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FTSE 100 ends higher as food groups power gains on takeover battle

Last updated: 17:41 17 Feb 2017 GMT, First published: 08:41 17 Feb 2017 GMT

Traders
  • FTSE 100 rises with food stocks

  • Unilever rejects 4th biggest corporate takeover in history

  • Pound down 0.5% against the US dollar at $1.2427

  • Sterling up by 0.1% against the euro at 1.1708 euros

FTSE 100 shares closed higher on Friday, powered by foodstuffs and consumer goods stocks after an attempt to takeover Anglo-Dutch foods giant Unilever (LON:ULVR).

What is more, by rejecting US food combine Kraft Heinz (NASDAQ:KHC) £112bn bid – the fourth-biggest in corporate history – Unilever only set itself up for further gains in the weeks ahead as Kraft vowed to be back.

The FTSE 100 closed up 0.3% at 7299 and led by Unilever whose shares finished up 13.4% at 3797p.

The top of the gainers’ board of the blue-chip index was a Who’s Who of food and consumer goods stocks. Behind Unilver it was Coca-Cola HBC (LON:CCH) up 4% at 1989p. Imperial Brands (LON:IMB) up 3.2% to 3781p, and then rival consumer goods giant Reckitt Benckiser (LON:RB.) was pulled higher by the news, with its shares rising 2.9% to 7100p. Associated British Foods (LON:ABF) was also in the top ten risers, up 1.6% to 2609p.

Meanwhile, Standard Chartered extended its earlier losses to 4.4% to 773p amid a wider sell-off in banking shares.

The mid-cap FTSE 250 ended flat at 18,707, while the small-caps firmed. The FTSE AIM 100 Index ended up 0.2% at 4350 and the FTSE AIM All-Share Index up 0.1% at 907.

London gainers and losers were fairly evenly matched with 34% of the bourse gaining and 32% losing.


 

1515 GMT - Unilever bid surprise helps propel FTSE 100 higher

  • FTSE 100 up 21 points, though US stocks retreat

  • Unilever surges on Kraft Heinz bid move

  • Pound remains lower after  retail sales data

  • Tesco, M&S lower on spending slow-down

3.15pm … Pushes higher …

The FTSE 100 pushed back towards sessions highs in late afternoon trading, despite early falls on Wall Street, buoyed by strong gains from consumer products giant Unilever PLC (LON:ULVR) after bid approach news.

Around 3.15pm, the UK blue chip index was up over 21 points at 7,299, not far from the day’s peak of 7,307, and well above the day’s low of 7,253.

After three-quarters of an hours trading in New York, the Dow Jones had retreated again from its recent run of record highs, losing 36 points at 20,584, with the broader S&P 500 and tech-laden Nasdaq composite indices also lower.

The decline came even though food giant Kraft Heinz Co. (NASDAQ:KHC) was up over 7% after it was revealed Anglo-Dutch firm Unilever had rejected a £120bn-plus bid from the acquisitive US group.

Shares in Unilever were up over 12% to 3,750p, easily topping the FTSE 100 leader board.

Neil Shah, director of research at Edison Investment Research, said: “Before biting off Heinz, Kraft’s last big chomp for a historic name In food was for Cadbury in 2010. An approach for Unilever is a sure sign of the surge in dollar buying power and the decline in Sterling.

“Today's 10% rise in Unilever's share price means this is cash neutral for a US purchaser compared with if it had approached seven months ago.”

But even outdoing Unilever, the market’s biggest gainer was AIM-listed online media and entertainment company, PCG Entertainment Plc (LON:PCGE) which soared 43% higher to 0.17p after it said it has begun disposing of the shares received from its sale of Centre Point Development Corp.

On the downside, however, proving it was better to travel than arrive, shares in Metal Tiger PLC (LON:MTR) ran into some profit-taking in late afternoon trading as it confirmed that a new zone of mineralisation has been discovered at the Kalahari copper belt in Botswana by its partner.

The group’s shares shed 16% at 2.33p - albeit having soared in the last two days on expectations of the announcement - even though the firm said  the results "could be the most significant" since it discovered the T3 site last March, though sampling and assays are still in progress.

