Monday lunchtime business bulletin

Jun 30 2008 By Karen Dent

A profit warning from the UK’s biggest care home operator Southern Cross saw shares slump by more than 80% today.

The Darlington-based group said occupancy levels at its 700-plus homes were lower than expected because central Government social care funding had reached local authorities later than in recent years, with admissions now taking longer.

The update spooked investors and the resulting sell-off wiped almost £500m off the value of Southern Cross today.

The firm currently has 33,450 residents - 90% of available beds - but said the lower occupancy levels reduced its scope to cut costs, hitting its financial performance since March.

Takeover talk in the mining and telecoms sectors provided a boost for London’s leading share index today.

The FTSE 100 Index advanced 27.1 points ahead to 5557, with miners littering the risers board on speculation that steel giant Lakshmi Mittal could make a move for Rio Tinto.

Investors also cheered news of a takeover in the telecoms sector, with Cable & Wireless tabling a higher £329m offer for smaller rival Thus.

Thus’ board said the offer was "not such a compelling proposal" that it should recommend the bid to shareholders, but its shares soared 20%, or 28.75p to 174p, while C&W shares rose 2%, or 3.2p to 150.6p.

However, miners took centre stage in early trading, with Rio Tinto up more than 2% - 139p ahead at 5982p - as market talk suggested Mittal may challenge BHP Billiton to take over Rio.

Car dealership Pendragon today warned of a sharp decline in used and new car markets and said it had cut 500 jobs to trim costs.

The Nottingham-based group, which owns retailers Evans Halshaw and Stratstone, shed the staff from its 15,700-strong workforce to cope with the tough climate - saying it was "difficult to forecast" prospects this year.

May saw a "significant decline" in national car registrations, with a 9.5% fall for private new cars and a 15.4% drop in registrations for small business vehicles, the group said.

Although Pendragon sought to reassure that sales volumes remained "robust" and the group was profitable, shares fell more than 20% after it said the volatile state of the market made forecasts difficult.

The pound at midday was US$1.9918 compared to US$1.9946 at the previous close, while the euro at midday was £0.7929 compared to £0.7897 at the previous close.