Weekly stock market report

Defence contractor BAE Systems, the former British Aerospace, has warned of ‘cost and schedule’ issues relating to its Nimrod early warning aircraft project and Astute attack submarines. That’s company-speak for ‘behind schedule and over budget.’ The news wiped out a quarter of the company’s value and is particularly disappointing given the long history of over-runs and problems with the Nimrod upgrade. Talks with the Ministry of Defence should be concluded by February.

The current cold snap could turn into a bitter winter for the UK’s retailers. British Retail Consortium figures show shop sales growing at the slowest rate for two years, and further data out next week is expected to confirm that trend. However, those holding retail shares shouldn’t be too despondent. Falling sales don’t always equate to falling share prices, because booming sales often lead to over-investment and too much stock, which depresses margins and therefore profits.

And underperforming retailers are being bought up by entrepreneurs. House of Fraser has turned down an 85p a share approach from Scottish retail millionaire Tom Hunter, although the two sides have met and an agreed bid may emerge after Christmas. If you own the shares, sit tight. Meanwhile, a resurgent Marks & Spencer has poached Selfridges’ Italian chief executive Vittorio Radice, describing him as ‘one of the most able retailers of his generation’. He’d better be, given the £1.2m ‘golden hello’ he’ll be getting on top of his £425,000 base salary. He’ll be replaced at Selfridges by Peter Williams, currently finance director.

Cable & Wireless’s troubles are deepening. The company has just been kicked out of the blue-chip index after another tumble in its share price. The trigger was news that it must set aside £1.5bn to cover possible tax liabilities on the sale of One2One to Deutsche Telekom. The contingency is unlikely to be needed, but the City is unhappy at the poor disclosure and the fact that chief executive Graham Wallace refuses to quit.

Private shareholders in Railtrack have collected an amazing £1.6m to fund legal action against the government. Campaigners say they were swindled by the government and want another £2-3 a share on top of the 260p they have been offered. The group’s website is www.rpsag.org.uk. Institutions appear unwilling to get involved.

Amey, the troubled PFI and support services group, said its full-year profits will be just £35m, and even that total will be wiped out by a raft of exceptional charges and writedowns. The company had to borrow its contribution to the London Underground PPP equity from its partners in the venture, and debt is set to soar. Some think the company will be taken over, but we think bankruptcy is equally likely and private investors should sell out.