U.K. Stocks Decline, Led by Vodafone, Barclays, Punch Taverns

By Sarah Thompson

Sept. 3 (Bloomberg) -- U.K. stocks retreated, led by Vodafone Group Plc after Credit Suisse Group AG said it expects the world's largest mobile-phone company to miss guidance.

Barclays Plc led banks lower after Royal Bank of Scotland Group Plc suggested investors sell the shares, saying the U.K.'s third-biggest bank may need to raise as much as 7.5 billion pounds ($13.3 billion).

Punch Taverns Plc declined after the U.K.'s largest pub owner reported declining revenue and said it will suspend its dividend to conserve cash as Britons stay away from pubs. Enterprise Inns Plc also fell.

The FTSE 100 Index dropped 126.9, or 2.3 percent, to 5,493.8 at 12:38 p.m. in London. The FTSE All-Share Index declined 2.2 percent and Ireland's ISEQ Index retreated 2.4 percent.

Vodafone slid 2.2 percent to 141.1 pence after Credit Suisse cut its recommendation to ``neutral'' from ``outperform.''

``We believe Vodafone is likely to slightly miss its new revenue guidance on an underlying basis,'' the analysts wrote in a research note dated today, ``and could slightly miss the lower end of its earnings before interest and tax guidance.''

``Vodafone Spain could shrink 4-5 percent year-on-year, worse than consensus,'' they added. ``We could see more economic pressure on mobile demand beyond Spain, particularly in the U.K. and Ireland.''

Barclays lost 4.1 percent to 349 pence. While the London- based bank's so-called tangible common equity is in line with U.K. banks it's low compared with rival securities firms, London-based RBS analyst Ian Smillie wrote in a research note to clients today.

Punch Taverns

``A deeply ingrained performance-led culture facilitated the generation of 8.3 billion pounds of economic profit over the last four years,'' Smillie wrote. ``It has, however, also led Barclays to a higher level of balance-sheet gearing than peers, an uncomfortable position in the current environment of financial system de-leveraging and heightened external scrutiny of banks' balance sheets.''

HBOS Plc, the U.K.'s biggest mortgage bank, slid 2.9 percent to 301 pence.

Punch slumped 18 percent to 261 pence. Full-year sales for pubs open at least 12 months fell 3.3 percent at outlets the company runs itself, while revenue from pubs leased to tenant managers slid 3.4 percent on that basis in the 53 weeks ended Aug. 23, Burton-Upon-Trent, England-based Punch said today. Its shares slid as much as 14 percent.

Punch, which said profit will be ``in line'' with analysts' estimates for the year, will skip this year's dividend to make sure it's able to repay convertible debt due in 2010.

Enterprise Inns, Britain's second-biggest pub landlord, plunged 14 percent to 263 pence.

The following stocks also rose or fell in the U.K. market. Stock symbols are in parentheses.

Cable & Wireless Plc (CW/ LN) lost 2.8 pence, or 1.6 percent, to 176.3. Prudential Plc, the U.K.'s biggest insurer by market value, will take responsibility for more than 1 billion pounds of pension assets from the U.K.'s second-biggest phone company.

DSG International Plc (DSGI LN) fell 0.25 pence, or 0.5 percent, to 52.5. The U.K.'s largest consumer electronics retailer said revenue fell 7 percent in the first 16 weeks because of slower U.K. and southern European sales.

DS Smith Plc (SMDS LN) slid 6 pence, or 4.4 percent, to 129.5. The owner of the Spicers office products brand said first-quarter business is ``in line'' with forecasts as improving results from continental Europe offset slowing demand in the U.K.

GlaxoSmithKline Plc (GSK LN) slid 30.5 pence, or 2.3 percent, to 1,296.5. Europe's biggest drugmaker sued Lupin Ltd., claiming the Indian company's plan to sell a generic version of the AIDS drug Combivir infringes a U.S. patent.

Spirent Plc (SPT LN) dropped 9.75 pence, or 12 percent, to 73. UBS AG and Royal Bank of Scotland Group Plc are selling 75 million shares in Spirent on behalf of Sherborne Investors.

Unilever (ULVR LN) dropped 42 pence, or 2.7 percent, to 1,500 after JPMorgan Cazenove Ltd. lowered the world's second- largest consumer-products company to ``underperform'' from ``outperform.''

Wolseley Plc (WOS LN) decreased 19.75 pence, or 4.1 percent, to 465.75. The world's biggest distributor of plumbing and heating gear was downgraded by Deutsche Bank AG, which said the stock has gained too much on speculation that a U.S. unit may be sold.

To contact the reporter on this story: Sarah Thompson in London at sthompson17@bloomberg.net.