Market Report: Chemring jilted after a stormy romance

  • @LauraHChesters

After two deadline extensions, private-equity player Carlyle's summer fling with Chemring has finally ended. Carlyle, which first admitted its interest in August, said yesterday it would not be making an offer for the company and defence contractor Chemring's shares flew down the mid-cap index.

A lot of punters were already doubtful the talks would come to anything but the shares still lost 12.9p to 258p. Chemring admitted it continues to "face near-term challenges resulting from defence-budget constraints in its Nato markets, which are not expected to ease in the immediate future" but argued that its new chief executive, Mark Papworth, has now joined the group and there are still "further opportunities" for the flares and explosive-device detectors group.

It had already issued a profit warning earlier this month, citing delays to contracts and technical problems, which at the time sent its shares to a six year low.

Over on the blue-chip index, oil and gas giant BG Group was in focus after rumours emerged that it is hiring advisers to help protect it from potential hostile bids. Its shares crashed last week when it surprised the market by warning on output. The shares fell 14 per cent that day, and speculation emerged that it was vulnerable to takeovers, with names including Shell whispered by traders. Yesterday its shares lost another 42.5p to 1,054.5p.

There were mixed fortunes for shares in gold miners. The price of gold is rising on expectations of further rounds of stimulus globally. Russian gold miner Polymetal gained 4p to 1,115p as Nomura analysts raised their share-price target for the miner to £15.30. News also emerged that its lost cargo from a shipping incident last month had been found by Russian scuba divers among the shipwreck off Russia's Far East.

But gold miner Randgold Resources' shares dug down to the bottom of the benchmark index after it said production in its third quarter was below its last quarter and is at the lower end of forecasts. It got the wooden spoon as the shares ended down 475p to 6,950p.

City scribblers think it is time for punters to get "on yer bike" when it comes to shares in the outsourcer that runs the Boris Bikes scheme. Analysts at Investec have raised the Sell sign above Serco, the outsourcer that runs everything from the bike scheme to the Passport Agency, and public services outsourcer specialist Capita.

Investec's Gideon Adler questioned whether "these stocks can continue to justify their premium ratings" and he urges investors to look elsewhere. In a note he called Cash, Bang, Wallop!, Mr Adler reckons that "building competitive intensity in UK and international outsourcing markets, and current challenges to cash and margin… should bring ratings under greater scrutiny".

He slashed Serco's share price target to 500p and Capita's to 630p. Serco, which has just bought out its joint-venture partner, P&O Maritime Services' Australian defence and marine services business DMS Maritime in a £68m million deal, saw its shares sink 6p to 568.5p while Capita's reversed 11.5p to 729.5p.

The end to uncertainty over the leadership of the world's biggest economy helped the FTSE 100 rise above the 5,900 mark in morning trade as President Barack Obama started his second term in office.

But the index came crashing back down when the European Commission issued a forecast of sluggish growth at 0.1 per cent next year, and fears emerged of Obama's looming battle with Congress over the upcoming 'fiscal cliff'. The FTSE 100 lost 93.27 points to 5,791.63.

There were choppy waters for shipping services group Clarkson. In its third-quarter update, it said "shipping markets continue to reflect global, economic uncertainty through reduced freight rates and lower asset prices" and its shares sank 113p to 1,187p.

Wealth manager Rathbone Brothers plans to raise £24.2m to fund acquisitions and loans. It will place two million shares to raise the cash. It is also buying the investment management business of Taylor Young for about £10m. The shares fell 28p to 1,245p.

Online gaming software specialist Playtech's strong third-quarter update helped its shares up 14p to 425p.

AIM-listed software group WANdisco won a US patent for a technology used by tech giants HP, Intel and McAfee, and saw its share rise 35p to 442.5p.