Last updated: March 11, 2013 4:44 pm

Melrose advances with talk of disposals

Disposal hopes helped push Melrose to the top of the blue-chip risers on Monday.

The engineering turnround specialist rose 4 per cent to 271.1p, helped by talk that potential buyers had been sounded out for parts of FKI, the power and automation conglomerate it bought for £480m in 2008.

Melrose management last week flagged up a better chance of disposals this year and pledged to return excess cash to shareholders after trimming its debt.
JPMorgan Cazenove has valued the group’s energy and lifting equipment units at more than £1bn each.

Barclays analysts were cautious. Melrose management “would be open to any realistic offers for any or all of Melrose’s businesses,” but spending on the former FKI units “suggest to us that further improvement is expected . . .  and that therefore now may not be the best time to sell them”.

Sterling’s weakness also helped the engineers, lifting the FTSE 100 by 20.05 points or 0.3 per cent to 6503.63. Weir Group was up 2.4 per cent to £24.74 and Babcock International added 1.1 per cent to £10.91.

Reckitt Benckiser rose 1 per cent to £46.83 after Merrill Lynch added the stock to its “Europe 1” recommended list.

A day ahead of its full-year results, Antofagasta climbed 2.4 per cent to £10.95 on hopes the copper miner would pay a special dividend. Société Générale, which took Antofagasta off its “sell” list, noted that the group ended the third quarter with nearly $2bn in cash, about 30 per cent higher than in 2010 when it last paid a special dividend.

Short covering lifted Talvivaara , the nickel miner, 22.2 per cent to 31p after shareholders agreed to a rescue rights issue. The Helsinki-listed group said late on Friday that it would raise €261m at €0.16 apiece, a 84.5 per cent discount to Thursday’s closing price.

Sage Group fell 2.2 per cent to 341.9p on a Merrill Lynch downgrade to “sell”.

Sage was due to launch cloud-based software by the end of the year, Merrill said, adding: “This, in our view, is a slow process and the market should remain sceptical over the next few quarters given that historically very few companies have managed to transform themselves from ‘on-premise’ vendors to credible cloud players.”

Merrill also worried that Sage was running out of firepower for buybacks. After buying back 11 per cent of its outstanding stock since January 2012, further purchases may hurt liquidity, Merrill said.

Handset testing software maker Anite slumped 16.1 per cent to 130p after it said demand for the Christmas quarter had been typically quiet, unlike last year.

Ladbrokes gained 6.5 per cent to 239.8p after agreeing to outsource its online marketing to Playtech , which rose 3.4 per cent to 570p.

ICAP fell 3.6 per cent to 330.2p and Tullett Prebon was down 1.8 per cent to 270.3p, with UBS downgrading both stocks to “sell”. Regulation of derivatives would affect volumes, with ICAP’s business also exposed to proposed moves aimed at curbing high-frequency trading, said UBS.

St James’s Place slipped from a record high, down 0.1 per cent to 536.5p. After the close, Lloyds Banking Group said it was selling a 20 per cent stake.

Intu Properties faded a further 0.3 per cent to a seven-month low of 327.7p even after deputy chairman John Whittaker bought another £1m of stock, taking his holding to 19.89 per cent. Mr Whittaker has spent £51m on Intu stock following its relegation last week from the FTSE 100.

TalkTalk Telecom rose 2.9 per cent to 265.7p. Barclays repeated an “overweight” rating based on cost-cutting potential and a shift into internet TV. “The return to subscriber growth in an inflationary pricing environment should support revenue growth in coming years,” it said.

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