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London close: Deals news fails to boost stocks
London stocks finished lower on Wednesday as Informa tumbled on news of a merger with UBM and weighed down by disappointing updates from the likes of Burberry and Pearson.
The FTSE 100 ended down by 0.39% or 30.50 points to 7,725.43, while the pound was up 0.50% against the euro at 1.1305 and by 0.25% against the dollar to 1.3827.
M&A was in focus as Informa, the events and specialist publishing group, agreed a merger with its smaller events-focused rival UBM in a transaction that is expected to create a £9bn heavyweight and generate "significant synergies". In a proposed deal that will need to be formalised in coming weeks, Informa would offer 1.083 of its shares and 163p per UBM share, to own roughly 65.5% of the enlarged group. UBM surged but Informa shares plummeted on the news.
Sticking with deals news, Melrose Industries traded lower after engineer GKN rejected its sweetened £7.4bn offer, saying the terms of the new offer were "effectively unchanged" from the previous one.
Trading updates did little to brighten the mood, with luxury clothes retailer Burberry under the cosh as it reported slower sales growth in the last three months of 2017 than had been expected but remained confident of sashaying on to hit full year profit targets as it makes initial progress on its new strategy.
IG analyst Joshua Mahony said: "The decision from Chinese and UK consumers to shift their custom towards more cost effective alternatives serves to undermine Burberry's latest plan to restrict supply and raise prices in a bid to increase margins. For many, today's figures highlight the difficulty the firm will have with their latest strategy, with the risk of significant further downside in the share price should they fail to attract enough customers at higher prices."
Education publisher Pearson retreated after saying it expects 2017 adjusted operating profit of around £570m to £570m and adjusted earnings per share of 53.5p to 54.5p at effective exchange rates, as lower US educational sales still drag on the company.
Cineworld was under pressure after announcing a rights issue to part fund its acquisition of US cinema china Regal, as it posted a 12% jump in full-year revenue. Cineworld is offering four new ordinary shares for every one existing share at 157p, which is a 34% discount to the theoretical ex-rights price of 238.3p.
Support services and construction company Interserve was down but off earlier lows as the government said it does not believe any of its major suppliers are in a similar position to collapsed contractor Carillion. The comments followed a Financial Times report suggesting that Interserve was under government watch following the demise of Carillion.
On the upside, shares of serviced office provider IWG traded higher following a report that Canada's Brookfield Asset Management Inc and Onex Corp are preparing a bid that values the company at about £2.7bn.
Stock of Beazley was also on the front foot after the insurer said 2017 full-year profit is likely to be ahead of current market expectations.
In broker note action, GlaxoSmithKline was higher after an upgrade by Barclays, Spire Healthcare was boosted by an upgrade to 'buy' at Jefferies and Big Yellow gained after an upgrade to 'buy' at Berenberg.
British Land and Workspace were both up after upgrades at Stifel, but Cairn Energy was on the back foot after a downgrade to 'neutral' at Macquarie.
Market Movers
FTSE 100 (UKX) 7,725.43 -0.39%
FTSE 250 (MCX) 20,769.36 -0.52%
techMARK (TASX) 3,522.86 -0.67%
FTSE 100 - Risers
Rolls-Royce Holdings (RR.) 900.00p 5.44%
Mediclinic International (MDC) 620.00p 3.30%
NMC Health (NMC) 3,152.00p 1.61%
Halma (HLMA) 1,307.00p 1.40%
GKN (GKN) 448.00p 1.36%
Coca-Cola HBC AG (CDI) (CCH) 2,360.00p 1.03%
Land Securities Group (LAND) 1,005.60p 0.89%
Direct Line Insurance Group (DLG) 372.20p 0.84%
Fresnillo (FRES) 1,390.00p 0.83%
Smiths Group (SMIN) 1,685.00p 0.81%
FTSE 100 - Fallers
Burberry Group (BRBY) 1,619.00p -9.30%
Informa (INF) 705.00p -5.67%
Pearson (PSON) 686.20p -4.48%
Micro Focus International (MCRO) 2,175.00p -2.51%
Johnson Matthey (JMAT) 3,222.00p -2.36%
Whitbread (WTB) 3,855.00p -2.31%
ITV (ITV) 165.40p -2.19%
Shire Plc (SHP) 3,500.00p -2.10%
Imperial Brands (IMB) 3,072.50p -1.95%
BT Group (BT.A) 269.00p -1.82%
FTSE 250 - Risers
UBM (UBM) 880.50p 11.95%
Drax Group (DRX) 290.40p 4.54%
IWG (IWG) 275.00p 4.01%
Beazley (BEZ) 527.00p 3.84%
Spire Healthcare Group (SPI) 250.00p 3.48%
Cobham (COB) 134.65p 2.47%
Daejan Holdings (DJAN) 5,920.00p 2.07%
Workspace Group (WKP) 983.31p 1.95%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 112.50p 1.81%
Hiscox Limited (DI) (HSX) 1,420.50p 1.61%
FTSE 250 - Fallers
Provident Financial (PFG) 699.00p -13.06%
Cineworld Group (CINE) 533.00p -5.41%
Cairn Energy (CNE) 217.40p -5.40%
Acacia Mining (ACA) 188.45p -5.30%
Dunelm Group (DNLM) 635.00p -5.22%
Kier Group (KIE) 1,097.00p -4.36%
Serco Group (SRP) 98.00p -3.92%
Marshalls (MSLH) 425.00p -3.76%
Victrex plc (VCT) 2,570.00p -3.75%
Brown (N.) Group (BWNG) 275.20p -3.23%