Market Report: Bid chatter and recovery hopes help De La Rue

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Its rise up the mid-tier index meant De La Rue's investors were in the money last night, as City scribblers talked up both the banknote printer's takeover potential and the chances of it executing a successful turnaround.

The troubled group, which produces passports and visas as well as currency, dipped on Thursday after releasing a mixed first-quarter trading update. Yesterday, however, the market appeared to have a change of heart as it shot up 33.5p to 779.5p, helped by Investec upgrading its advice to "buy" from "hold".

The broker said it believed there were two possible scenarios for De La Rue – which in May revealed that its full-year profit had dropped nearly 70 per cent thanks to production issues – and that both provided a "meaningful upside".

In the first, said Investec's analysts, it could once again be a takeover target, potentially for Oberthur, the French technology group with which it was involved in takeover talks that fell apart last January. The analysts noted recent reports that Oberthur is close to selling some of its businesses, "which, if accurate, would provide a significant portion of firepower required to acquire De La Rue".

However, they added that since the company said in June that it would not make a renewed attempt, any fresh approach would have to wait until December because of Takeover Panel rules.

The other scenario, they proposed, would be it trading "its way back towards peak profitability", and they highlighted their "confidence in the turnaround". Giving their backing to the management, the analysts calculated a fair value for the company of 935p a share, the same price they predicted any potential bid would start at.

With the emergency summit in Brussels producing a bailout package for Greece, the FTSE 100 extended its recent gains by climbing 35.13 points to 5,935.02, meaning it has added nearly 150 points over the past four days. Despite the news, however, Royal Bank of Scotland and HSBC were the only banks in the blue, surging up 0.81p to 36.86p and 3.6p to 612.2p respectively.

Aviva was still marching forwards, closing 5.4p better off at 425.4p after bid rumours linking the insurer to a potential approach from Zurich or Allianz emerged on Thursday. Meanwhile, engineer GKN put on 3.9p to 235p thanks to mutterings being reheated yesterday that it may be a target.

Another takeover tale being given an airing was hardly a fresh one, as rumours did the rounds that the US giant Exxon Mobil could be interested in BG Group. There was widespread scepticism among market voices given the number of times bid chatter has focused on the oil explorer, and – with the rumours suggesting a price between 2,200p and 2,400p – it eased forwards just 8.5p to 1,409.5p.

United Utilities was another subject of takeover talk, as Investec's Angelos Anastasiou said that although an approach was "not necessarily on the cards, it is also not beyond the bounds of reason". The water group increased by 4p to 588p after revealing it was on track to meet its targets, prompting the analyst to keep his "buy" advice.

Elsewhere, Sage slid back despite Microsoft's announcement late on Thursday that its annual sales had reached a new high. The software group retreated 2.7p to 280.8p, even though Panmure Gordon said the read-across from the US giant confirmed its "positive view that Sage is trading well".

The stand-out stock on the FTSE 250 was easyJet after it flew up 55.3p to 368p – a move of nearly 18 per cent – after the release of its interim management statement. The budget airline had lost almost 13 per cent since the start of the month, but the news that an increase in business travellers meant it was raising its annual forecasts more than wiped out that fall.

The holiday theme at the top of the mid-tier index continued with Thomas Cook, as the under-fire tour operator ticked up 4p to 72p. The group has been shunned by investors since its profit warning earlier in the month, but things were looking sunnier yesterday after Charles Stanley's Douglas McNeil said fears were "overdone". "If this business did not exist, it would have to be invented," said the analyst, who kept his "buy" recommendation while playing down the likelihood of its UK operations being closed down.

Also travelling higher was FirstGroup, after HSBC upgraded its advice to "overweight". The transport group ticked up 8.6p to 364.3p as the broker said that although margins as its US school bus unit may not recover as hoped thanks to underlying cost inflation, "they can be stabilised".

RM was left with the unwanted honour of being the main market's biggest loser, as the small cap company plummeted nearly 19 per cent. The supplier of IT equipment for schools was driven back 27p to 117p in the wake of a profit warning which it blamed on difficult trading in the US and UK.

FTSE 100 Risers

Fresnillo 1,681p (up 37p, 2.25 per cent)

Precious metals miner takes the top spot as it enjoys a boost from a rise in the price of gold.

Capita 700p (up 14p, 2.04 per cent)

Outsourcer climbs after Numis Securities initiates coverage with a "buy" recommendation.

Vodafone 164.55p (up 3.25p, 2.02 per cent)

Mobile phone group's first-quarter revenue comes in ahead of forecasts.

FTSE 100 Fallers

AstraZeneca 3,054p (down 38p, 1.23 per cent)

Drugs maker hit by Bank of America Merrill Lynch cutting its rating to "neutral".

Essar Energy 380p (down 4p, 1.04 per cent)

Power generator knocked back after three consecutive sessions closing in the blue.

Prudential 694p (down 4.5p, 0.64 per cent)

Insurer falls as investors bank profits in the wake of advancing for three straight days.

FTSE 250 Risers

Talvivaara 426.4p (up 16.4p, 4 per cent)

Miner moves ahead after Numis Securities changes its advice to "add" from "hold".

Colt 118p (up 4p, 3.51 per cent)

Telecoms provider sees partial rebound following Thursday's sell-off in the wake of its half-yearly report.

Halfords 350.5p (up 9p, 2.64 per cent)

Retailer shifts forward despite Arden Partners cutting its target price to 340p from 440p.

FTSE 250 Fallers

bwin.Party 140.8p (down 4.9p, 3.36 per cent)

Gambling group hit by profit taking after advancing for three straight sessions.

Cable & Wireless Communications 36.92p (down 1.16p, 3.05 per cent)

Telecoms group drops as its says its first-quarter was "satisfactory".

New World Resources 859p (down 17.5p, 2 per cent)

Miner behind after revealing cheaper coking coal and coke agreements.