1.30pm … Unilever boost…

The Footsie stayed modestly higher in early afternoon trading awaiting Wall Street’s restart for fresh direction, with attention squarely on consumer products giant Unilever PLC (LON:ULVR) after news of a surprise bid approach.

Around 1.30pm, the FTSE 100 index was ahead about 6 points at 7,284, drifting back from a session high of 7,307, but well off the day’s low of 7,253.

Shares in Unilever stood out, leaping 12% higher to 3,754.5p after it was revealed the Anglo-Dutch Marmite maker had rejected a £120bn-plus bid from acquisitive US group Kraft Heinz (NASDAQ:KHC).

The American giant said it had tabled a “comprehensive proposal”, which was declined. It added: “We look forward to working to reach agreement on the terms of a transaction.”

Kraft is rumoured to have tabled a bid of £40 a share.

In a quick note to clients, analysts at Liberum said: “While Unilever has declined the proposal, we note Kraft Heinz's backers 3G Capital and Warren Buffet's Berkshire Hathaway have a history of undertaking significant industrial combinations.

“At this point, we are placing our ratings and target prices for Unilever NV and plc shares under review until further details are forthcoming.”

12.15pm … Bounce as pound falls …

The FTSE 100 rallied higher in lunchtime trading, finally benefitting from a fresh drop by sterling after weak retail sales data added to signs the UK economy is starting to feel the impact of last year’s Brexit vote.

Around 12.15pm, the FTSE 100 index was up 15 points at 7,294, near session highs at 7,298, and well off the day’s low of 7,253.

On currency markets, the pound was down 0.5% versus the dollar at US$1.2422 and off 0.3% against the euro at €1.1659 after the below-forecast data added to concerms after weaker than expected inflation and average earnings numbers earlier this week.

Neil Wilson, senior market analyst at ETX Capital, said: “Sterling plunged after some very soggy retail sales numbers for the UK hints at a slowdown in spending. The consumer –driven post-Brexit bounce may be fading.’

He added: “Consumer spending is now starting to weaken and this is bad news for the UK economy, which has been very resilient so far since June because consumer sentiment has been good.

“However most of this confidence, which helped send the UK to the top of the G7 for growth last year, was driven by high levels of consumer borrowing. Bank of England figures show a slowing in consumer debt between Nov and Dec and this is hitting retail sales. “

Shares in retail giants Tesco PLC (LON:TSCO) and Marks & Spencer Group PLC (LON:MKS) were among the FTSE 100 fallers on the dismal retail sales data, both down 0.6% at 195.6p and 328.1p respectively.

Commercial  broadcaster ITV PLC (LON:ITV) was also a blue chip faller, slipping 0.1% to 207.9p as Panmure Gordon cut its rating back to ‘hold’ from ‘buy’ ahead of full-year results due on March 1.

But FTSE 100-listed South African paper and packaging group Mondi Plc (LON:MNDI) got a lift as JPMorgan Cazenove upgraded its stance for the stock to 'overweight' from 'neutral', with shares up 1.3% to 1,863p.

Among the small caps, shares in European Metals Holdings (LON:EMH) gained almost 8% at 69p after it announced an increased resource at the Cinovec lithium deposit in the Czech Republic.

But digital media and social video broadcaster Brave Bison Group PLC (LON:BBSN) lost a fifth of its value, down 20% at 1.5p after  it warned revenues this year would likely be sUBStantially lower than those achieved in 2016.

10.15am … Retail disappointment ..

The Footsie remained weak as the morning session progressed, weighed by falls in heavyweight banks and commodity stocks, and failing to benefit from another drop in the pound following weak UK retail sales data.

Around 10.15am, the FTSE 100 index was down 12 points at 7,265, just holding off the session low of 7,253.

On currency markets, after a slight respite yesterday, sterling shed 0.7% versus the dollar at US$1.2397 and lost 0.5% against the euro at €1.1646 after more below-forecast UK economic data, having fallen after inflation and average earnings numbers missed estimates earlier this week.

Joshua Mahony, market analyst at IG, said: “UK retail sales failed to live up to expectations this morning, with the reading posting its second consecutive negative reading for the first time since early 2016.

“Probably the biggest warning sign was the December revision, which showed that in declining 2.1%, that month saw the second biggest fall in retail sales for 20 years.

