Black gold Midas touch


1808p +34p


612p -18.5p

WHEN Cairn Energy announced it was making its first acquisition since floating off its India assets, the reaction seemed disproportionate with the event - 38 million cash for two AIM minnows.

Some analysts have been highly negative about the stock, asking that even if its major fields in India progress as it hopes, where would the real upside come from?

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Yesterday the faithful got their reward. During its years on the rise Cairn seemed to play up to the reputation of risk taker come good, striking oil almost wherever the drills were laid.

In fact, the company has spent more than $100 million seeking data on its South Asia assets, but the reputation remains the same, that just perhaps Sir Bill Gammell and his crew had the golden touch. Only this week Goldman Sachs, initiating coverage of Cairn, told its clients to buy the stock, as it held major potential from high-risk exploration, this at a time when it is still much more fashionable to make safety plays.

If indeed the technical crew at its HQ in Clydesdale Bank Plaza in Edinburgh know something that the "super-majors" don't, the early signs are that that formula will remain the same.

Commercial director Simon Thompson says the theory is to find somewhere that the others didn't think was worth a punt, load up to the gills, and search.

Should it work again, it may not be long before there are two FTSE 100 companies on Lothian Road.

CAIRN'S announcement came on the same day that one of Cairn's former golden boys had less welcome news to reveal.

Kevin Hart, who left as finance director of Cairn in June last year to join another Edinburgh-based oil & gas explorer, the troubled BowLeven, was forced to effectively deny there were problems at the company when a major shareholder dumped its stake at a loss.

Early report cards for the Hart-led management had been almost entirely glowing.

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An apparently synergistic acquisition, positive drilling results and fawning analyst notes have preceded a steady rise in the company's share price.

Yesterday, though, there were signs that the honeymoon may be over.

One of BowLeven's early coups was to attract a major cash injection from Suntera Resources, which bought 13 per cent of the company at an 8.6 per cent premium to the share price, an early sign of the City's faith in the new management, just a month after Hart joined.

But yesterday Hart was forced to "thank Suntera for their support whilst an investor" after it confirmed the company had appointed Merrill Lynch to sell its entire stake, and at a discount to the market rate of more than 10 per cent.

Hart insisted the company was well placed and viewed the future with confidence, and released a statement saying that the move was a rationalisation of its portfolio, and "not a commentary on its view of BowLeven as an investment proposition".

THE drama behind the Carlsberg/Scottish & Newcastle rumours took a new tack yesterday, when the Danish company's chairman, Povl Krogsgaard-Larsen, made apparently unsolicited comments to the effect that the brewer was ready to buy S&N's stake in BBH, the Russian brewing giant in which they share as a joint venture.

That he wants to get both hands on the fast growing BBH is not a surprise, but his statement's framing, that the company had built up resources for a purchase, suggested he thought the day S&N would sell was coming.

A spokesman for the Edinburgh brewer would say only that the company "was comfortable with the status quo".

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But privately S&N was making it very clear that its stake in S&N was not for sale, thank you, and it would take comments more seriously only when they came from Carlsberg's chief executive.

Apparently, Krogsgaard-Larsen's company is not 100 per cent happy with having to compete in the marketing of its brands next to those of S&N in Baltica's territories of Russia and Eastern Europe. S&N pointed out that no matter how the beers were marketed, both sides would share the benefits, and it saw no problem.

Carlsberg is also evidently keen on owning 100 per cent of its foreign subsidiaries, but it will have to be very careful about how it goes about seeking ownership of BBH.

The Russian joint venture is held in such a way that if Carlsberg was to make an offer, S&N would have the exclusive right to bid the same price plus 1, a level at which the Danish company would have to accept.


Marshalls results pave way for a share bounce

MARSHALLS bounced off 12-month lows yesterday after the paving slabs maker reported a 9 per cent rise in first-half pre-tax profits and said the outlook remained good.

Profits before tax for the six months to 30 June jumped to 27.4 million from 25.1m in the year-earlier period on revenue 6 per cent higher at 209.9m. Like-for-like revenue was up 3.7 per cent.

Chief executive Graham Holden said: "We have good visibility of demand in the public sector and commercial market and lead indicators continue to be positive for 2007 and 2008.

"Underlying activity in the domestic market was good until it was hampered by exceptional summer rainfall."

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He added that the company's sponsorship of the RHS Chelsea Flower Show increased brand awareness and provided the platform to launch its national garden design and installation service.

Holden said:

"With the spread of our business across the public sector and commercial and domestic markets, we are well placed to take advantage of market growth opportunities."

The interim dividend of 4.55p is up 5.8 per cent.


Financial stocks slide, with HBOS also hit by Deutsche downgrade

SCOTTISH companies were yesterday generally caught up in the market turmoil caused by the surprise US employment data, although some managed to keep their heads above water.

