London shares continue to make modest gains in early trade on Wednesday with UK investors seemingly unconcerned about the outcome of a policy decision from the US Federal Reserve later today, despite some analysts warning of deflation risks. Even the Shanghai Stock Exchange’s Composite Index finished higher overnight, rising by 3.4% to reach 3,789.19 points, offering slight hopes that the worst of the China stocks slump may be over.
Hikma Pharmaceuticals (HIK) again heads the blue-chip leader board following a strong showing on Tuesday, adding 3.5% to £24.02, as investors continue to warn to the pharma firm's $2.65 billion acquisition of Roxane Labs.
But arguably the biggest corporate story of the day is real estate group Quintain Estates (QED), the subject of more M&A activity of UK assets by American buyers. The proposed £700 million recommended offer has been made by Dallas-based private equity group Lone Star Funds, and will mean Quintain investors getting 131p per share in cash, a rough 23% premium to Tuesday's 107p close. That sparks stock in the UK property group to jump 22.5% to 131.25p.
On the flip side, electronics distributor Premier Farnell (PFL) slides 9.6% to 141p as it reports a marked slowdown in growth in the three months to 30 June 2015. Sales per day grew 1.2%, down from 5.4% in the first quarter, because of weakness in its UK and North American markets.
Other big movers include little 2D to 3D conversion technology tiddler DDD (DDD:AIM), up a little more than 9% to 3p as it seals a welcome licence extension from Korean gadgets giant Samsung Electronics (005930:KS) out to 2016.
The smaller end of the resources space is also typically active, with 88 Energy (88E:AIM) rallying close on 14% to 0.62p, but LGO Energy (LGO:AIM) slumping badly. This comes as LGO reports that its GY-676 well on the Goudron Field development in Trinidad has confirmed the presence of recoverable hydrocarbons, although perhaps the news is not quite what investors were hoping for, the stock sliding around 7% to 1.62p. The GY-676 well has been successfully cased for future production.
Elsewhere, funeral services provider Dignity (DTY), a running Shares Play of the Week, rises another 3.8% to £24.605 as strong interims and a positive outlook drive earnings upgrades. Due to a high number of deaths in the first half of 2015, annual numbers will beat expectations, though Dignity sensibly flags the 'strong possibility' of a decline in 2016.
Bakery retailer Greggs (GRG) warms up another 5% to £12.43 on another round of forecast upgrades. Tasty interims show shop like-for-like sales up 5.9%, while CEO Roger Whiteside guides towards 'a year of good growth slightly ahead of our previous expectations.'
Specialist retailer Pets at Home (PETS), one of Shares' 15 for 2015 picks, cheapens 6.2% to 270.10p after a strong run. A mellow first quarter like-for-like sales performance reflects a testing period for its health and hygiene products and a negative hit from hot July weather.
UK big six energy supplier SSE (SSE) is to acquire a 20% stake in the four gas fields and surrounding exploration acreage roughly 125 km north west of the Shetland Islands. Collectively known as the Greater Laggan Area, SSE hopes this will help improve security of future gas supply. It has also bought a 20% interest in the new Shetland Gas Plant. But the news fails to do much for the shares, flat at £15.08, with investor attention still very much rooted around regulatory change, wholesale price declines and the implied threat to future dividends.
Catering giant Compass (CPG) tumbles 4.6% to £10.36 after warning additional restructuring costs of £25 million this year and next will lead to flat margins. Organic revenue grew by 5.5% in the nine months to 30 June driven by strong net new business in North America and an acceleration of its growth in Europe and Japan. Its fast growing and emerging markets were more subdued and underlying margin improvement slowed to five basis points in the third quarter.
Alternative asset manager Man Group (EMG) leaps 5.3% to 159p on a big earnings ‘beat’ in the six months to 30 June. Interim adjusted profit-before-tax (PBT) was up 89% at $280 million (£179 million) because of higher performance fees in its momentum-driven AHL product. Analysts expected PBT of $180 million.
Packaging group Smurfit Kappa (SKG) adds 2% to €27.3 on a 7% rise in pre-tax profit to €243 million in the six months to 30 June with earnings per share 38% higher due to lower finance costs. Recycled containerboard inventories remain at very low levels which has supported recent increases in containerboard prices. These increases are expected to be recovered in corrugated prices towards the end of 2015/start of 2016. The interim dividend has been increased by 30% to 20c as a sign of this improved confidence.
Barclays (BARC) rises 2.1% to 285.5p as interim pre-tax profit grows 11% to £3.7 billion. A further £1 billion has been put aside to pay compensation claims for the mis-selling of packaged bank accounts and payment protection insurance (PPI).
Estate agent and lettings group Foxtons (FOXT) climbs 8.6% to 242.3p despite pre-tax profits falling 21% to £18.1 million in the six months to the end of June. Investors are encouraged by expectations of a stronger second half now that the uncertainty surrounding the General Election has been removed.
