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
News
ebooksAn unforgettable anthology of contemporary reportage
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: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back