LONDON Midday Report

London midday: Lethargic mood prevails

The Footsie remains marginally up on the day but that is largely due to the strength of mining stocks, which are higher after US aluminium giant Alcoa said demand for aluminium in China will increase this year.

Gold miner Randgold is wanted on the back of a $22 leap in the price of the yellow stuff in New York yesterday while platinum miner Lonmin is on the rise on renewed speculation that Xstrata may use its 25% stake to launch a bid if its quest for a ‘merger of equals’ with Anglo-American fails. Broker RBS Capital Markets notes that ‘Takeover Panel restrictions on a potential acquisition by Xstrata end in early October 2009. With an Xstrata-Anglo American merger looking ever less likely, we believe a Lonmin acquisition looks more so.’

Elsewhere in the sector Kazakhmys, Fresnillo and Vedanta Resources are all going well.

Having enjoyed a spell in the sun earlier this week when markets were faltering, defensive favourites such as tobaccos and pharmaceuticals are out of favour.

Marks & Spencer (M&S) is boosted by US broker Bernstein raising its rating on the stock to ‘outperform’. M&S has done a bit of boosting of its own, awarding three contracts to distribution group Wincanton which should be worth Ł275m over five years.

Rumours persist that insurer RSA is set to launch a Ł1bn rights issue but the shares hokld relatively steady, having been hammered earlier in the week.

Investors are getting on board rail and bus group National Express after a consortium involving funds advised by CVC Capital Partners and interests of the Cosmen family tabled an indicative final cash offer of 500p per share for the company. The terms value National Express at Ł765m. Stagecoach, which hopes to buy the UK Bus and Rail operations of National Express should the consortium’s bid succeed, also motors forward briskly.

Sector peer Go-Ahead is higher after reporting results that were slightly ahead of its expectations in June despite profits more than halving. Pre-tax profit fell to Ł42m against Ł103.1m last year due to higher costs and exceptional charges. Revenue increased 6.7% to Ł2,346.1m primarily due to a full year of London Midland and Gatwick Express rail revenue.

HMV reported a 1.8% drop in total like-for-like sales in the 18 week period since the end of April in what the entertainment media group called a tough consumer environment. Separately, the group today announced that it is acquiring a 50% equity stake in digital media company 7digital for Ł7.7m in cash. 7digital is the company that sells music via the fast growing music streaming application, Spotify.

Premier Farnell said second quarter sales fell 17% although the rate of sales decline in Europe and Asia Pacific has abated. Revenue fell to Ł183.7m during the second quarter ended 2 August 2009 from Ł195.8m the same period a year before. Underlying profit before tax slumped 41% to Ł10.7m.

McBride’s private-label products helped the personal care products supplier to post a rise in profits for the year. Pre-tax profit rose to Ł22.2m from Ł15.7m before on revenue that increased 13% to Ł792.4m

Recruitment group Hays posted a sharp fall in profits in the year to June 30 and said it was seeing no signs of recovery. Pre-tax profits for the year slid to Ł151m from Ł264.4m as revenues fell to Ł670.8m from Ł786.8m. The firm retained its full-year dividend at 5.8p.

Housebuilder Bovis said it plans to raise approximately Ł60m in the sale of 10% or around 12.1m ordinary shares to pay for land purchases.

Swedish firm Tricorona said it has decided not to proceed with an offer for Irish carbon credit company EcoSecurities, which is currently considering the terms of the revised offer from Dutch firm Guanabara Holdings.

Irish property company Blackrock International Land’s net assets per share fell to €0.2507 at 30 June were compared to €0.2571 at 31 December 2008 as difficult markets continue.

Online gaming technology developer Playtech reported a 33% increase in half year EBITDA as it increases its dividend for the period by 17%. Playtech said it expects a stronger second half performance as is signs more licensees.

FTSE 100 - Risers
Randgold Resources (RRS) 3,986.00p +8.05%
Lonmin (LMI) 1,455.00p +6.91%
Fresnillo (FRES) 644.50p +6.88%
Vedanta Resources (VED) 1,713.00p +5.03%

FTSE 100 - Fallers
Experian Group (EXPN) 502.50p -2.43%
Unilever (ULVR) 1,632.00p -2.04%
Cable & Wireless (CW.) 140.00p -1.89%
BT Group (BT.A) 128.00p -1.84%