London Report: Profit warnings from J Sainsbury and Colt Telecom disrupted the relief investors felt yesterday after Alan Greenspan delivered the expected 25 basis point rise in US interest rates.
The FTSE 100 fell 0.9 per cent to close at 4,424.7 and the mid-cap FTSE 250 shed 0.6 per cent to finish at 6,240. Trading volume was 3.6 billion.
But investors were able to celebrate Centrica's sale of the AA motoring organisation for a higher-than-expected £1.75 billion (€2.61 billion).
Shares in Centrica rose 5.1 per cent to 236p as the UK's biggest household supplier of gas and electricity said the AA sale would enable it to return £1.5 billion to shareholders through a £1 billion special dividend payment, and the launch of a £500 million share buyback programme.
Commerzbank kept an "outperform" rating on Centrica, while Williams de Broe stuck with its "buy" recommendation and raised its price target on the stock from 250p to 280p.
CVC Capital Partners and Permira Advisers, the private equity buyers of the AA, said they planned to float the organisation within five years.
J Sainsbury dropped 5.7 per cent to 268½p as brokers downgraded forecasts following the supermarket chain's second profit warning in four months.
ABN Amro, joint broker to Sainsbury, cut its 2005 pre-tax profit forecast by 23 per cent to £400 million but stuck with its "hold" recommendation. Williams de Broe, on the other hand, told investors to sell.
A telling concern is that the appointment of Philip Hampton as chairman, replacing Sir Peter Davis who resigned yesterday, could see Sainsbury cut its dividend. Mr Hampton quit his job at Lloyds TSB because he believed the bank's dividend was too generous.
There was no joy for Sainsbury's rivals as dealers focused on the increasingly fierce competition among the supermarkets. Tesco fell 1.4 per cent to 262½p, Morrison Supermarkets lost 2.8 per cent to 225¼p, Somerfield shed 1 per cent to 153¾p and Big Food Group dropped 7 per cent to 95¾p. Telecoms stocks also came under pressure as Colt Telecom fell 34 per cent to 53p after the mid-cap company warned it would miss its 2004 targets.
Shares in Ulster TV, the regional media group, fell 6.3 per cent to 394½p following the announcement after the close on Wednesday that UBS had placed 15.7 million UTV shares at 375p with institutions, raising almost £60 million on behalf of CanWest Global Communications, the Canadian media group. - (Financial Times Service)
