Market Report: Compass and Misys bid for Footsie membership

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The Independent Online
COMPASS, the contract caterer, and Misys, the computer group, are neck and neck in a battle for membership of the exclusive Footsie club.

As the stock market closed Misys, with a 5p gain to 2,682.5p, managed to open up a marginal lead with Compass off 2p at 915p. One, possibly both, will join the blue-chip index. In third spot but unlikely to force its way into contention is Northern Rock, the mortgage bank, little changed at 616p.

The catering/computing battle is too close to call. Today's closing prices provide the basis for the crucial calculations which will be presented to the Footsie steering committee when it meets tomorrow.

Compass and Misys have enjoyed remarkable runs, The catering group, which has expanded aggressively through acquisitions, has been as low as 582.5p. The shares have moved ahead strongly this year, drawing some support from rumours of a takeover bid from Rentokil Initial, but are 13p below their peak. Misys shares have climbed from a 1,111.5p low and are 65p below their high.

Dixons, the electrical retailer which has blown a fuse since it became apparent festive sales would disappoint, will almost certainly be relegated. From 720p in November the shares are bumping along at a 12 month low of 512p.

It is now valued at pounds 2.2bn with Compass and Misys both above pounds 2.9bn. Rank, the leisure group little changed at 332p, is another possible casualty.

Footsie, and the supporting indices, are important investment indicators for many funds. Some tracker funds invest only in Footsie constituents; others use the supporting FTSE 250 index as their cut-off point.

Consequently, membership, even of the midcap index, can have a significant impact on a share.

For example, on Friday Micro Focus arrived in the midcap index, replacing T&N, the engineer taken over by Federal-Mogul of the US. Micro Focus was up 40p on Friday and managed a 37.5p gain to 3,570p yesterday.

IT shares, including Micro Focus and Misys, have scored from the introduction of an index covering the computer sector which was launched at the start of the year.

Footsie ended just a whisker below its peak, climbing 36 points to 5,818.9 in what was a rather featureless session. Supporting shares also made headway with the smallcap index breaking through 2,500 points for the first time.

BTR, once a conglomerate now an engineer, continued its revival, gaining 20p to 210p and topping the blue chip leader board. Williams, another to flee the now unglamorous conglomerate pack and move into the security and fire alarms bracket, also gain 20p, reaching 388p. Figures are due today. Profits could approach pounds 290m against pounds 248m. But some of the gain was due to speculation it could accompany the results with the sale of its Nu-Tone US building materials business for pounds 140.

Reed and Pearson offered contrasting media displays. Pearson jumped 49p to 992p in further response to Friday's sale of the troublesome Mindscape business. Since the disposal the shares have risen 73p. Deutsche Morgan Grenfell announced a 1,130p target

Reed International tumbled 57p to 620p after the planned pounds 17.5bn merger with Dutch publisher Wolters Kluwer was called off.

Financials had a relatively quiet session although Legal & General, the insurer, jumped 32p to 697p as takeover rumours returned. Halifax, which has barged into the Birmingham Midshires takeover with a pounds 780m offer, fell 12p to 925p. The BM building society has agreed a pounds 630m bid from the Royal Bank of Scotland.

Close Brothers, the merchant bank, rose 45p to 726.5p. Interim figures impressed but there is also a sneaking suspicion the group will soon be the subject of a takeover strike. Norwich Union, figures today, overcame an early 14p fall to close 17p (after 32p) higher at 515p.

British Energy surged 23p to 454p after forecastings its profits would be "at least" pounds 160m and not the pounds 125m the market expected. The higher- than-expected profits are due to the way fuel prices have held up at a time costs have been kept under control.

Asda jumped 8.5p to 197p on speculation the Safeway bid will come from J Sainsbury. Safeway rose 4p to 378.5p; Sainsbury's gained 10p to 480p.

Drugs group SkyePharma, figures on Thursday, gained 7p to 80p following positive comments from SBC Warburg.

Builder Tilbury Douglas added 10p to 235p following a pounds 15m water contract. Figures are due on Thursday and around pounds 22.5m is expected against pounds 19m.

On Ofex, Advance Digital Communications climbed to 29.5p from its 20p placing price.