London close: Footsie takes a battering

13.12.2007

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London closed the day nearly 200 points lower, with a weak start on Wall Street adding to concerns about banks, Rentokil and Rexam.

News that full year results from HBOS will be hit by a £180m write-down sent shares in the bank deep into the red, although underlying earnings should meet forecasts of 106.0p per share.

Investors were also disappointed to hear that weaker net interest income growth in the second half will result in a "slightly" lower group margin for the full year than guided.

UK banks also caught a cold from Wall Street after Wachovia announced a $240m hit to the value of its mortgage-backed securities Wednesday, while Bank of America warned write-downs will top estimates of some $3bn. Royal Bank of Scotland, Barclays and Lloyds TSB are struggling.

Meanwhile, beleaguered mortgage lender Northern Rock has appointed Andy Kuipers as it new chief executive and warned that it will take a £281m hit due to its exposure to credit market woes.

Miners Antofagasta, Kazakhmys, Anglo American and BHP Billiton all turned lower on weaker metal prices.

Rentokil Initial lost over a fifth of its value after the pest control firm said fourth quarter profits from its express parcels delivery business City Link are seen up to £10m below expectations. This will have a similar impact on the results for the group as a whole.

Consumer packaging and can maker Rexam is also sharply lower after it warned that the weaker dollar and the higher price of oil will hit profits this year. But it did add that its underlying performance is broadly in line with management's expectations.

Oil giant BG, up on talk of a lucrative find in Brazil, is joined in the blue by Reckitt Benckiser, Tullow Oil, Smith & Nephew and GlaxoSmithKline.

Elsewhere, drugs group Shire Pharmaceuticals has named finance boss Angus Russell as it new chief executive, replacing Matthew Emmens who will become non-executive chairman.

Improvements in advertising revenue at its digital channels enabled ITV to stabilise its income stream during 2007, and the terrestrial broadcaster remains on track to deliver the planned £40m of efficiency savings by 2008.

But Misys made a decent start after the software firm said it is trading ahead of management expectations with first half revenues increasing year-on-year across all divisions, although the shares have since lost ground.

Newspaper group Trinity Mirror is confident that its performance in 2007 will be in line with expectations, although month on month volatility is expected to continue in 2008.

Building materials group Travis Perkins boasted "excellent" progress in the second half, with turnover to the end of November up 12.1% on the year before.

Engineering group GKN said trading in 2007 is in line with market expectations and its strong order book should ensure another year of solid progress, despite uncertain market conditions.

Project management firm AMEC expects underlying pre-tax profit for 2007 to be towards the upper end of market expectations of between £111m and £122 m.

Passenger transport specialist Go-Ahead has traded strongly in the second half of 2007 and is on course to post an encouraging improvement in interim operating profits.

Support services group Serco remains confident of delivering double-digit growth for the foreseeable future and further increasing margins.

Energy services company Hunting expects to meet full-year expectations despite the weakness of the dollar.

Publisher Huveaux said it is no longer engaged in discussions with private equity houses interested in acquiring the company.

Shares in scar-reduction specialist Renovo fell after it reported problems with clinical trials of its Juvista treatment. Renovo said a trial of its Juvista treatment for the removal of moles failed, due to a design flaw. It reported progress for other trials of Juvista including one for scar treatment on different areas of the body, skin colours, ages and sexes.

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