Market report
Robert Lindsay
The talk was that SGS of Switzerland, the world’s biggest tester and inspector of consumer goods, was planning a £14-a-share bid for Intertek, valuing its smaller rival at £2.2 billion.
That was enough to trigger heavy trading in Intertek, a maiden entrant to the FTSE 100 last month, and its shares closed up 78p – 8 per cent – at £10.04. Neither side would comment, but the testing market is seen as ripe for consolidation and Intertek, SGS and the No 2 player, Bureau Veritas, of France, have all expanded by acquisition and are still looking for takeover targets.
SGS, with a market capitalisation of £5.8 billion and a £340 million cash pile, revealed last month that trading had remained strong in January and February.
Sector bulls argue that the recession will drive more companies to out-source their quality assurance while bears warn that declining world trade is bound to hit the volume of container imports from the Far East – many of which are inspected dockside by Intertek – and cut the number of new products requiring testing.
Analysts at Noble cut their price target on Intertek to 700p last month, predicting a fall in revenue and profits this year. “It would be heroic if Intertek is not meaningfully affected by the extent of the decline in global trade,” it said.
The FTSE 100 ended down 12.43 at 4,018.23 as rising retail stocks were offset by falling banks, property groups and insurers.
Next continued its recovery after Debenhams surprised the market with a return to like-for-like sales growth in the past seven weeks. While Debenhams surged 13¾p to 77¼p, levels it has not reached since before the credit crunch, Next gained another 94p to £15.29. Its trading update in two weeks’ time is expected to be strong, mirroring Marks & Spencer’s recent update.
M&S rose 10¾p to 340p and Home Retail Group, owner of Argos and Homebase, rose 15p to 279p.
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