Market Report: Smith & Nephew may fall short of market forecast

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Knees must be knocking at Smith & Nephew, the artificial joints company which continues to insist it will meet the market's profit forecasts for the year.

Knees must be knocking at Smith & Nephew, the artificial joints company which continues to insist it will meet the market's profit forecasts for the year.

The shares were off 3.5 per cent yesterday as the market heard another little bit of news which suggested it is getting increasingly tough for the company to keep that promise.

The group's results statement last month showed slower than expected growth in the second quarter because of a supply problem in its wound dressings business. That has already put pressure to deliver strong numbers in the second half. Yesterday Bear Stearns, the US broker, was warning its clients that significant sales from a new ceramic hip will only start to come through in the final months of the year. Bear Stearns didn't do anything as rude as suggest that S&N might miss its earnings guidance, only that earnings in the third quarter will be below previous forecasts, with the fourth quarter making up for it.

The market wasn't going to wait with its fingers and toes crossed, though, and sold S&N shares down 17.5p to 485.5p.

It was one of the worst performers in the FTSE 100, although obviously Abbey National got that booby prize after HBOS scotched hopes it would launch a bidding war. Abbey shares fell 37.5p to 572.5p and HBOS rebounded 23.5p to 738p after saying it would save its money to buy something more profitable.

The FTSE 100 settled 2.8 points higher at 4,548, shrugging off the early slide on Wall Street. Of those blue chips which fell substantially, many were shares which traded for the first time without the value of their dividends. They included Diageo, the spirits giant, which was down 20p to 687.5p. It is paying a 17p dividend. Scottish & Newcastle, the historic brewer, which is paying 6.87p, was off 14.25p at 384p.

Cadbury Schweppes, the chocolate and fizzy drinks group, was shorn of the value of its interim dividend, 3.8p, but its shares ended down more than that thanks to the profit warning from Coca-Cola. Cadbury is likely to be suffering similar competition from healthier drinks and the effects of a cold summer, investors reasoned. The company's shares were off 9p at 441p. Even Rexam, the world's largest maker of aluminium cans, was caught up in the reaction to Coca-Cola's news, ending down 2p at 416.5p.

The rising oil price was a fillip to Shell (up 4.5p to 417p) and BP (4.5p better at 511.5p), and also to BHP Billiton, the mining group which makes a third of its profits from oil and gas. Its shares rose 6.5p to 528.5p.

Trading in Geest shares was a bit like the last few minutes before closing at the supermarkets it supplies with prepared salads: its stock has been "reduced to clear" after lack of buying interest. After falling more than 12 per cent since May, some investors thought it worth betting that results today might be no worse than the 22 per cent fall in profits expected. Previously, everyone has fretted that Geest will admit there has been little demand for salads during the ropey British summer.

Rumours of a takeover at Amec got another outing, with the US group Fluor again in the frame to make a bid. Its shares were up 3p to 310p. And MFI Furniture, the disaster-stricken retailer, bounced 3p to 107.75p on suggestions it may receive a private equity or trade bid at its depressed share price.

Thus, the alternative telecoms carrier, was a penny lower at 16p after a profit warning in the sector in the US overnight. And Alba, the maker of cut-price hi-fis and televisions, was off 36.5p at 776p on gossip that trading has slowed.

Antonov, which is trying to develop a revolutionary six-speed gearbox, was up 4p to 44p before its exhibition at the Paris Motor Show and what gossips believe is the imminent appointment of a new broker. Torotrak, which is working on "infinitely variable transmission" technology of its own, was up in its wake, as bulletin boards went into overdrive with rumours of development progress by a big car company. Torotrak shares closed 3.5p better at 44.5p.

Hardman Resources, which said earlier this week that it had begun drilling at its offshore oil well in Mauritania, was up tuppence to 82.5p thanks to a "buy" recommendation from an Australian broker. Sky Capital, the mini-investment bank which had disappointing results early this month, fell 22.5p to 171p as a former employee sold a big line of stock.

And some fund managers were pointing out a curious phenomenon yesterday: the plunging share prices of companies connected with Terry Ramsden, the convicted fraudster turned small cap investor. Caplay, the first of his shell companies, was off 0.38p at 4.62p. And Financial Development Corporation, the public relations group formerly called Hansard, was down 0.25p to 3.12p. Several investors who were expected to come in with Mr Ramsden when he invested in FDC last month reneged on their agreements.

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