry- baby investors had dried their eyes sufficiently to pile back into Sports Direct International, the company founded by Newcastle United owner Mike Ashley. Its stock was among the top risers in the morning, up 3.68 per cent although it weakened to close up 0.92 per cent at 137.25p. Its stock rose after another profit warning failed to emerge in its trading update yesterday. Ashley, one of UK Plc's more colourful characters, called unsupportive investors cry babies, in June. He added: "I've got balls of steel."

Among the fallers was Alfred McAlpine, the construction company, after a bearish note from Goldman Sachs. The broker said McAlpine's value opportunity had largely played out, causing the shares to slide 4.36 per cent to 455.5p. Regus Group also fell as broker support weakened. KBC Peel Hunt downgraded the office space manager after saying "there is not enough value left to compensate for risk". Its shares ended 6p lower at 123p.

Outside the FTSE 350, Brady had – in the words of one trader – "a bit of a shocker". The software company's interim results showed a 48 per cent jump in sales revenues, but one-off costs are set to smash full year profits. The statement said the cost of recruiting a new board, and an internal overhaul meant profits "will be substantially below expectations".

Falklands Gold & Minerals could be facing an identity crisis after announcing its exploration programme in the region had failed. The group said it was set to pack up its exploration in the Falklands and "intends to seek opportunities elsewhere in the world". Presumably it will change its name to Gold & Mining in the process.

Valirx was among the top AIM risers, after positive initial research results from its drug designed to combat cancer. Cancer Research Technology said GenICE compound appears to arrest the development and terminate the existence of cancer cells, sending its stock up 22.22 per cent in 16.5p.

Investors were feeling loved up as Mobestar Holdings, the IT group, agreed to supply its mobile dating platform to German dating agency It rose 6.98 per cent to 23p.

Positive results drove the shares up at 888 Holdings, the online gambling group. 888 revealed that pre-tax profits had more than trebled to £19m in the first half of the year. It also revealed it had signed a poker deal with a group in South America. The group was hit by the wider sell-off at the end of the day and closed 1.25p down at 119.25p.