Wednesday lunchtime business bulletin

Jul 2 2008 by Andrew Mernin

Retail stocks were hammered on the London market today after a shock profits warning from Marks & Spencer.

M&S - down more than 18% - painted a grim picture of deteriorating consumer confidence amid a sharp decline in first-quarter sales.

Despite the high street giant’s woes, the wider FTSE 100 Index was 56.9 points higher at 5536.8 by mid-morning, staging a recovery from yesterday’s 2.5% fall as heavyweight drugs and mining stocks gained ground.

But investors’ attentions were firmly focused on retailers as M&S, down 59.5p at 258.75p, led a dire day for the sector after like-for-like sales fell 5.3% in the 13 weeks to June 28.

The firm was closely followed by fashion chain Next, down 64p at 845.5p, or 7%, after a downgrade from Panmure Gordon brokers.

Supermarkets Sainsbury’s and Morrisons lost 14p to 296.25p and 7p to 256p respectively, while B&Q owner Kingfisher shed 2.4p to 104.3p.

The UK’s biggest construction firm Balfour Beatty bucked the industry gloom today after telling investors trading would remain ``strong" this year.

Balfour said it had won £400 million of new orders in the first five months of the year, taking its order book to £11.8bn.

Among the new deals for the firm, which operates in more than 20 countries, is a £150m contract to build a new highway in San Antonia, Texas. It has also been selected as part of the consortium to build the £445m M74 extension in Glasgow.

Balfour said the future pipeline of work was also looking good thanks to being selected as the preferred bidder for the M25 widening and maintenance project. The contract award, which involves adding an extra lane of traffic to 63 miles of the 120-mile orbital carriageway, will be formally announced later this year.

The firm said: "Trading in the year to date continues to be strong."

Bread and cake maker Finsbury Food warned of an earnings slowdown today a as tougher trading climate and soaring ingredient costs bear down on the business.

Chief executive Dave Brooks said the firm was faced with a 10% increase in the cost of staples such as wheat, dairy products and eggs in the past year.

Finsbury, which supplies to major supermarkets including Tesco, Sainsburys, Marks & Spencer and Waitrose, said margins were cut by more than £1.5m during the year to June 2008.

Shares fell more than 4% as Mr Brooks expected the difficult conditions to continue for ``the next twelve to eighteen months", with earnings growth likely to be slower than achieved recently.

But the Cardiff-based company, which makes a range of luxury cakes, low-fat products and organic breads, believes it is well-equipped to move with consumer trends if people start curbing their spending on baked goods.

The pound at noon was US$1.9855 compared to US$1.9930 at the previous close while the euro at noon was £0.7949 compared to £0.7916 at the previous close.