Market Report: Rentokil defies critics to rise after key resignation
Saturday 11 December 2010
The resignation of a senior boss and a savaging from brokers is not normally the recipe for a share price rise, yet that is exactly what Rentokil Initial enjoyed yesterday.
The company, which does everything from pest control to cleaning, ended up 1.9p stronger on 96.85p, despite the announcement that the managing director of its City Link unit, Stuart Godman, has left by mutual agreement.
Reacting to the news, which came with Rentokil's third-quarter update, Prime Markets' Richard Curr said the group was in "crisis mode" and described the departure as "yet another nasty wake-up call for shareholders hoping that the worst might be over". JP Morgan Cazenove was also pessimistic, downgrading its advice to "underweight".
Yet investors clearly weren't put off, with City Index's Joshua Raymond noting that the "reassertion in the company's update of expected full-year profits is being seen in a positive light considering the troubles the firm has had of late."
He also added that Mr Godman's departure could generate some positive sentiment, suggesting that "perhaps shareholders are hoping a change of management there could reignite [City Link's] fortunes."
Overall, the FTSE 100 rose 4.99 to 5,812.95 as the markets endured a thin session, with one trader quipping that there were "quite a lot of very bored people in the City today". The release of November's producer input prices data was delayed until Monday, meaning they had to make do with the latest factory gate inflation figures, which were disappointing.
The miners enjoyed a positive end to the week after China decided to increase reserve requirements for lenders rather than raise interest rates, as feared. The sector was also helped by China's announcement that imports of copper and products in November were up 29 per cent.
Earlier in the week there was talk of Diageo having a potential interest in Fortune Brands' drinks unit, and yesterday the Guinness-maker was reported to have started discussions over buying the Turkish company Mey Icki, which specialises in raki.
The price mentioned was $2.5bn (£1.6bn), and Diageo was driven up 11p to 1,174p as RBS reacted fairly positively to the idea of the deal, describing Turkey "as an attractive long-term growth market".
Elsewhere, Centrica put on 3.8p to 324.5p, sparked by Nomura turning its eye towards the European utilities sector. Generally, the broker was bearish, but it highlighted Centrica as one of its "top long picks" and said that the energy supplier "offers one of the best growth rates in the sector".
Meanwhile, Cobham came close to the top spot, advancing 5.9p to 209.5p as gossip over a potential bid for the defence group refused to go away.
At the other end of the blue-chip index, Standard Chartered continued to fall after Thursday's trading update, shedding 47.5p to 1,762.5p. Bank of America Merrill Lynch downgraded its advice to "neutral", saying that although it still supports the stock, "with expectations already very high, risks to the rating seem skewed more to the downside as we enter 2011".
On the FTSE 250, the big loser of the day was Imagination Technologies, which fell nearly 5 per cent, dropping 18.6p to 363.9p. The chip maker, which releases its interim results next week, dipped after Numis said that although it remains "attracted to [Imagination's] positioning and prospects... with the stock up 76 per cent over the past year, [we] are conscious that a lot has been priced in."
Speculation that Punch Taverns may be taken over was the main point of discussion recently for watchers of the pub sector. UBS's Kate Pettem said she believed the chatter could prompt a rise in Enterprise Inns' share price, even if no bid materialises. As a result, the analyst upgraded the broker's recommendation on the company to "neutral" from "sell", despite describing it as "much less of a takeover candidate". Its share price duly benefited, closing up 2.6p on 117p.
Also making a positive move off the back of coverage from analysts was IG Group, after Goldman Sachs declared that its "valuation does not reflect its medium-term growth potential". The spread-betting company, which released a trading update on Thursday, was boosted 7p to 511p.
On the Alternative Investment Market, Regal Petroleum rocketed over 30 per cent after announcing that it was in "final-stage discussions" over a cash offer for the company of 24p-a-share. Regal climbed 5.75p to 24.25p following the statement, which came a fortnight after it revealed that it had received a number of enquiries regarding a potential deal.
It was take-off time for Flybe, with the domestic airline starting its first day of trading. The flotation raised £60m, and the group said some of it could be used for acquisitions. The shares were priced at 295p, reaching 341.25p – up 46.25p – by the bell.
FTSE 100 Risers
Smith & Nephew 650.5p (up 14.5p, 2.28 per cent)
Manufacturer of replacement knees and hips renews its debt facilities.
BAE Systems 330.4p (up 5.7p, 330.4 per cent)
Defence company announces that its group finance director George Rose will retire in March.
Anglo American 3,027.5p (up 32.5p, 1.09 per cent)
Says it will begin construction on the Minas Rio iron ore project in Brazil early next year.
FTSE 100 Fallers
BG Group 1,303p (down 30.5p, 2.29 per cent)
Sees its share price drop despite UBS raising its target price to 1,350p from 1,290p.
Associated British Foods 1,091p (down 14p, 1.27 per cent)
Primark owner says trading has matched expectations so far this financial year.
British Land 508p (down 4p, 0.78 per cent)
Announces application for planning consent for UBS's new offices in London.
FTSE 250 Risers
Carpetright 800p (up 32p, 4.17 per cent)
Floor coverings retailer finishes the week on a high ahead of next Tuesday's interim results.
Kesa Electricals 168.4p (up 6.4p, 3.95 per cent)
Partial recovery for Comet owner after suffering large losses during Thursday's trading.
John Wood 488.2p (up 2.2p, 0.45 per cent)
Sees its share price edge up following the win of a five-year contract from Stadtwerke Munchen.
FTSE 250 Fallers
Ashtead 155.3p (down 2.7p, 1.71 per cent)
Down despite Evolution raising its recommendation to "buy" and Peel Hunt upping its price target.
BSS 477p (down 7.9p, 1.63 per cent)
OFT accepts proposed measures to resolve competition problems over BSS's merger with Travis Perkins.
DS Smith 208.2p (down 1.8p, 0.86 per cent)
Drops, as UBS decides to increase its target price to 200p from 185p.
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