“With a weaker pound, the idea was that people would spend more, yet recent months have instead shown that falling consumer confidence could be having a material impact upon spending.”

Among equities, real estate groups were a positive focus after results and takeovers in the sector.

Segro PLC (LON:SGRO) was the biggest FTSE 250 gainer, adding 3.4% at 499.6p  after its net asset value rose in 2016 and it said there has been little apparent impact from the Brexit vote on occupier or investor demand for warehousing.

The market’s biggest riser was also in the same sector, with shares in Industrial Multi Property Trust PLC (LON:IMPT) jumping 25% higher to 307.25p after Hansteen Holdings plc(LON:HSTN)  a £25.2mln offer for the small cap firm.

Under the terms of its offer, Industrial Multi Property shareholders will receive 300p per share, a 5.6% premium to the group’s last reported net asset value as at June 30.

FTSE 250-listed Hansteen, which invests in industrial property assets in the UK and Europe, saw its shares edge 0.1% lower to 116.9p.

The biggest FTSE 250-faller was satellites operator Inmarsat Plc (LON:ISAT) which shed 4.8% at 619p as Swiss broker UBS reportedly downgraded its rating for the stock to sell from neutral, chopping its target price back to 550p from 810p.

8.45am .. Weak banks and miners nudge Footsie lower ...

The FTSE 100 was down 8 points at 7,270 shortly after 8.30am, with banks Standard Chartered PLC (LON:STAN) and Barclays PLC (LON:BARC) the two biggest fallers – down 2.2% and 1.7% respectively.

Index heavyweight AstraZeneca PLC (LON:AZN) put the brakes on the Footsie's fall, rising 1.7% after it revealed positive breast cancer treatment trial results.

Renowned stock-picker Neil Woodford also gave the shares an extra fillip by revealing that Woodford Investment Management had upped its stake in the drugs giant.

Miners were generally off the pace, but with gold on the up precious metals miners Randgold Resources PLC (LON:RRS) and Fresnillo PLC (LON:FRS) defied the trend.

Further down the food chain, Hansteen Holdings plc (LON:HSTN) sent shares in Industrial Multi Property PLC (LON:IMPT) soaring 25% to 307.25p as it announced an agreed bid pitched at 300p a share.

Proactive small cap headlines:

Tern PLC (LON:TERN), which specialises in investing in companies in the Internet of Things sector, saw its shares jump nearly 8% higher to 10.25p as it trumpeted a 560% uplift in its net asset value during 2016.

Jersey Oil & Gas (LON:JOG) told investors that it expects that a rig contract will be in place in the near future for the Verbier prospect in the North Sea. Project operator Statoil is due to drill the exploration well this summer. Shares up 4% to 202.5p.

Landore Resources Ltd (LON:LND) announced a maiden resource of 301,000 ounces of gold at its BAM East project in Canada. Shares up 1.5% to 3.375p.

Shares in European Metals Holdings (LON:EMH) rose over 5% to 67,5p after it announced an increased resource at the Cinovec lithium deposit in the Czech Republic.

Video games services provider Keywords Studios has purchased animation and digital design company Spov for about £1.2mln.AIM-listed Keywords said the acquisition of Spov will “strengthen our market position” as a provider of digital art services and will contribute to its continuing growth in this area. Shares gained 0.9% at 626.5p.

Ithaca Energy Inc (LON:IAE) has declared a successful start-up of the Stella field in the North Sea. The oil company, which earlier this month received a US$1.24bn takeover approach, today said that production has begun at Stella and oil transportation via shuttle tanker has started. Shares slipped 0.6% lower to 117p.

Driver Group (LON:DRV) fell after the construction company launched a fund-raising as it swung to a full year loss. The AIM-listed group plans to raise £8mln through an accelerated book-built placing of 22.8mln shares at a minimum price of 35p  per share with existing and new institutional investors to reduce outstanding debt. Alongside the announcement, Driver reported a loss before tax of £0.4mln in the year to 30 September 2016, compared to a profit of £1.1mln the previous year. Shares lost 10% at 42p.

