Market Report: LSE tempts techs on to new market
Wednesday 13 February 2013
California's Silicon Valley appears to have it all if you are a tech firm: money available from entrepreneurs and government, and a network of tech specialists that is the envy of the world. For the UK, no matter how much Silicon Roundabout, Fen or Glen is marketed as east London's, Cambridge's or Scotland's answer to the Valley, the numbers just don't add up.
But the London Stock Exchange is trying to do its bit to attract the next Apple or Facebook to list in London. On Wednesday it released further details of its new High Growth Segment – a stepping stone between AIM and a premium listing to encourage technology and other high-growth firms to consider listing in London.
There have been no IPOs in the technology sector in Europe since 2010, sparking concerns that the UK is missing out on companies that could one day become technology giants. The move to create the High Growth Segment – for companies valued at about £300m with compound growth rate of 20 per cent over the last three years – will of course be welcomed. But research from tech experts at Deloitte has found that small tech firms on AIM are not in short supply. Deloitte highlights that no UK technology companies have listed in the US in the past three years, whereas during the same period over 30 UK tech groups listed on AIM.
John Hammond, partner at Deloitte, said: "Our analysis shows that smaller UK technology companies have, for some while, been choosing London rather than the US. AIM has been doing its job as an incubator for UK companies. What is exciting about the launch of the High Growth Segment is that larger UK technology now have a real alternative, and that can only be a good thing for London."
AIM looked as if it was losing one small tech tiddler. The Dundee-based cash-machine software group I-Design received an £8.5m takeover offer from the UK arm of the American ATM operator Cardtronics. It recommended shareholders accept the offer and the shares shot up 36p to 59p.
During afternoon trade, the FTSE 100 index reached a five-year high and edged above the 6,377 mark. But it fell back before the close – mimicking Wall Street which fell back in early trade – and finished the day up 20.7 points to 6,359.11.
A number of stocks going ex-dividend held back the blue-chip index. AstraZeneca was one of them, down 68.5p to 2,950p. But UBS issued a note stating the buy case for the pharmaceuticals group.
There has been plenty of speculation about corporate activity at the telecoms group Vodafone, focused on its US joint venture. But news emerged that it was considering a £5bn-plus takeover of Kabel Deutschland. The shares responded by declining 1.85p to 171.65p.
Water experts at JPMorgan played down the chances of mergers in the utilities sector. Morgan's Edmund Reid and Chris Gallagher think "the closer we get to Ofwat's 2014 price review, the less likely a bid becomes".
Mr Reid and Mr Gallagher are so sure of the adverse effects of regulation – including the Water Bill due before Parliament this year – that they have slashed the rating of their "favoured UK water utility", Pennon. They now rate Pennon neutral or hold – down from buy – but have slightly increased their share-price target to 695p. Shares in the water and waste group trickled down 2.5p to 676p. Severn Trent, down 1p to 1,610p, is rated as neutral with a share-price target of 1,520p. Vague rumours that United Utilities is a bid target have been doing the rounds for months, but the JPMorgan team rates the stock neutral with a price target of 720p. The shares slipped 0.5p to 729.5p.
Top of the table on the benchmark index was the explorer Tullow Oil. Its results were in line with forecasts, and it reported a 5 per cent spurt in full-year operating profit. It added that its Kenyan well, Twiga South-1, reported better-than-expected results and the shares gushed 80p higher to 1,260p.
Plans for cost-cutting at the Tanzania-focused miner African Barrick Gold sent its shares to the bottom of the mid-cap index, down 39p to 302p. Sale talks for the miner, initiated by its parent company Barrick Gold, collapsed in January, and it said it would now focus on cutting costs.
One mid-tier dweller still the subject of vague bid rumour was Man Group. The hedge-fund shares have risen more than 20 per cent since the start of the month and added 3.5p to 108.6p.
Conroy Gold and Natural Resources appointed Seamus FitzPatrick as deputy chairman as rumours circulated that partner Goldfields may be interested in a joint venture. The shares sparkled up 0.58p to 2.38p.
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