TalkTalk boosted as bears cut their losses

A short squeeze sent TalkTalk to a record high on Thursday as bears on the internet provider cut their losses.

Talktalk boosted long-term growth targets with its full-year results, sending the shares 5.8 per cent higher to 384.1p.

It said revenue should grow 5 per cent a year to 2017, from 4 per cent previously, while still maintaining a 25 per cent profit margin.

Nearly 15 per cent of TalkTalk's shares are on loan to short sellers, up from around 2 per cent a year ago, with Odey Asset Management and Ricky Sandler's Eminence Capital among the hedge funds to disclose bets against the stock.

Over the same period, Talktalk shares have risen by 35 per cent.

"We see TalkTalk as offering a strong organic growth story with accelerating revenue growth and expanding ebitda [earnings before interest, taxes, depreciation and amortisation] margins," said Morgan Stanley, which repeated "overweight" advice.

"As well as this, we believe TalkTalk has strategic value given UK telecoms companies are moving into selling quad-play products."

A subdued wider market meant the FTSE 100 ended 0.3 per cent higher, up 23.41 points, at 6,973.04.

The biggest headwind came from stocks trading without dividend rights such as Kingfisher, off 2.3 per cent to 352.6p, and Royal Dutch Shell, whose B shares slipped 1.3 per cent to £20.55.

GlaxoSmithKline, another stock to trade ex dividend, was 1.4 per cent lower at £13.31.

UBS cut Glaxo off its "buy" list, saying long-term guidance given at a recent investor day suggested a deterioration in core profitability "to a level that may barely cover the cost of capital".

ViiV Healthcare, Glaxo's HIV and Aids venture, and its Triumeq shingles vaccine are underappreciated assets that can deliver substantial sales growth, said UBS.

But earnings are still being held back by issues elsewhere, particularly in the legacy pharmaceuticals business where the revised strategy is to deliver volumes not innovation, it said.

SABMiller edged 0.7 per cent higher at £36 as earnings forecast upgrades followed Wednesday's results, which showed quicker than expected progress with cost cuts.

The persistent takeover speculation around SAB continued to divide opinion, however.

"Our scepticism around an AB Inbev acquisition of SAB is unchanged," Nomura told clients. "ABI has historically been a value investor, buying undermanaged assets cheaply and running them better. SABMiller does not appear to fit these criteria - it is a well-run asset with a high valuation."

Restaurant Group faded 4.4 per cent to 688p after reporting a slow start to 2015. The Garfunkel's owner said like-for-like sales growth was 2 per cent for the first quarter, slowing from 2.8 per cent in 2014.

Telecity slipped 3.2 per cent to £10.80 after US peer Digital Realty was bounced into saying it does not intend to make takeover offer.

Digital Reality executive John Sarkis was quoted a day earlier as saying "we are seriously looking at" Telecity, which last week received a bid from Equinix.

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