Digital media and social video broadcaster Brave Bison Group PLC (LON:BBSN) lost a fifth of its value as it warned revenues this year would likely be sUBStantially lower than those achieved in 2016. The group suffered two material contract losses at the end of 2016 and is also pondering discontinuing certain low margin business activities.

Proving it was better to travel than arrive, shares in Metal Tiger PLC (LON:MTR) ran into some profit-taking as it confirmed that a new zone of mineralisation has been discovered at the Kalahari copper belt in Botswana by its partner.

The group’s shares shed 16% at 2.33p - albeit having soared in the last two days on expectations of the announcement - even though the firm said  the results "could be the most significant" since it discovered the T3 site last March, though sampling and assays are still in progress.

Arix Bioscience (LON:ARIX) rose to a modest premium in the first hour of trading in London. The shares, listed at 207p, advanced to 210p on thin volumes. Arix raised £100mln as part of the float – money that will be ploughed into early-stage drug developers and university partnerships.

Highlands Natural Resources Plc (LON:HNR) offers investors access to significant upside, so says City broker Cenkos which has initiated coverage with a 'buy' recommendation. With a 66p price target Cenkos sees almost 150% upside to the current price of 26.7p.

6.45am ... Little change seen ...

Mirroring an indecisive session on Wall Street yesterday, the FTSE 100 is set to open little changed this morning.

Having closed yesterday down 25 points at 7,278, the top-share index is currently being traded at around 7,277 on spread betting sites.

The US markets last night gave no lead to UK investors, with the Dow Jones up eight points at 20,620 and the S&P 500 down a couple of points at 2,347.

Asian markets were getting in the neck this morning, however, with the Nikkei 225 in Tokyo down 113 points at 19,235 and the Hang Seng in Hong Kong down 111 at 23,997, approaching the end of trading.

A fairly sedate day is in prospect on the corporate news flow front, with dates from property investor Segro PLC (LON:SGRO) and hotels operator Millennium & Copthorne Hotels PLC (LON:MLC) set to be the highlights.

In a January trading update, industrial warehouse developer Segro reported a “strong end to 2016” and said it sees both net asset value (NAV) and adjusted earnings per share reaching the top end of the consensus forecast range.

The guidance range for 2016 earnings per share is between 18.40p and 19.70p while the NAV range of estimates is between 459p and 499p.

Peel Hunt said following Segro’s “relatively strong” trading statement last month, the full year results are unlikely to offer many surprises.

The broker expects NAV of 464.0p in 2016, compared to 462.5p the previous year.

Adjusted pre-tax profit is forecast at £145.3mln, up from £134.2mln in 2015, while adjusted earnings per share is projected to climb to 18.9p from 18.4p.

Peel Hunt predicts a dividend per share of 16.3p, compared to 15.6p a year earlier.

M&C, meanwhile, should have enjoyed a fairly heft boost from sterling's weakness in the second half of the year.

Credit Suisse forecasts full-year revenue of £910mln, underlying earnings (EBITDA) of £234.6mln and adjusted profit before tax of £150.4mln.

Around the markets

  • Sterling: US$1.2496, up 0.09 cents
  • 10 year gilt: Yielding 1.355%
  • Gold: US$1,238.90 an ounce, down US$2.70
  • Oil: Brent crude US$55.76 a barrel, up 11 cents earnings per share is between 18.40p and 19.70p while the NAV range of estimates is between 459p and 499p.

Headlines

  • One million US consumers behind on car loan payments – Financial Times
  • French bond trading doubles over election fears – The Times
  • Uber hopes to charm its drivers out of revolt – The Times
  • Canada Goose set for $300 million float – The Times
  • Deutsche Bank has examined Trump’s accounts for Russia links – The Independent
  • Chief executives to earn 400 times the average worker by 2037 – The Independent
  • Asset manager Fidelity urges Ministers to get tough on Executive pay committees – City AM
  • Banks caution against ‘significant’ overhaul of pay rules – The Daily Telegraph
  • Nestlé’s new boss sets out recipe for growth as sales disappoint – The Daily Telegraph
  • Giggs and Neville skyscrapers ‘threaten Manchester’s heritage’ - The Guardian
  • Sales of bad debt top €100 billion in 2016 as Europe’s banks try to put crisis behind them – City AM


 

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