mm02 is okay

Leaders & Laggards
By Yvette Essen (Filed: 01/01/2005)TELEGRAPH

Who fared best when bears went to ground

If you bought shares last January, well done. With the FTSE 100 up 7.5pc during 2004, the bears have been driven into hiding for the second consecutive year.

As always, a rising market climbs a wall of uncertainty and obstacles this year have come in the form of rises in interest rates. Indeed, there have been some bleak moments, in March and July, when it had seemed that much higher interest rates would be needed to curb our seemingly insatiable appetite to borrow and spend. In June, yields on a five-year government stock rose to a two-year high of 5.2pc, driving the blue-chip index down the following month to 4,287, its worst since the previous October.

The swings in prices have helped the growing army of spread-betters, like Angus Campbell of Fin Spreads. "In the final quarter of the year, the FTSE 100 broke out of a narrow trading range and recovered from what looked at one stage to be another bearish year," is how he puts it.

Independent oil exploration group Cairn Energy, the best-performing blue-chip company, began 2004 in the FTSE 250. After five successful oil wells in northern India on a block bought from Shell, the shares shot from 401p to more than £15 and into the top index. The tracker funds that were obliged to buy at that point have seen a third of their clients' money vanish, as the shares have come back to £10.90.

Corus Group, the next best performer, returned to the FTSE 100. Rising steel prices thanks to Chinese demand reinforced the sensible approach of Philipe Varin, who is developing into a seriously impressive chief executive. Financial information provider Reuters continued its dramatic recovery under chief executive Tom Glocer, another newcomer who is doing a fine job rectifying the mistakes of his predecessor.

Mm02 had been one of the biggest gainers in 2003 on expectations of a quick bid for the former Cellnet arm of BT. There were indeed bid talks, in February with KPN of Holland, but the company has demonstrated that, in the world of mobile telephony, big is not always best. Mm02 has cut debt, almost doubled revenues and announced a maiden dividend. The shares are now above the price being talked about for the bid.

In 2003, Enterprise Inns had become the UK's biggest pub landlord by sinking the 4,000-strong chain of Unique. As the prospect of efficiency gains became clearer, the shares prospered. Atkins dieters' thirst for the low-carbohydrate beer Miller Lite led to a surge in profits at brewer SAB Miller.

Commercial property had a fine year, which was reflected in the 20pc rise in British Land's net asset value in 12 months. The shares caught the mood, rising 53.4pc.

The growing realisation that the long wait for rewards from its world-beating engines might finally be at hand brought in buyers for Rolls-Royce. Capita Group, which runs the London congestion charging scheme, won more contracts as the government's faith in outsourcing was undimmed by experience, helping the company to regain its spot in the FTSE 100 in June and gain 50.5pc in 2004. Tate & Lyle also returned for the first time since 1997, thanks to demand for its Splenda Sucralose sweetener.

High street retailer Next prospered. Its executives, now incentivised by an imaginative (and risky) bet on a rising share price, increased floorspace by some 20pc and continued to steal customers from troubled rival Marks & Spencer. Its shareholders may yet rue the day that the new management refused to discuss Philip Green's extraordinary 400p-a-share offer.

Catering Group Compass was the worst blue-chip performer. September's shock profits warning did the damage. It was blamed on problems with a distributor and a contract to provide school meals at a price which looked impossibly low to outsiders. Drug companies also suffered, as promising treatments ran into problems. There were safety concerns over Glaxo Smithkline's asthma drug Serevent and Astrazeneca's cholesterol-busting treatment Crestor. Rat-catcher Rentokil Initial continued to struggle. Chairman Sir Clive Thompson was exterminated in a boardroom coup in May, accompanied by profits warning. Two months later chief executive James Wilde followed. There's no sign yet of a replacement.

Anglo-US fund manager Amvescap was punished for its role in the US marketing timing scandal. It paid $375m to settle with the US regulators, lost clients and cut its interim dividend.

J Sainsbury's problem was getting the stock on to its shelves. The supermarket crashed into the red for the first time since it was founded in 1869, sounding four profits warnings. Chief executive Sir Peter Davis, whose fault it was, left in disgrace, clutching a multi-million pound payoff.

Broadcaster BSkyB faced tough competition from digital service Freeview and investor concern over chief executive James Murdoch's plans to increase marketing spend. Persuading millions more to switch to Sky is proving a hard task.

The dozen or so changes to the index included the arrival of Chilean copper miner Antofagasta for the first time, and the departure of Abbey National and Safeway after being taken over.

Who fared best when bears went to ground | Late rally for the second liners



Late rally for the second liners

It really was a year of two halves for the 250 stocks just below the FTSE 100 premier league. Having done nothing much in the first seven months, the index took flight and rose almost without a break by almost 20pc. Even the TechMark 100 rose 17.9pc, demonstrating just how short investors' memories are nowadays.

Not all the rises owed much to high technology. Burren Energy, which floated at 130p in December 2003, at one point hit 483p following a string of successful drilling results in its Congo oilfields. Paladin Resources anounced plans to more than double oil production by 2008 while Tullow Oil spent more than $1 billion on snapping up gas fields, hoping to take advantage of rising UK gas prices.

Topps Tiles demonstrated that a well-run niche retailer can always make good money if its formula chimes with shoppers. Our love affair with our homes continued unabated, although the rise in SIG, the old Sheffield Insulation, owed more to ever more absurd building regulations than any intention to prettify the bathroom. Another niche retailer posted the year's biggest rise. The young executives from Asos, a contraction of As Seen On Screen, must spend most of their time glued to the telly or going to the movies, in order to track down cut-price replicas of whatever the stars are wearing. This Aim-listed internet retailer that came to market in 2001 had a rocky couple of years but has taken off almost vertically, from a near-terminal 3¼p in mid-2003 to 78½p last night. Its started the year at 5.62p.

As if to show that online retailing is still a tough place to make money, Lastminute.com missed its forecasts and found itself down among the losers. The departure of that ubiquitous chairman, Allan Leighton, didn't help sentiment.

Telecoms, too, is a hard place to make money, as Colt Telecom showed. Chief executive Jean-Yves Charlier's strategic review failed to impress and, without the backing of Fidelity, its controlling shareholder, Colt would be struggling. Avis Europe shares were also driven lower as the car rental market also proved too competitive.

Big Food Group, the owner of Iceland frozen foods chains, struggled to find a role before falling into the arms of Icelandic retailer Baugur.

IT hardware wholesaler Computacentre short-circuited after taking a hit from renegotiating a deal with biggest supplier Hewlett-Packard. Troubled rail and schools contractor Jarvis suffered from a cash crunch and fell 85.5pc. Furniture store Courts, which started trading in 1850, found that there are only so many self-inflicted wounds a company can stand without collapsing. It fell 95.6pc over the year.