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Last updated: March 22, 2013 8:12 pm
BT Group led the blue-chip risers yesterday on cost cutting hopes and optimism about pricing.
The shares gained 3.9 per cent to 276.7p after an investor roadshow by management raised the potential for deep cost cutting at its Global Services division.
Costs at the IT outsourcer fell just 1 per cent last year against 6 per cent in its retail operations, Barclays highlighted. With declining demand from financial services customers and in southern Europe, “BT can clearly do more here,” the broker said.
Investors expect BT to announce a restructuring plan at results in May with the aim of saving about £300m a year. BT Global Services currently employs more than 24,000 people and is estimated to take about a fifth of revenue from financial customers.
Separately, Nomura argued that BT’s Openreach network infrastructure division merited a re-rating based on the European Commission’s reticence to impose price controls on fibre connections.
“Regulatory rhetoric is turning positive for all of Europe’s network owners, but the benefits should prove more tangible for fixed networks and highly significant for BT,” it said. Valuing Openreach more in line with utilities lifted Nomura’s BT share price target to 360p.
The wider market stalled after five straight declines, leaving the FTSE 100 up 4.21 points at 6,392.76. That left the index showing only its second weekly decline of the year, losing 1.5 per cent.
Luxury goods stocks fell yesterday after a profit warning from Mulberry , with the handbag maker blaming tourist spending.
A sales warning from Bang & Olufsen also affected sentiment, as did data showing that Swiss watch exports fell in February. Mulberry tumbled 17.1 per cent to £10.24 while Burberry was down 4.1 per cent to £13.30.
Petrofac lost 3.7 per cent to £14.46 on a downgrade to “underweight” from HSBC. It argued that the oil services engineer’s $1bn purchase of a ship for deepwater rigs, due for delivery in 2016, was a distraction from problems at its onshore business where margins were under threat.
With mega projects such as the South Yoloten gasfield in Turkmenistan due to close out this year, Petrofac’s current contract backlog does not appear to support 11 per cent net margins beyond 2013, HSBC said.
AstraZeneca rose a further 3.3 per cent to £32.36 following Thursday’s investor day, when new chief executive Pascal Soriot played down the chances of sacrificing shareholder returns for an acquisition. “While Mr Soriot didn’t completely close the door on major M&A, management’s commitment to the current progressive dividend policy suggests megadeals are unlikely at least through 2016,” said Leerink Swann analysts.
A UK cold snap benefited Centrica , up 1.5 per cent to 357.6p, and National Grid , up 1.3 per cent to 753.5p. HSBC turned positive on National Grid, saying the group’s recent £2bn hybrid bond issue had eased fears of a dividend cut.
Esure closed at 306p in its first day of conditional trading following a share sale at 290p apiece. The flotation valued the car insurer at £1.2bn.
Cupid , the owner of online dating sites, dropped 57 per cent to 49p after calling in an auditor to investigate claims in the Ukrainian press that some staff on its 24-person “motivational team” had posed as eligible women to convince men to subscribe during a free trial period. Similar so-called date bait accusations have led to class action lawsuits in the US against other companies.
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