Confectionery company Cadbury Schweppes delivered one of the worst performances in a becalmed FTSE 100 yesterday as investors waited nervously for tomorrow's strategy review from rival Coca-Cola.
Although best known for its chocolate, Cadbury generates 40% of its annual earnings before interest tax and amortisation (EBIT) from its US beverage operations, whose brands include Dr Pepper, 7-UP and Snapple.
Tomorrow, Neville Isdell, the new chief executive of Coke, will announce his plans to put the company back on track and Cadbury watchers are worried he will increase marketing spending significantly, especially in the US where Coke has been losing market share to Cadbury and Pepsi.
John Parker at Deutsche Bank reckons Mr Isdell will increase spending by between $350-$500m (£190m-£270m) in 2005, of which about 40% will probably be spent in North America. He also believes Mr Isdell could announce plans to merge with Coca-Cola Enterprises (CCE), the bottling company 40% owned by Coke. This would be particularly bad news for Cadbury as about 30% of Dr Pepper's sales are made through CCE.
"It would not be a comfortable situation for Cadbury to have its main competitor acting as a bottler for its main brand," Mr Parker said, reiterating his sell rating on Cadbury Schweppes.
With traders also noting that the problems in the Ivory Coast are pushing up cocoa prices, Cadbury closed 6.25p lower at 446.75p, the fifth biggest faller in the FTSE 100.
Meanwhile, leading shares went precisely nowhere as investors decided to sit on their hands ahead of results from Cisco Systems, which were announced late last night, and today's interest rate decision from the US Federal Reserve.
The final scores showed the FTSE 100 up 1.1 point at 4717.1, with mining stocks the standout feature.
Xstrata rose 13.5p to 832.5p, while BHP Billiton gained 8.5p to 569p, and Anglo-American added 17p to £12.30, as further oil price weakness helped to sooth concerns about a slowdown in demand from China.
Elsewhere, it was also quiet. The FTSE 250 index eased 3 points to 6471.4, while the FTSE Small Cap index improved 1.4 points to 2647.4. In the bond market, the benchmark 10-year gilt closed around 101.980, yielding 4.745%. Market turnover was light, with 2.3bn shares changing hands
Support services company Capita took the FTSE 100's wooden spoon. Its shares drifted 6.5p to 362p, hit by news that Capgemini had sold its 14.6% stake in Vertex to United Utilities, off 2.5p to 570.5p, for £47.5m. Vertex competes with Capita in local authority and private sector outsourcing. Goldman Sachs believes the price paid for the Capgem stake shows that Capita shares are currently overvalued. It has a fair value target for Capita of 300p.
Rumours of tough trading left Boots 9p lower at 658p, even though it acquired 400,000 shares for cancellation.
Luminar , Britain's biggest nightclub operator, made a rare appearance on the FTSE 250 leaderboard. Its shares gained 11.75p to 483.75p after broker Panmure took the bold step of upgrading ahead of Monday's half-year figures. Lifting its rating on the stock to "buy" from "neutral", analyst Douglas Jack, said he expected next week's results to shed further light on the company's rebranding strategy and attempts to sell its non-core clubs.
Heading in the other direction was Burren Energy, the oil exploration group focused on the Congo. Its shares fell 19p to 416p as traders picked up on the fact that 17% shareholder Tacoma will be freed from a lock-in period on De cember 11. Burren's broker Seymour Pierce is said to be readying itself to place stock if Tacoma decides to sell. London Stock Exchange eased 3.5p to 378.5 despite news that arch rival Deutsche Börse has no plans to buy back shares while there are other ways to spend its cash. Speaking after the publication of third quarter figures yesterday, Mathias Hlubek, DB's finance director, said for the next few months the company had decided to "accumulate cash" as it assessed the "quality" of current investment opportunities.
Elsewhere, grocer Somerfield firmed 1.25p to 136.75p on news that Icelandic investment group Baugur had increased its holding from 3.6% to 5.55%.
Among the small caps, Superscape, which develops 3D games for mobile phones, eased 2.5p to 58p after US rival Jamdat Mobile fell 30% after third quarter figures disappointed. Traders expect any weakness in the Superscape price to be short-lived as the company is on course to gain entry to the FTSE All-Share index at next month's review.
Cider maker Merrydown firmed 0.5p to 102.5p on talk that it could be a takeover target for Irish drinks company C&C Group, up 0.07 cents to €2.65. Uniq, the chilled foods company which reported half-year figures, held steady at 200p after rumoured private equity bidder Duke Street Capital declared the purchase of a further 1m shares at 200p, taking its holding to 6.6%.
On Aim, Neteller, the online money transfer provider, continued to claw back the losses that followed Friday's placing of 30.6m shares at 280p on behalf of two founders. Market gossips believe an upbeat trading statement and a contract win could be announced soon.
Cambridge Silcon Radio was the biggest FTSE 250 faller yesterday after the wireless chip designer issued a gloomy outlook statement and concerns surfaced that its venture capital backers are poised to dump stock.
After announcing a 24% rise in third quarter pre-tax profits to $18.3m (£9.9m) on sales up 32% to $77.7m, CSR unsettled investors by predicting sales growth in the fourth quarter would be less than 10%. It also confirmed lock-ins covering the remaining 24% of the firm owned by its original backers ended on October 31 and yesterday's result announcement is the final barrier to their departure. Management, who own about 12%, are still locked in until about February next year.
CSR, which came to the market last February at 200p, fell 28.5p to 320p.