One big faller was HBOS, Britain's biggest mortgage bank, which lost ground after Deutsche Bank cut its share-price estimate by 8.2 per cent to 1,010p, saying a "more challenging capital markets environment" would be likely to restrain its private equity gains.

Shares in HBOS dropped 18p - or 2 per cent - to 879p, while RBS also suffered a hefty loss (see main UK report).

Other financial companies continued to suffer following the credit squeeze woes. Standard Life lost 10p to 285.5p, while Aberdeen Asset Management dropped 7p to 168.75p.

BowLeven was another to suffer after Merrill Lynch announced it was selling up to 21.78 million of shares in the explorer for oil and gas in Africa.

BowLeven closed 12p lower at 227p, a fall of 5 per cent.

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Other big percentage included Wolfson Microelectronics, 11p off at 255p, Stagecoach, which dropped 7.75p to 222.75p and Venture Production which fell 17p to 722.5p.

Among the handful that showed a gain was British Energy, up 3p to 468p.


Gambling report due 19 September

THE Gambling Commission is expected to publish its prevalence study looking at problem gambling in the UK on 19 September, gambling industry sources said.

"There will be a presentation to industry bodies on the Tuesday evening before it is released the next day," said one gambling industry source.

The Gambling Commission's long awaited report will look at the prevalence of different types of gambling in Britain, ranging from betting at casinos to online gambling and playing the National Lottery. The study will also measure the biggest areas of addiction and is to provide the baseline for future legislation and policy on the issue.

The spokesman for the Gambling Commission declined to comment.


Michael Page

446.5p -27p

Scotsman says BUY

MICHAEL Page is a recruitment consultancy, specialising in accounting, tax and treasury, banking and financial services, engineering and manufacturing and other white collar areas.

It has an international profile, operating in Europe, the Middle East, Asia Pacific and the Americas.

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A couple of weeks ago the company announced very positive results, somewhat giving the lie to worries about a developing international economic slowdown.

Companies such as Michael Page are much in demand for their expertise, both in knowing the potentially loose teeth in the corporate mouth and in the saving of internal management time in the endless candidate screening.

Michael Page shares have been particularly vulnerable of late, on concerns that the events of the past month or so may lead to a marked slowdown in general economic activity which, in turn, could have an effect on the mobility of executive labour - the essential lubricant of the group's activities.

This looks both nave and harsh. Just as a bull market can be mistaken for brains, so in more challenging periods it is essential to have the most competent people at the helm.

The next 12 months or so may well see some disappointing results as the shortcomings of the incumbent management are exposed by more difficult trading conditions, which may persuade both shareholders and non-executive directors to consider key changes at the boardroom table.

Michael Page looks ideally placed to capitalise on this prospect .

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

DOW JONES 13,196.30 -167.05

US SHARES plunged while bonds surged higher yesterday after the US government reported payrolls in August fell for the first time in four years, rather than rising as had been expected.

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The Dow Jones industrial average was down more than 200 points at one stage.

Investors were unpleasantly surprised by the Labor Department's report that payrolls fell by 4,000 in August, the first decline since August 2003. The unemployment rate held steady at 4.6 per cent as expected.

Wall Street had been awaiting the report as it tried to determine how well the economy was holding up under the weight of a faltering housing market, a rise in mortgage defaults and tightening availability of credit.

To help the situation, analysts expect the Federal Reserve to cut interest rates by a quarter or half point when it meets later this month.

Broker snaps

BHP Billiton

1,435p -38p

Broker says BUY

BHP Billiton was lower yesterday despite an upgrade to "buy" from "hold" at Deutsche Securities on predictions that strong earnings growth would continue. The move came as the broker reviewed both near-term and long-term commodity price assumptions, revising earnings up 4 per cent for 2008 and 11 per cent for 2009. Earlier this week, there was speculation that the company, with Brazil's Vale do Rio Doce, would make a joint bid for Rio Tinto, the world's third-largest miner.


243p +4.25p

Broker says BUY

SOFTWARE firm Sage received more support as UBS lifted the shares to "buy" from "neutral", with price target up to 285p from 265p. The Swiss broker saw good growth opportunities as many US customers planned to upgrade their physician practice management systems as they buy electronic medical record products. It also saw UK and European markets, which account for 56 per cent of Sage's EBIT, remaining healthy.


394.25p -19.25p

Broker says HOLD

SUPPORT services company Carillion slipped back after Citigroup cut the shares to "hold" from "buy" and dropped its price target to 430p from 450p. The broker attributed the downgrade to the recent share price performance and the sector de- rating as well as a lack of upgrades. It also cited an increase in lower-rated construction profits in the sales mix. This week, the group reported a 40 per cent increase in first half profit following the integration of Mowlem.