March 26, 2013 8:56 am

Morrison tightens gap with rivals

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Hopes of a sales recovery on Tuesday gave Wm Morrison its biggest daily gain since September.

Morrison rose 3.5 per cent to 276p after a grocery industry survey showed its cash sales growing for the first time in three months. While Morrison continued to underperform its main rivals its market share loss had moderated in March, the Kantar survey showed.

A decline in like-for-like sales in the quarter to January raised concerns that Morrison was hobbled by a lack of convenience stores and online ordering, leading most analysts to turn negative. But Citigroup argued that management had held back on promotions for the start of its financial year in February, which magnified the poor performance.

February’s step-up in promotions and the recent rollout of a children’s clothing range gave grounds for optimism, Citi said. And, with no profit warning at its full-year results, Morrison looked out of the danger zone until August when it closes the books on the first half, the broker added.

Citi also highlighted that Morrison owns about 90 per cent of its store estate, which it said had a replacement cost nearly equal to the group’s enterprise value at around £8.4bn. Its observation helped reheat the longstanding idea that Morrison could be a leveraged buyout target.

A trendless wider market left the FTSE 100 up 0.3 per cent or 20.99 points at 6,399.37.

Aberdeen Asset Management rose 4 per cent to 428.4p after Monday’s results brought upgrades from UBS and Numis Securities. Best-in-class funds could deliver 19 per cent compound annual earnings growth for the next two years, versus 8 per cent for its sector peers, UBS said.

Sector peer Schroders rose 1.9 per cent to £21.30 after its acquisition of Cazenove Capital led Oriel Securities to turn positive.

Melrose rose 2.5 per cent to 263.5p after finance director Simon Peckham said at a conference that the engineer expected to make near-term disposals. Separately, Melrose chairman Christopher Miller bought 365,000 shares.

Morgan Crucible faded 0.5 per cent to 287p in spite of the efforts of day traders to spread takeover rumours.

Among the miners, Kazakhmys lost 8.6 per cent to 405.3p after full-year earnings missed consensus expectations, due to a larger than expected charge for disability benefits.

The results focused fears that Chairman Vladimir Kim, Kazahkmys’s biggest shareholder, may have to sell some of his stake to cover debts. Mr Kim had pledged a $1bn stake as collateral for loans in October 2012, when the shares were trading above 700p. But the value of that 17 per cent holding has fallen to $530m

Compatriot ENRC faded 3 per cent to 260p, taking its fall to 26 per cent in the past eight days. ENRC’s founding shareholders own a combined 44 per cent of the company and, because they are not company directors, do not have to disclose loan collateral. The stock’s recent slump has intensified speculation that Alijan Ibragimov, an 8 per cent shareholder in ENRC, might consider taking the company private.

Gold miner Polymetal rallied 2.7 per cent to 881p, with house broker Morgan Stanley playing down concerns about operational difficulties following a site visit to Russia.

Problems with pressure oxidation caused Polymetal difficulties in December but management remain confident of improving recovery rates, and earnings are relatively resilient to rising costs, Morgan Stanley said.

Savills , the estate agent, fell 7.2 per cent to 534.5p on word that Oaktree Capital was selling a 7.8m stake, or 5.9 per cent of the company, via Credit Suisse. The placing was equivalent to about 75 times Savills’ average daily volume.

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