SHARES IN the banking giant Lloyds TSB were in retreat yesterday after a rather downbeat assessment of the group’s prospects by Merrill Lynch. In a review of the sector Merrill downgraded Lloyds to”neutral” from “buy”. The US broker came across as far from impressed with the new strategy of Eric Daniels, the man who officially took over from Peter Ellwood as chief executive of the group backin May.
“The direction, if not the detail, of Lloyds TSB’s new chief executive appears to be taking shape,” commented Merrill, which went on to warn investors that “with the exception of curtailing hopes of a cross border M&A transaction, it does not appear radically different from the direction set under the previous management.” This approach has in the past seen “pedestrian growth” at Lloyds, according to the US broker, which fears that the group will struggle to create superior value relative to its peers going forward. Such comments left Lloyds down 3.5p on the day at 415.5p.
Elsewhere in the sector Royal Bank of Scotland fell 1p to 1,567p as Morgan Stanley cut back its recommendation to “equal weight” from “overweight”. Morgan Stanley also reduced its 2004 earnings estimates and told clients that the bank’s historic 10 per cent premium relative to peers is beginning to look to optimistic. Meanwhile, the wider FTSE 100 index finished the session static at 4,204.4 as better than expected manufacturing figures out of the US failed to inspire blue chips this side of the Atlantic.
Mitchells & Butler fell 5p to 239p in response to a downgrade from Deutsche Bank. The broker cut its rating to “hold” from “buy”. Last week’s news that M&B has dropped out of the bidding war for Scottish & Newcastle’s pubs business leaves the group open to press ahead with its refinancing, which most in the City expect will pave the way for a major share buy- back. Deutsche calculates that M&B is likely to be in a position to return about pounds 400m to shareholders. With that kind of money it can buy back more than 20 per cent of its share capital at current prices.
Invensys ticked 1.25p higher to 36.5p as hedge funds were heard to be piling into the stock on talk of a major contract win for the engineer and whispers that it is close to securing the sale of its water meter division. Invensys has been busy selling off assets in an attempt to cut its debt pile and has been quite successful so far. Meanwhile the recent rise in global stock markets will have without doubt reduced the group’s pension fund deficit by some way.
Deutsche Bank also helped Invensys higher yesterday as the German broker added the stock to its “UK Focus List”. The list consists of Deutsche’s top picks on the London market. The broker told clients that Invensys will be among the first beneficiaries from a recovery in US economic growth, a scenario which recent data from across the Atlantic has been strongly hinting at.
Computacenter soared 32.5p to 440p after the computer services group posted an impressive 31 per cent jump in first half pre-tax profits. After the market had closed it emerged that non-executive Philip Hulme had used the share price spike to sell down his holding. Mr Hulme sold 250,000 shares at 440p.
Last week rumours of a bid for Woolworths did the rounds of the Square Mile. Yesterday, the retailer gave up 0.5p to 39.5p despite whispers that next week’s interim results will not disappoint. Some even suggested that they may well top expectations.
Renold added 1.5p to 88p on talk of strong trading at the machine tools group. UBS is heard to have set a 105p price target on the stock. Mears gained 4p to 125.5p after yet another set of strong figures from the AIM listed facilities management group. For the six months to the end of June profits before tax soared almost 40 per cent to pounds 2.2m. Along with the figures Mears unveiled the acquisition of Scion, a deal which analysts believe will increase earnings at the group by 13 per cent next year.
Coffeeheaven International, the coffee shop operator, held steady at 1.02p despite the sale of 700,000 shares at 1p by Richard Worthington, the chairman. Mr Worthington retains a holding of 9.4 million shares, or 3.5 per cent of the company. There was also evidence of director selling at the software group Alterian, up 3p to 62.5p. Iain Johnston, a non- executive, sold 500,000 shares at 58p. Moss Bros, steady at 63.25p, saw Shami Ahmed up his stake in the retailer to 22.1 per cent.
Just Car Clinics jumped 3.25p to 23.25p ahead of results from the accident repair group next week. According to market gossips, business has been booming at the group over the past two quarters and currently stands at near record levels.
Finsbury Food Group improved 9p to 56p after unveiling a five- year partnership agreement with Nestle. Under the deal Finsbury Food will recreate Nestle brands including Smarties, Yorkie, Milky Bar and After Eight in cakes and muffins.
Michael Jivkov
