London midday: Stocks stay down as Burberrry, Pearson disappoint; M&A in focus

London stocks were still in the red by midday on Wednesday, weighed down by disappointing updates from the likes of Burberry and Pearson, while Informa tumbled on news of a merger with UBM.

The FTSE 100 was down 0.2% to 7,740.42, while the pound was up 0.4% against the euro at 1.1291 and flat versus the dollar at 1.3792.

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 deal 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 deal 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, serviced office provider IWG surged 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.

Beazley was 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) 7,740.42 -0.20%
FTSE 250 (MCX) 20,845.98 -0.15%
techMARK (TASX) 3,537.43 -0.26%

FTSE 100 - Risers

Mediclinic International (MDC) 614.20p 2.33%
NMC Health (NMC) 3,158.00p 1.81%
Rolls-Royce Holdings (RR.) 866.53p 1.52%
Anglo American (AAL) 1,781.00p 1.47%
National Grid (NG.) 849.70p 0.99%
St James's Place (STJ) 1,257.50p 0.92%
GlaxoSmithKline (GSK) 1,366.60p 0.86%
Tesco (TSCO) 213.60p 0.85%
Coca-Cola HBC AG (CDI) (CCH) 2,355.00p 0.81%
Unilever (ULVR) 4,022.00p 0.80%

FTSE 100 - Fallers

Informa (INF) 685.00p -8.35%
Burberry Group (BRBY) 1,665.00p -6.72%
Pearson (PSON) 682.60p -4.98%
Whitbread (WTB) 3,854.00p -2.33%
Imperial Brands (IMB) 3,064.50p -2.20%
WPP (WPP) 1,358.00p -1.67%
Shire Plc (SHP) 3,521.50p -1.50%
Centrica (CNA) 142.35p -1.28%
Marks & Spencer Group (MKS) 306.50p -1.19%
Paddy Power Betfair (PPB) 8,360.00p -1.18%

FTSE 250 - Risers

UBM (UBM) 876.00p 11.38%
IWG (IWG) 274.80p 3.93%
Drax Group (DRX) 288.00p 3.67%
Spire Healthcare Group (SPI) 250.00p 3.48%
Beazley (BEZ) 524.00p 3.25%
Cobham (COB) 134.85p 2.63%
Sequoia Economic Infrastructure Income Fund Limited (SEQI) 113.00p 2.26%
Workspace Group (WKP) 985.50p 2.18%
Big Yellow Group (BYG) 846.50p 2.17%
Ashmore Group (ASHM) 430.20p 2.14%

FTSE 250 - Fallers

Provident Financial (PFG) 693.00p -13.81%
RPC Group (RPC) 764.20p -4.31%
Acacia Mining (ACA) 190.70p -4.17%
Cineworld Group (CINE) 541.00p -3.99%
Cairn Energy (CNE) 222.40p -3.22%
Capita (CPI) 384.60p -2.63%
Kier Group (KIE) 1,117.79p -2.55%
Hochschild Mining (HOC) 241.86p -2.16%
Greene King (GNK) 519.80p -2.07%
TalkTalk Telecom Group (TALK) 137.20p -2.07%