Aggreko leads Britain's FTSE 100 lower on outlook worries

LONDON Mon Dec 17, 2012 5:57am EST

Workers walk outside the London Stock Exchange October 16, 2008. REUTERS/Andrew Winning

Workers walk outside the London Stock Exchange October 16, 2008.

Credit: Reuters/Andrew Winning

LONDON (Reuters) - Britain's top share index fell early on Monday, led lower by temporary power provider Aggreko, which warned on its 2013 outlook, and heavyweight Vodafone, hit by concerns about the cost of new generation wireless networks.

By 3.45 a.m. ET, the FTSE 100 .FTSE was down 14.72 points or 0.3 percent at 5,907.04.

Aggreko (AGGK.L) slumped 17.4 percent after the firm said it would be difficult to provide a definitive view on next year's trading.

"Guidance for 2013 confirms that the weakening trend identified in Q3 has continued, with performance for the coming year now expected to be below 2012. This would imply at least 10 percent downside risk to our forecasts, hence we place our fair value and rating under review," Espirito Santo said in a note.

Aggreko had been highly valued by investors, trading on a smartestimate price-to-earnings ratio of 19.2 times, according to Thomson Reuters Starmine. That compares with ratios for its peers of around 14 times, leaving little room for disappointment.

But the warning signs had been there, with valuation momentum for the company grinding to a halt and leaving Aggreko among the lowest-ranked FTSE 100 companies in Starmine's valuation and momentum model.

Vodafone (VOD.L), down 1.8 percent, also added its hefty weight to the downside on worries over the cost of the next generation of mobile networks after the Dutch state raised much more than expected in its auction of fourth generation (4G) wireless frequencies. Prices were so that high market leader KPN (KPN.AS) said it would have to cut dividends to afford its licenses.

The falls offset gains among miners .FTNMX1770, which have found support of late after improving economic data from China, following a year of underperformance which has seen the sector fall 1.6 percent compared with the FTSE 100's 6.3 percent rise.

Kazakhmys (KAZ.L) and ENRC ENRC.L rose 1.7 percent and 0.9 percent, respectively, the top gainers early on Monday, after Kazakhstan revealed refined copper and gold output rose in January-November 2012. The two London-listed miners account for a large part of the country's metal production.

Egypt-focused Centamin (CEY.L) recouped some of its recent steep losses, rallying 24.9 percent after it said it expected operations at its mine to restart in the coming days after customs officials allowed it to export gold.

The broader FTSE 100 remains rangebound in recent days, with the index up just 0.1 percent over the last week, as macro uncertainties keep investors from making large bets on the market in the run up to the end of the year.

The FTSE hit its highest since early March but the lack of momentum on the breakout indicated that it was either weak buyers entering or weak shorts covering small positions. Volume was relatively low, which could reflect a lack of conviction among bullish traders, according to a technical analyst.

The main worry remains the U.S. "fiscal cliff" of steep tax hikes and spending cuts, although there were some signs of progress in talks between the two parties in the United States.

"The slow progress of discussions in Washington will continue to distract investors; a deal to avert the fiscal cliff will need to be done soon if the recent momentum in risk assets is to be maintained all the way into the year end," said Ian Williams, strategist at Peel Hunt.

(Editing by Catherine Evans)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.