The company, which is Europe’s largest oil services group, said 2013 profits at its onshore business would fall by 80pc, while earnings from its offshore operations are expected to drop by 70pc. To make matters worse, Italy’s market regulator said it would investigate a share placement in Saipem stock ahead of the profit warning earlier this week.
In the wake of the unwelcome surprise from the Italian group, traders sold off shares in Saipem’s London-listed competitors Petrofac dropped 122p to £16.15, John Wood Group fell 18 to 805½p and Amec closed 23p lower at £10.76. Saipem itself took a beating in the Italian stock market and the shares sank 34pc.
But while investors fled, some analysts who run the rule over the British companies were less alarmed. Deutsche Bank (Xetra: 514000 - news) highlighted that Petrofac has already said it expects to see growth in 2013. The company may be more specific at its full-year results at the end of February and guide towards double-digit growth, the broker added.
Overall, disappointing US GDP figures, showing a surprise contraction in the economy during the final three months of 2012, served to bring the FTSE 100 ’s recent strong run to end. Having risen for five consecutive trading days, the blue-chip index shed 16.08 points to 6,323.11. Traders said the fall in US defence spending, highlighted by today’s figures, dragged BAE Systems (LSE: BA.L - news) down 7.3 to 341p.
A spate of disappointing corporate updates also held the benchmark index back. Copper miner Antofagasta (Other OTC: ANFGY - news) tumbled 106p to £11.69, the biggest faller among the blue-chips, after missing market estimates with its output guidance for the metal this year. As a result, analysts at Bank of America (Other OTC: BACYL - news) Merrill Lynch cut their recommendation on the miner to “neutral” from “buy”, adding that Antofagasta’s copper forecast for this year is 6pc below their estimate.
Declining third quarter profits saw chemicals group and platinum refiner Johnson Matthey fall 102p to £23.06, while Davidoff cigarette maker Imperial Tobacco declined 105p to £23.61 on news the illicit market for cigarettes would hurt first-half profits. The negative sentiment towards Imperial weighed on British American Tobacco (LSE: BATS.L - news) , which closed 26p lower at £32.75½.
Among the FTSE 100 (FTSE: ^FTSE - news) risers was WPP , lifted by the prospect of cash returns. The advertising giant spent $540m (£342m) on its takeover of digital agency AKQA last year, but is unlikely to make any blockbuster acquisitions in 2013, according to scribblers at Jefferies. That would allow the company to boost its dividend, they said.
“Historically, acquisitions have been a significant consumer of cash for WPP and while we still expect the group to buy businesses, we see 2012’s transformational M&A as complete and believe the focus in 2013 shifts to returning cash to shareholders,” the Jefferies analysts argued.
“Management has indicated increasing the dividend is the top priority for use of cash flows in the near term with the payout ratio to be lifted from 36pc to 40pc over the next three years.”
On the FTSE 250 (FTSE: ^FTMC - news) down 61.02 points at 13,046.54 chip designer Imagination Technologies (Other OTC: IGNMF - news) was bolstered by an upgrade to “overweight” from “equal weight” at Morgan Stanley (Xetra: 885836 - news) . The shares topped the mid-cap index with a gain of 56.4 or 12.8pc to 497.9p.
Analysts at the US bank argued that Imagination was “well positioned” to capitalise on smartphone growth in emerging markets, because of its exposure to China via a license with MediaTek, a big player in the country’s smartphone market. They also argued that equity investors were not pricing in the possibility that Imagination’s technology may be used in Samsung’s Galaxy S4 device.
FTSE 100-listed ARM Holdings (LSE: ARM.L - news) , Imagination’s rival, put on 4 to 873½p, with the bullish message from Amazon late on Tuesday on the growth of electronic books helping to lift the shares its technology is used in the Kindle eBook reader. ARM also shrugged-off a downgrade to “hold” from “buy” at Numis.
Back with the mid-cappers, traders chased life insurer Phoenix (LSE: PHNX.L - news) up 39 to 630p, despite the company announcing a discounted share placing to raise £250m hedge fund Och-Ziff is taking a 9.2pc stake in Phoenix as a result. The insurer will use the money to help cut debt, and also pleased investors by revealing it plans to lift its final dividend for 2012 by 27pc.
Oriel Securities analyst Marcus Barnard said the developments at Phoenix would calm some of the market’s fears around the company’s debt levels and repayment schedule.
Elsewhere, International Mining & Infrastructure Corporation , which is understood to be carrying out due diligence on takeover target Afferro Mining , upped its stake in the iron ore group to 5pc.
Afferro said earlier this month that it is in talks with a number of potential bidders and IMIC has already made an initial approach. Traders are still waiting for news of a firm offer, and Afferro yesterday dipped 1 to 83½p, while IMIC slipped ½ to 29p.