Market Report: Sorrell keeps the advertising bulls happy

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The Independent Online

A bullish presentation by Sir Martin Sorrell to a media conference organised by Merrill Lynch got shares in WPP moving yesterday. The chief executive of the advertising giant told those assembled the company had enjoyed a strong March and April and highlighted a series of high-profile new business wins. These include deals with corporate giants such as HSBC, Microsoft and Toys R Us.

A bullish presentation by Sir Martin Sorrell to a media conference organised by Merrill Lynch got shares in WPP moving yesterday. The chief executive of the advertising giant told those assembled the company had enjoyed a strong March and April and highlighted a series of high-profile new business wins. These include deals with corporate giants such as HSBC, Microsoft and Toys R Us.

There were also upbeat comments from Sir Martin about the outlook at WPP. For the long term, he indicated that the group will focus on high-growth markets such as Asia and said investors should expect double-digit earnings growth from the company. Such talk helped WPP rise 6p to 566p.

Meanwhile, Sanford Bernstein also did its bit for the advertising giant's share price. The US broker described WPP shares as cheap at current levels and tipped the stock to outperform in the months ahead. It said: "The investment case for WPP is straightforward: double-digit earnings growth driven by a reasonable set of assumptions and underpinned by minimal technological risk."

Capita put on 1.25p to 315p as the support services group looked set to return to the FTSE 100 in the latest shake-up of the blue-chip index. Capita will replace GKN, unchanged at 233.75p, which will be relegated. A note from Morgan Stanley also helped Capita yesterday. The broker argued that the group's earnings forecasts look undemanding given the recent slew of contract wins it has secured. Lower down the pecking order, two recent new issues were tipped to join the FTSE 250 as part of the review: Catlin, the general insurer, up 2.5p to 364p, and CSR, the Bluetooth microchip developer, 22.5p better at 365p. Supporting CSR was ABN Amro. The Dutch broker slapped a "buy" rating on the stock and a 400p price target. ABN forecasts CSR's market share to rise from 35 per cent of the Bluetooth market to 48 per cent by 2006.

MFI ticked 0.25p higher to 161.75p after the furniture retailer completed a series of meetings with City institutions. Of most interest to those present was the response by management to the recent bid rumours that have surrounded MFI. The group's directors are believed to have stayed tight-lipped when the subject was brought up.

Analysts believed the fact that the company held these presentations means a management buyout is not on the cards. "We can assume that an MBO is not being planned, since MFI would have been forced to say something by now, but a hostile bid cannot be ruled out," analysts at Evolution Beeson Gregory argued. They initially dismissed rumours of a move on the company, but have since warmed to the theory.

Traders exited JD Wetherspoon, down 2p to 285p, after it emerged that Anthony Lowrie, a non-executive director at the pubs group, had sold 390,000 shares. Fayrewood gained 2p to 121.5p as brokers were heard to be upgrading their forecasts for the group's German-listed subsidiary ComputerLink AG. Charter was unchanged at 137.5p despite talk of strong trading at its Howden division.

Belhaven, the Scottish breweries group, put on 14p to 460.5p as a plethora of brokers upgraded their forecasts after Monday's forecast-beating full-year figures. Among them was the company's house broker Collins Stewart, which expects Belhaven to achieve pre-tax profits of £16.7m for the current year, up from the £14.2m in the year just gone. CML Microsystems jumped 12.5p to 367.5p after the semiconductor designer boasted of a return to the black in its annual results statement.

Bond International held steady at 49p despite the sale of 110,000 shares at 47.5p by Tim Richards, the managing director of the software group. Bond shares have more than doubled over the past 12 months.

Kewill Systems put on 2.75p to 62.75p ahead of today's annual results. Brokers expect the group to post profits of £1.2m. This compares with a loss of £4.8m in 2003. Kewill will also update the market on the acquisition of TradePoint Systems and Shipnow, which will have bolstered the company's international trade and shipping software offering.

Epic Brand Investments dropped 0.5p to 80.5p after the investment group bought back 7 million of its own shares at 80p. This move seems quite wise given Epic trades at a hefty discount to its 94p net asset value. Strong annual results from the City broker Walker, Crips, Weddle, Beck pushed its shares 4p better to 127.5p.

Investors should keep an eye on Skiddaw Capital, off 0.5p to 19.5p. Word has it the company is days away from unveiling a company-making deal.

The AIM-listed group is run by Simon Fry, the former head of equities at the Japanese banking giant Nomura, and recently acquired the Hong Kong-based investment bank Crosby.

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