Market Report: WS Atkins damaged in West Coast row
Saturday 06 October 2012
The fallout from the fiasco over the West Coast line franchise continues to reverberate, with WS Atkins' shares tumbling nearly 5 per cent because of questions about the advice it gave the Department of Transport. Atkins provided "technical support" to the Whitehall department during the botched awarding of the franchise to FirstGroup. Patrick McLoughlin, the Transport Secretary, had to backtrack this week because his civil servants had used faulty figures. The saga could cost the department up to £40m.
"We do not believe there are any issues concerning the quality of the advice that we provided," insisted a spokesman for Atkins, which provides architectural and engineering design services for big public-sector clients, which have included the Olympics and Crossrail.
But traders were jittery. The broker Espirito Santo said: "Should any review find Atkins to have been at fault during this tender process, then clearly it could have a negative reputational impact for the group." Shares in Atkins, which have risen more than 30 per cent on a year ago, fell 34p to 695p.
Looking to next week, the big news will be the flotation of the insurer Direct Line, owner of brands including Churchill. Traders at ETX Capital say they are seeing demand in the "grey market" before official trading begins. Having opened this week at 175p-185p, they say the shares are now being pencilled in at 179p-189p, giving a value of around £2.8bn.
The FTSE 100 index was subdued, moving up 43.24 points to 5,871.02 points, as traders digested a drop in US unemployment.
WPP rose 18.5p to 878p after the consumer goods giant Unilever, one of the world's biggest advertisers, handed Sir Martin Sorrell's marketing group a big chunk of its media budget. WPP's Mindshare has got the lion's share, including most of Europe and North America.
Tesco was one of the bigger fallers. The shares dropped for the third day in a row, down 2.8p to 315.35p, after the supermarkets giant announced its first half-year profit fall in 18 years on Wednesday.
Analysts remain unconvinced that Tesco knows how to move the brand beyond price promotions.
Wm Morrison was another grocer to feel the squeeze. Dalton Philips, chief executive, talked of plans to open 70 of its M-local smaller shops before the end of 2013. But analysts zeroed in on how underlying sales fell by 0.9 per cent in the half-year to 29 July. The shares dropped 2.2p to 278.2p.
Goldman Sachs is feeling bearish about property amid fears that a new round of City job cuts and a flatlining economy are going to push down on London office rents in 2013. The bank downgraded a raft of property stocks, including Great Portland Estates, British Land and Land Securities, which all took an initial tumble. "We believe positive catalysts (both at the macro and micro level) have passed or faded for now," said Goldman in its chunky note, although it reckoned rents should still grow "on a more muted basis". The bank is pencilling in a rise of just 2 per cent in the City but 7 per cent for the West End.
But traders shook off that gloom later in the day. Great Portland Estates ended up 0.4p at 450.9p, British Land was unchanged at 521.5p and Land Securities bounced 4p to 775p.
Among the tiddlers, the online exchange Blur Group made its debut on Aim, with an initial public offering that raised £4m before expenses at 82p a share. It closed at 84.75p, giving a total valuation of just over £20m. Optimists who say London remains a good place for tech firms to list will take comfort from the IPO of Blur, which lets clients commission marketing and technology work from agencies and individuals. But the truth remains that the number of tech IPOs in London this year can be counted on the fingers of one hand.
Several other small stocks caught traders' attention. One recent Aim arrival, the oil and gas explorer Bridge Energy, which floated just over a week ago, advanced 6.5p to 131.5p on the completion of the Boa Field Acquisition, which sits between UK and Norwegian waters.
Aim-listed Avarae Global Coins, the UK's only listed rare-coin dealer, was less in demand. First-half sales have dropped by two-thirds as it "did not benefit this year from the strong performance in our coins in the Hong Kong auction of August last year". The shares initially fell, before closing unchanged at 10.63p. It was that kind of day.
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