UK small caps open lower; Network Data hard-hit by FY warning

07.22.08, 5:34 AM ET

LONDON (Thomson Financial) - UK small caps were lower in early trade, dragged down by the wider market, with Network Data hard-hit on the back of a full-year results warning.

The FTSE Small Cap index was 7.40 points shy at 2,723.90 by 9.08 am, while the FTSE 100 was 71.40 off at 5,332.90.

Network Data was a major casualty early on, plunging 42.86 percent -- or 6 pence to 8 pence -- after the company warned full-year results are likely to be below market expectations.

Its trio of businesses are reliant on the volume of transactions in the mortgage and property markets and have consequently found the first six months of 2008 to be a challenging environment.

'The declining transaction levels have been well-chronicled in the national business press and the results for the six-month period will reflect these market conditions,' said the company in a trading update.

Hard on Network Data's heels was Myhome International, whose shares slid 2.75 pence to 5.125 pence as the domestic cleaning franchise warned it is in breach of some of its banking facility covenants due to a weak economic climate and reduced trading expectations.

However, it is in 'constructive' talks with Lloyds TSB to restructure its 8 million-pound bank line.

A number of options are being explored to reduce the facility, including an equity issue at 'a realistic discount' to the current share price. The board is in preliminary discussions with some of its larger shareholders about the possibility of participating in such an equity fundraising.

Meanwhile, Myhome's Q3 results were in line with the board expectations.

Punters also exited Supporta, 6-1/2 pence lower at 22-1/2 pence, after Romac Investments terminated its offer talks and said it does not currently intend to make an offer for the outsourced services provider.

Last month, Supporta, rejected Romac's proposal saying it undervalued the company. Romac owns 28.2 percent of Supporta through its Gingko Investments unit.

Still on the downside, Nestor Healthcare slid 4-1/4 pence to 43-3/4 pence after the company confirmed it received indications of interest for certain parts of its business, but that no interest has been expressed in the company as a whole.

Talks are underway, but there can be no guarantee that any agreement will be reached.

And shares in WIN lost 8 pence, at 106 pence, after the provider of interactive mobile entertainment and information services warned that, despite results for the second half of 2008 being substantially ahead of the first, management expectations are below current market forecasts for the full-year overall.

Aim-listed Canadian miner Kirkland Lake Gold dropped 22-1/2 pence to 412-1/2 pence, with news of reduced gold production outweighing a narrowing of full-year losses.

On the upside, biotechnology company Summit Corp climbed 4 pence to 59-1/2 pence following news of a worldwide licensing agreement with BioMarin Pharmaceutical Inc. for the company's pre-clinical candidate SMT C1100 to treat the fatal genetic disorder Duchenne muscular dystrophy.

Under the deal -- worth $143 million -- biotechnology company Summit said it will receive an upfront payment of $7 million in the form of an equity investment in Summit shares, along with future development and regulatory milestones of up to $51 million, tiered royalties in the low teens tied to sales and product sales milestones.

Landsbanki's valuation of 135 pence a share represents around 127 percent potential upside to the current share price and underpins the broker's 'buy' recommendation for the stock.

Again on the upside, Sinclair Pharma ticked up 2-3/4 pence to 35-1/2 pence as the international specialty pharma company said it expects sales for 2008 to be 30.2 million pounds, up 30 pct on last year, and that it would achieve its first profitable full year since its IPO.

The company achieved 2.5 million profits at EBITDA level in the second half, before exceptional net credits.

In response, Lansbanki firmly reiterated its 'buy' recommendation on the stock. The shares are trading well below the broker's 152 pence fair value on the business. Moreover, with further clarity expected on Impede/Decapinol in the near term and the good financial performance for the year indicating the benefit of the business' focus on its key disease and geographic areas, Landsbanki expects the company to start to deliver attractive profit growth from its positive operational gearing in F2009.

Elsewhere, buyers came for Velosi, 5-1/2 pence higher at 92-1/2 pence, after the oil equipment and services company said it continued to experience strong revenue growth in the first half and that trading for the year to end-December is in line with market expectations.

With recently won contracts commencing in the coming months, it expects profits to be more heavily weighted to the second half of the current year.

smartFOCUS Group, too, attracted support and hardened 1/2 of a penny to 10 pence as the international marketing software group was selected to provide Chelsea Football Club with its Intelligent Marketing Software and services.

Still with the risers, Lithic Metals & Energy edged up 1/4 of a penny to 5 pence as the company successfully negotiated with BHP Billiton for 100 percent unencumbered ownership of the Mavita licences, Mozambique.

Finally, Fortune Oil moved up 0.60 of a penny to 10 pence following government approval for the company's Tianjin Tianhui Natural Gas joint venture to construct a high capacity gas pipeline from Xiao-Bian-Zhuang to the Jinghai Industrial Park in Tianjin.

tf.TFN-Europe_newsdesk@thomsonreuters.com

fjb/lam

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved.