LONDON Midday Report-22nd October 2009

London midday: Footsie off worst but still lower

Footsie is off its worst but is still showing hefty falls as miners and insurers lead the market lower.

Platinum miner Lonmin has again unsettled the mining sector as it saw a 20% decline in production of the precious metal in the fourth quarter after having to shut down mines for safety reasons and for maintenance.

The firm, which operates in South Africa, the source of most of the world’s platinum, mined 2.6m tonnes during the quarter. Fellow mining giant Anglo American has announced plans to divest assets including its zinc and tarmac operations as it seeks to focus on its core operations. Fresnillo, Xstrata, Kazakhmys and Antofagasta are among the main fallers.

Insurer Aviva has announced that it is restructuring its European operations, turning its 12 separate continental businesses into a single pan-European unit. Elsewhere in the insurance sector Old Mutual, Prudential and Standard Life are friendless.

Credit checking firm Experian is one of the few blue-chips to advance, after Goldman Sachs upgraded the stock from ‘neutral’ to ‘buy’.

With the market in retreat, defensive stocks such as Scottish & Southern Energy, Centrica, National Grid and United Utilities are not surprisingly faring better than most, though even these stocks are in the red or, at best, holding steady.

Pub groups are the star performers as they celebrate a victory over pressure group the Campaign For Real Ale (CAMRA) after the Office of Fair Trading found no evidence to support CAMRA’s assertion that the beer tie arrangement inflates the price of a pint of beer by around 50p.

Enterprise Inns and Punch Taverns are the major beneficiaries of the verdict, while the likes of Greene King andMarstons, both of which are less dependent on their pub estates because of their brewing interests, advance less briskly.

Bus and rail group National Express, which is facing a merger approach from rival Stagecoach, warned that full year pre-tax profits will be ‘slightly’ below previous expectations.

Oilfield services firm Petrofac said it is increasingly confident that the group will deliver earnings growth for the full year of at least 20%. Engineering Services and Training Services activity levels continue to be somewhat depressed, however, although business development activity has improved over recent weeks.

Sportswear retailer Sports Direct still expects, at current exchange rates, to achieve underlying EBITDA of at least Ł150m this financial year. The sportswear retailer said trading continues to be in line with expectations.

Telecom operator Colt Telecom reported a 3.7% increase in quarterly EBITDA as revenue fell 4.9%. For the quarter ended 30 September 2009 EBITDA rose to €79.5m from €76.7m the same time a year before as demand improved in Data and Managed Services and as the group tightened costs.

Newspaper and magazine wholesaler Smiths News revealed a 44% drop in annual pre-tax profit after was hit by a number of charges but said revenue improved during the year.

Transport and logistics group Stobart saw pre-tax profits rise to Ł12.4m in the six months to August 31 from Ł11m over the same period the previous year as turnover climbed to Ł218.2m from Ł199.2m.

Respiratory inhaler firm Vectura expects to receive a milestone payment of $7.5m as a result of the initiation of Phase III studies relating to QVA149, its chronic obstructive pulmonary disease (COPD) treatment, but it won’t be until the financial year to 31 March 2011.