Market Report: BAT soars after stubbing out racketeering charge

Following a key legal triumph in the US, British American Tobacco (BAT) was left high up the top-tier index’s leaderboard last night, advancing 54.5p to 2,462p. The cigarette group made the move after investors awoke yesterday morning to news from across the Atlantic that the company had succeeded in its attempt to be removed from a racketeering ruling.

BAT was among a number of groups found in 2006 to have fallen foul of anti-racketeering laws by hushing up the health dangers of smoking, and as a result a range of restrictions on the sector were ordered.

However, BAT has since argued that, as a British company, it should not be subject to the judgment, and late on Monday a US judge found in its favour. It will still have to make a contribution – expected to be almost $400,000 – to the US government’s costs from the case.

Lawyers for the group called it a “tremendously significant win”, while Tina Cook, an analyst at Charles Stanley, said the news provided “welcome clarity and lifts an overhang of potential litigation on the share price”. H2O Market’s Daniel Harris also said the ruling was a positive for the company, but noted that the risk of stricter regulations on cigarette packaging still face the group elsewhere in the world.

Overall, the FTSE 100 added 27.68 points to 5,932.17, despite BP declining 10.55p to 466.55p as reports emerged that it could face manslaughter charges over the Gulf of Mexico disaster. The energy giant also had its rating cut to “sell” from “hold” by Collins Stewart, with the broker’s analysts citing valuation concerns, the potential for a fall in oil prices and its dispute with its partners in the TNK-BP venture over the attempted deal with Rosneft.

The miners were generally impressive, with the sector helped by positive comments from Credit Suisse on commodity prices. The broker was upbeat on China’s growth, saying it is “more sustainable in terms of inflation, property and profitability than consensus believes”. However, Kazakhmys edged forwards just 1p to 1,426p, despite revealing that its full-year profit had risen nearly 75 per cent.

Next, meanwhile, was lifted 41p to 2,065p after Morgan Stanley reiterated its “overweight” recommendation. Pointing out that the retailer has purchased more than half of its share capital since 2000, the broker said it believes it will maintain its share buy-back programme.

Wolseley advanced 65p to 2,154p after the builders’ and plumbers’ merchant announced that it was bringing back its dividend and said its trading profit for the first six months rose nearly 65 per cent.

Man was another blue-chip company updating the market, and the hedge fund manager ticked up 1.7p to 246.2p after saying in its trading statement that it had managed to start attracting investors again.

Reheated takeover speculation saw Home Retail jump up on the FTSE 250 as market gossips once again linked it to Walmart, with the US giant said to be considering a possible approach. Traders played down the tale, but with a potential price of 290p a share being mentioned, the owner of Argos rose 4p to 201.4p.

The most dramatic move, however, came from CPP, which found its share price cut by 46 per cent after plummeting 130p to 150p. The identity theft insurer announced that it is under investigation by the Financial Services Authority over “alleged failings in sales calls”. As a result, the group said, it was halting the sale of its UK ID protection products, and that its revenue and profits would therefore fail to meet its targets. Peel Hunt’s Henry Carver warned that he anticipates downgrading his expectations by about 5 per cent, but added that he was “more concerned with reputational risks that could impact CPP’s relationships with its business partners”.

Also down was Supergroup, 23p lower at 1,477p after the fashion retailer revealed that its chief operating officer, Diane Savory, is leaving at the beginning of May for personal reasons.

Seymour Pierce’s Freddie George was reassuring, saying that he does “not read anything negative… in this resignation”, although he added that Ms Savory did play “an important part in the development of the company”.

Also releasing figures was Babcock International, which was driven up 22p to 600p after the defence services group said its trading was on track. Meanwhile, the insurer Phoenix eased back 2.5p to 675p as it revealed that it generated £734m of cash in 2010, ahead of its target.

The small-cap outsourcing group Mouchel shed a huge 33 per cent, leaving it 48.5p worse off at 99p, after revealing that it had rejected two different takeover approaches. Interserve and Costain were the two failed bidders, with the former’s offer deemed too low while the latter’s was judged to have “an unacceptably high level of execution risk”. Mouchel also revealed its underlying pre-tax profits for the first six months dropped nearly 75 per cent.


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