Miners provide foundation for FTSE while Convatec plummets
Reuters
Published Oct 16, 2017 09:49
Miners provide foundation for FTSE while Convatec plummets
By Helen Reid
LONDON (Reuters) - Medical device firm Convatec was bruised in early deals after a profit warning, but failed to drag down the broader FTSE share index as mining companies cemented British stocks.
The FTSE 100 (FTSE) inched up 0.1 percent by 0820 GMT, with basic resource stocks the biggest boost.
Data showing improving manufacturing profits in China, indicating robust growth in the world's top metals consumer, boosted heavyweight miners as copper prices soared to a three-year high.
Antofagasta (L:ANTO), Rio Tinto (L:RIO), Anglo American (L:AAL), Glencore (L:GLEN) and BHP Billiton (L:BLT) topped the index, up 2.2 to 3.5 percent.
Mid-caps Vedanta Resources (L:VED), Sirius Minerals (L:SXX) and Kaz Minerals (L:KAZ) also gained 3.2 to 3.5 percent.
Analysts' earnings expectations for the basic resources sector have grown rosier in recent weeks.
UK-listed miners rose in line with the European sector index (SXPP), which was up 2.1 percent at its highest since February 2013.
Convatec (L:CTEC) shares plummeted 20 percent after the medical devices firm warned full-year revenue growth would fall short of expectations, citing severe supply issues impacting two of its divisions which together account for 60 percent of revenue.
The stock hit an 11-month low and was set for its worst ever day since its listing a year ago.
"For such a high-profile IPO to have its growth expectations slide so soon after listing is a poke in the eye for the London market," said Patronus Partners analysts in a note.
Earnings per share expectations could be downgraded 5 to 10 percent after this update, they predicted.
"Convatec is on a punchy rating," said Paul Kavanagh, director at Patronus, adding the 20 percent drop is not an overreaction.
"We hope this statement really bottoms out the extent of the problem, but the jury is still out until we see progress in the next three months," he added. "If there's not a bit of catch-up then 2018 forecasts could come under further pressure."
Another big faller was British engineering group GKN (L:GKN), down 2 percent after several brokerages cut their target price on the stock after GKN warned its annual profit would fall short of expectations due to disappointing aerospace trading.
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Written By: Reuters
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