Market Report: Fundraising concerns weigh on Barratt

Barratt Developments was in focus last night after a leading broker weighed in, anticipating further land writedowns, which in turn may necessitate a capital raising.

Bank of America-Merrill Lynch said the incoming finance chief David Thomas is likely to undertake another assessment of the group's landbank carrying values towards the calendar year-end, which in turn is likely to precipitate a "further 'hit' to stated NAV [net asset values]".

"Although the risk of further extensive land provisions has eased in the second quarter, the fact that Barratt has been so far 'behind the curve' recognising lower land values suggests that it is the most vulnerable to a further meaningful writedown," Merrill said, adding that such a move is likely to "compel a second round of talks" between the group and its lenders, and also "some form of capital raising" to strengthen the balance sheet.

As a result of Merrill's assessment and weakness in the wider sector, at the close Barratt was a penny weaker at 163p, while Persimmon eased to 401p, down 4p, Redrow was 4.5p behind at 187p and Bellway lost 3.5p to 649p.

Overall, the FTSE 100 held on to earlier gains, closing broadly unchanged at 4361.84, up 15.38 points. The FTSE 250 was also broadly flat, easing slightly to 7,554.11, down 18.22 points. Sentiment among traders remained strong following some positive economic news from China, and forecast-beating results from JP Morgan Chase, the American banking group that posted a 36 per cent jump in second-quarter profits.

Parts of the mining sector were weaker than they have been in recent sessions, thanks to a bout of profit taking both in equities and on the commodities exchanges following news that the Chinese economy had grown at a faster than expected pace in the second quarter.

The trend undermined the Eurasian Natural Resources Corporation, which retreated to 720.5p, down just over 3 per cent or 23.5p, and Anglo American, which was 2.3 per cent or 41p behind at 1,759p. Others in the sector, including BHP Billiton, flat at 1,435.5p, and Antofagasta, up 1.5p at 649p, managed to stay afloat, but failed to make much headway.

Further afield, SABMiller advanced to 1,314p, up 1.8 per cent or 23p, after Exane BNP Paribas weighed in, moving the stock to "neutral" from "underperform", with a revised 1,350p target price, compared to 900p previously. Citing strengthening profits in Latin America, currency benefits and falling raw material costs, the broker also raised its earnings per share forecasts for the group.

Insurance issues were mixed, with Friends Provident rising by 2 per cent or 1.4p to 72p as traders awaited Resolution's next move, but Legal & General declining to 56p, down 2.3 per cent or 1.33p. ING, which maintains a "sell" stance on L&G, expressed caution ahead of the group's results, which are due early next month. For sector peer Aviva, which is also due to update the market in early August and is rated "buy" at ING, the broker said it had changed its dividend forecast "from a maintained 2009 payout to a cut to 25p", compared with 33p in 2008.

At the interim stage, ING expects Aviva, which was down 1.2 per cent or 3.75p at 318p, to cut the payout from 13.09p to 8.75p. "We think this could signal a revival in the stock which has performed poorly in recent months," the broker said.

On the second tier, the rumour mill rolled on around Wellstream, the oil services group that gained 4.8 per cent or 22.7p to 496.75p amid talk that it may be in the sights of a larger peer, who may be willing to offer a large premium to the current share price.

Elsewhere, the oil explorer and producer Heritage Oil, which last month announced plans to merge with Turkey's Genel Energy, fell back, easing to 490.75p, down 1.7 per cent or 8.25p, as speculators moved to bank profits from recent gains. Earlier this week, the oil major Royal Dutch Shell, up 0.9 per cent or 14p at 1523p, was rumoured to be eyeing Heritage, with some in the market quoting a potential offer price of as much as 700p per share.

But Pali International, which weighed in on the chatter, played down the probability of an offer, saying that while the potential for an approach could not be ruled out, in its view there was only a 10 per cent to 15 per cent chance of a counter-bid. "We believe that the sale of Heritage's assets in Uganda to a large oil player (like Shell) could be a more likely scenario," the broker said, adding that it would be surprised if such an asset sale takes place before the completion of Heritage's merger with Genel.

Among smaller companies, Regal Petroleum closed at 62.25p, down 0.25p, despite Merrill reiterating its "buy" stance on the stock, saying that the recent pullback in the share price provided an attractive opportunity to wade in. "Regal's recent underperformance against [European oil explorers & producers] opens a particularly attractive opportunity for investors ahead of potentially transformational MEX 106 and SV 58 well results," the broker said, sticking to its 130p target price for the stock.

Start your day with The Independent, sign up for daily news emails
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Beverley James: Accounts Payable

£22,000 - £23,000: Beverley James: Are you looking for the opportunity to work...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower