Experian leads FTSE’s slump

The main driver for markets worldwide came from the dollar, with the euro and sterling both hitting 18 month highs as yesterday’s stronger than expected business confidence reading from Germany was seen to increase the chances of further rate hikes from the European Central Bank. While trading liquidity was low, traders were still talking about a technical breakout after the euro breached the key $1.30 level.

ICI, having been lifted by its Quest sale on Wednesday, ran back 11.5p to 423.5p even as credit derivatives traders speculated about potential bid interest, while Sage was off 5p to 244.5p ahead of results from the accountancy software maker next week.

Meanwhile, Wolseley was down 20p to £11.39 as the dollar weakness provided another headwind in front of the builders’ merchant’s AGM statement, which may reveal how badly the group’s lumber business has been hit by the US housing downturn.

Experian, another big dollar earner, dropped 17p to 596p after the credit checking agency was rated “sell” in new coverage at Citigroup.

The US broker’s team worried that the $2 billion Experian has spent on acquisitions over the past three years has yielded unimpressive returns, arguing: “we believe the acquisition track record is not strong enough for investors to pay anything for the potential of future deals”.

Citigroup also saw Experian’s organic growth as slowing, its core business cyclical by nature and its tax rate as unsustainably low. On valuation, it judged Experian’s interactive business as “nearly as expensive as Google, which given a short track record and unconvincing market share trends feels very generous”.

Meanwhile, Old Mutual slid 5.25p to 177.75p on worries about what currency translation may do to its third quarter results due Tuesday, with the rand depreciating by 18 per cent versus sterling from the previous quarter. South Africa’s biggest insurer generates nearly 70 per cent of its earnings in rand.

Utilities were among the few blue chip risers, with Scottish & Southern Energy up 17p to £14.99 and Severn Trent ahead 12p to £14.63. Neither have significant exposure to the dollar, while sector consolidation hopes are seen putting a floor on the price. There was also a theory that ITV, up 0.75p to 110.5p, could benefit from the weaker dollar because it buys programmes from the States. Lingering bid hopes sounded a more credible, although perhaps less rational, explanation.

DIY retailer Kingfisher fell back 6.75p to 249.5p after Deutsche Bank cut its rating to “sell” from “hold” ahead of the B&Q owner’s third quarter results due November 30.

Deutsche highlighted that Kingfisher shares are up 13 per cent in the last three months on recovery hopes as management puts a new store format in place. However, the German broker’s team did not expect sales to rebound as fast as the market expects, while pre-opening costs could take next year’s forecasts to below consensus levels.

Compass Group lost 2.75p to 280.25p ahead of annual results from the caterer due Wednesday, which is expected to come with a cost-cutting plan from Richard Cousins, its new chief executive. “The market now seems to be assuming that Compass is a short-dated recovery story, but we are sceptical about a quick turnaround,” said ABN Amro, which recommended a “trading sell” as it believes improvement will take a while to show through the numbers. “We consider that forecasts for 2007 are at risk even if more cost savings are identified,” it said.

Premier Oil was ahead 17p to £12.97 on growing takeover speculation, with ONGC Mittal Energy was said to be weighing up an approach. According to reports, the Indian government is weighing up giving clearance to the proposed deal: : ONGC is a joint venture between state-owned Indian exploration group ONGC and Mittal steel.

Premier last month admitted it had received a takeover approach, thought to have come from Dubai Energy, while reports out of India have named materials group Reliance Industries as interested in a double deal that would also see its capture BP’s Belgian petrochemicals division. However, there have been doubts over whether any Indian company would be prepared to acquire Premier’s assets in Pakistan. There have also been persistent rumours that Shell (down 14p to £18.42) could be drawn into the auction: with so many runners in the field, investors are not betting on a declaration any time soon.

Homeserve lost 69p to £17.92 after UBS cut the shares from its “buy” list ahead of first half results from the the home energency services provider due Monday. The Swiss broker told clients that there was not sufficient upside to justify a buy, with the stock fully reflecting the potential of Homeserve’s push into the American market.

UBS noted that Homeserve’s earnings are heavily weighted to the fiscal second half so next week’s nubers will likely hinge on partner deals, particularly in the US where the company has been talking to at least five utilities representing 3.7 million households. Looking forward, a mild winter in the UK could drag on sales going into the second half, it said.

Among the small caps, TV Commerce halved after the broadcaster said it may go private, blaming increasing interference in its business from the telephone services regulator.



That comes after the group, which runs psychic TV challel Your Destiny, was last month fined £25,000 and given a formal reprimand over one of its daytime shows, which has since been taken off air.

“While trading has been profitable in the second half of the year to date, given the increased intervention of the regulator in this market, the directors are concerned for the future viability of the company’s existing business model,” TV Commerce added. Shares were off 1.75p to 1.75p.

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