Market Report: Share buyback puts Compass in demand

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The Independent Online

Those investors in Compass greedy for more must be licking their lips. The world's largest caterer may already be in the midst of buying back £500m-worth of shares, but talk doing the rounds yesterday claimed it could end up serving seconds.

Compass' share buyback programme has been well received, with its share price having added around 25 per cent since it was unveiled back in November. According to JP Morgan Cazenove, the chances of a repeat are high, with analysts from the broker claiming the group could announce another £500m of stock repurchases when it releases its final results later in the year.

Pointing out Compass has not splashed out much recently on acquisitions and saying management expect "relevant, well-priced targets to remain difficult to find", scribblers from the broker argued the capital return could happen "without endangering the group's credit ratios".

They also upgraded their forecasts in the wake of last week's third-quarter update, so it was no surprise they kept both their "overweight" recommendation and 730p target price as Compass rose up another 11.5p to 701p, setting a new all-time high.

It was definitely a day of light volumes – thanks in no small part to the Olympics – as the FTSE 100 kept its recent rally going. Rising for a third straight day, the top-tier index moved up 66.42 points to 5,693.63 accompanied by continuing hopes the European Central Bank may soon take action in the wake of bullish comments over the eurozone from its chief, 'Super' Mario Draghi, last week.

Leading the charge was International Airlines Group. The British Airways-owner flew 10.9p higher to 162p after rival Air France-KLM beat forecasts with its latest set of results, although the Franco-Dutch group still made a loss of €895m (£570m) between April and June.

Aviva was pushed up by 12.6p to 299p amid more talk which suggested that the insurer may be nearing a deal to offload its US business. Reports over the weekend claimed a number of interested parties have made approaches for the unit, with a price of £1bn being suggested – close to half of what Aviva had paid for the business in 2006.

However, Shore Capital's Eamonn Flanagan warned that while a deal at this price may be initially applauded by the Square Mile, afterwards there would be a "more sober assessment of the implications … [which is] likely to subdue share price appreciation thereafter."

The blue-chip index's wooden spoon ended up in the hands of Pearson. The publisher, which last week warned 2012 had so far been more challenging than expected, was knocked back 40p to 1,190p after Barclays' scribes kept their "underweight" advice and said they saw "limited opportunity for upgrades" that "are required to justify a premium valuation".

Any punters involved in Ladbrokes were left holding a losing ticket. The bookie – whose online business issued a profits warning last month – was smacked back 6.7p to 155.8p on the FTSE 250 after announcing its digital director Richard Ames was no longer performing "executive duties".

A strong day for some on the high street saw Argos-owner Home Retail and Dixons Retail power up 4p to 78.15p and 0.68p to 16.7p. The two have been helped recently by encouraging electricals sales figures from John Lewis, while Dixons' rise was also accompanied by the reheating of some rather vague bid speculation –not a fresh idea.

Among the small-cap stocks, there was an exceedingly good appetite for Premier Foods. The Mr Kipling-owner advanced by 3.5p to 71.25p on the small-cap index following the completion of a £41m sale of its pickles and vinegars business – which includes the Sarson's brand – to Japan's Mizkan.

The news it had appointed an interim chief executive failed to cheer investors in JJB Sports, with the retailer retreating 0.38p to 5.62p after hiring Beverley Williams, a former director at La Senza.

A tie-up with BlackRock World Mining Trust, 11p better off at 549p, saw London Mining soar up 25.25p to 173.75p. The Aim-listed company is receiving $110m in return for giving its shareholder a 2 per cent royalty on sales of iron ore from the Marampa mine in Sierra Leone.

However, gold explorer Ariana Resources was not in sparkling form – it slumped 0.5p to 1.62p after raising £625,000 through a share placing priced at a discount of 1.5p-a-pop.

FTSE 100 Risers

Evraz 241.6p (up 13.1p, 5.73 per cent) Having reached a new all-time low last week, the Roman Abramovich-backed steel maker manages to advance for the third trading session in a row.

HSBC 543.1p (up 12p, 2.26 per cent) Bank finishes ahead after releasing its interim results despite admitting it has set aside $700m for fines and other costs from the money laundering scandal.

FTSE 100 Fallers

RSA 111.1p (down 0.5p, 0.45 per cent) Insurer slips ahead of the release of its first-half results later in the week as Nomura trims its price target from 120p to 118p while keeping its "neutral" rating.

Reckitt Benckiser 3,536p (down 6p, 0.17 per cent) Consumer goods firm retreats after announcing its first-half numbers and warning that it currently sees no signs of near-term recovery in southern Europe.

FTSE 250 Risers

Devro 300.6p (up 22.6p, 8.13 per cent) Sausage-skin manufacturer – which publishes its half-year results today – manages a partial rebound after dropping more than 9 per cent last Friday.

International Personal Finance 288p (up 15p, 5.49 per cent) Emerging markets lender given a boost by Numis Securities raising its target price on the stock to 442p from 401p.

FTSE 250 Fallers

Fidessa 1,405p (down 95p, 6.33 per cent) Trading software group is knocked back after its interim results and its admission that margins are expected to be slightly below recent years.

Diploma 420p (down 26p, 5.83 per cent) Technical products supplier has its rating downgraded to "sell" by Shore Capital despite announcing its revenues over the third quarter rose by 5 per cent.