The FTSE 100 was 48.9 points behind at 4185.35 while the FTSE 250 eased to 6454.68, down 41.6 points, at around 11.50am.
BT was the weakest of the blue chips this morning, losing almost 7 per cent or 7.1p to 98.1p after disappointing the market with its third quarter results, telling investors that full year earnings will be affected by poor performance and one-off charges related to flagging performance at its troubled global services unit.
The group said profits for the three months to the end of last year were down 81 per cent compared to 2007, coming in at £133m after being hit by a previously announced one-off charge emanating from global services.
Manoj Ladwa, senior trader at ETX Capital, said “it goes from bad to worse” for the company, warning that the “market is not going to take kindly to its key global services division potentially suffering further one-off charges in the fourth quarter”.
Jonathan Groocock, analyst at Investec, was also cautious, keeping the stock at “hold” until there was more clarity on another one-off charge, the group’s pension deficit and the dividend.
“These issues still cloud the investment case and clarity here will be a welcome change,” Mr Groocock said.
Wolseley was up 5.3 per cent or 11p at 218p thanks to Citigroup, which moved the construction material group’s stock to “buy”, telling investors that, after a rights issue, the company will be all set for a modest recovery in two years.
“The rights issue needed is a minimum of £350m but ideally at least £600m – the minimum amount being needed to avoid covenant breach but with little head room. The £600m offers some comfort on covenants and gives the group some options for when trading improves,” the broker said,
“In terms of timescale, the group has until the middle of the year to decide whether or not it is going for a rights issue. After this it needs a new covenant structure in place.”
British Land, down 4.8 per cent or 23.2p at 460p, announced its long anticipated rights issue, tapping investors for £740m – well above analyst estimates – in a bid to bolster its balance sheet as the commercial property slowdown begins to bite.
Collins Stewart analyst Aaron Guy welcomed the move, saying the cash would significantly reduce the group’s covenant risk.
“British Land have significant committed unused credit lines totalling £2.4bn (available at 48 basis points over LIBOR) and this rights issue will help keep covenants in check, potentially facilitating opportunistic buying,” he added.
Also on the downside, Diageo, the world’s largest alcoholic drinks business, was 4.7 per cent or 43.5p behind at 851p after reducing its full year profits forecast owing to slowing sales as European demand slides.Reuse content