Thursday March 27, 10:37 AM
London shares broadly higher midmorning; FirstGroup, Compass rally after updates
LONDON (Thomson Financial) - UK blue-chips traded broadly higher in midmorning deals, with FirstGroup (LSE: FGP.L - news) and Compass Group (LSE: CPG.L - news) among the top risers following reassuring trading updates from both companies, while Kingfisher (LSE: KGF.L - news) was the main casualty after slashing its dividend.
At 10.10 am, the FTSE 100 index added 57.50 points at 5,717.90, while the FTSE 250 (news) index gained 180.40 points at 9,936.50.
Volume was fair, with 505.6 mln shares changing hands in 153,844 deals.
On the economic front, figures released this morning revealed the UK's housing market recovered slightly in February even though it remains in the grips of the credit crisis.
The British Bankers' Association said in its monthly survey of lending in the UK that net mortgage lending during the month was 5.6 bln stg higher, up on the 5.0 bln recorded in January and ahead of the previous six month average of 5.1 bln.
But the news had little impact on London's leading shares, with the Footsie (news) remaining around 1.0 pct higher both before and after the data release, although mortgage-lender Alliance & Leicester and housebuilder Persimmon (LSE: PSN.L - news) were among the top risers, taking on 12-1/2 pence at 556-1/2 and 20-1/2 at 758 respectively.
Elsewhere, Cairn Energy (LSE: CNE.L - news) topped the leaderboard, up 124 pence at 2,810, fuelled by further oil price gains following yesterday's weaker-than-expected energy stockpiles report in the US. Oil heavyweights BP (LSE: BP.L - news) and Royal Dutch Shell (Amsterdam: RDSA.AS - news) were also in demand, 5-1/2 higher at 521 and 19 better at 1,676.
New York's main contract light sweet crude for May delivery was 0.92 cents higher at 106.82 usd a barrel earlier this morning, while London's Brent North Sea crude for May delivery gained 1.05 usd to 105.04 usd.
Cairn's gains were closely followed by those of FirstGroup and Compass after the two groups issued pre-close trading updates that reassured.
FirstGroup, 25 ahead at 569-1/2, said it hopes to meet UK government demands to improve the performance of its controversial train franchise First Great Western (FGW) as it forecast full-year results in line with management expectations, following a strong trading performance throughout the second half of the year.
In response, Merrill Lynch (NYSE: MER - news) repeated its 'buy' advice, saying today's news is reassuring and there could be small upgrades to estimates.
And Compass, up 13-1/2 at 324, said trading in the first five months of the current year was ahead of its expectations and it is confident the current momentum will be maintained throughout the second half.
Merrill Lynch said this positive statement and recent favourable currency moves could lead to consensus upgrades for the food caterer.
The same broker also helped boost a number of banking stocks, with Barclays (LSE: BARC.L - news) 12 ahead at 456-3/4 after Merrill Lynch added the company to its 'most preferred' list on valuation grounds and on the expectation that the Bank of England will take action to help return the UK money markets to a more normal state.
Standard Chartered (LSE: STAN.L - news) , retained on the broker's 'most preferred' list, was up 27 at 1,785.
Sticking with financials, Man Group (LSE: EMG.L - news) added 16 at 561-1/2 after the world's biggest listed hedge fund manager said its full-year profit is set to grow by more than the 40 pct expected by analysts, prompting Landsbanki to repeat its 'buy' advice.
Man said its pretax profit from continuing operations for the year to March 31 is set to come in ahead of the 1.824 bln usd penciled in by analysts, according to the average of thirteen forecasts collected by the company, and against the previous year's figure of 1.301 bln usd.
On the downside, Kingfisher led only a handful of blue-chip fallers, down 2.5 at 132.6, after the global home improvement retailer slashed its final dividend payout by 50 pct and issued cautious comments about its cash position and trading outlook, overshadowing in-line full year numbers.
The group, which trades from about 780 stores in nine countries in Europe and Asia, also said it expected to cut its interim dividend in the current year by the same magnitude.
In reaction, Pali International, which has a 'sell' rating on Kingfisher, said the dividend cut was not as bad as it had expected, but with the interim to be halved to 1.9p, the cut is actually worse than it looks, with the rebased annual dividend effectively 5.33 pence. There is no trading update, but we can assume that the key Easter weekend for B&Q was pretty disastrous, said Pali.
Turning to the second line, Rentokil Initial (LSE: RTO.L - news) led the mid-cap risers, 9 pence higher at 96-1/2, after being added to Merrill Lynch's Europe 1 List with a 'buy' recommendation, according to traders.
The broker lifted its price target for the stock to 120 pence from 105 following the group's management changes, according to traders.
Talvivaara Mining Company (LSE: TALV.L - news) was also up, taking on 31 at 365, as Merrill Lynch initiated the stock as one to 'buy', with a 420 pence target.
Among those reporting figures today, Chloride Group gained 16-1/4 at 185-1/2 after announcing it expects its results for the year ended March 31 to be ahead of its own expectations, with an increase in operating profit before amortisation of 50 pct over the previous year.
The power services company said it continues to make excellent progress, and that it expects sales for the year to be around 30 pct higher than last year 'with organic sales growth well ahead of the market'.
And Northern Foods was up 7 at 94 after saying its trading performance continued to meet expectations and it sees adjusted pretax profit for the year to March 29 beating the median market consensus.
In reaction, Evolution Securities said that Northern Foods (LSE: NFDS.L - news) rehabilitation continues, with good sales growth, a full recovery of commodity cost increases, margin progress in two out of three divisions, and pretax profit ahead of median market consensus. It (Frankfurt: A0MLX5 - news) added that management would appear to be rectifying the group's problems.
Finally, Enodis (LSE: ENO.L - news) fell 5 to 146-1/2, retracing yesterday's gains, following what Merrill Lynch called a 'solid' first half trading statement, but with the broker saying it does not expect to make significant changes to its estimates.
The commercial food equipment manufacturer said it expects its first-half sales to rise about 7 pct on a like-for-like basis and added that its full-year expectations remain unchanged from the interim management statement issued on Feb 7.
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