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Oct. 21, 2015, 12:10 p.m. EDT

U.K. stocks end slightly higher; Pearson suffers biggest drop ever

Merlin Entertainments, ARM help keep FTSE 100 in the black

By Carla Mozee and Victor Reklaitis, MarketWatch


Shutterstock/Maria Maarbes
Merlin Entertainments is aiming to open a Legoland Park in China.

U.K. stocks closed slightly higher Wednesday, as Pearson PLC’s 16% plunge was offset by gains by ARM Holdings PLC, Merlin Entertainments PLC and other blue chips.

The FTSE 100 (FTSE:UK:UKX)  closed up less than 0.1% at 6,348.42, snapping a two-day losing streak.

The worst performing shares were those of Pearson PLC (LON:UK:PSON) . They closed down 16% for their biggest percentage drop ever after the educational publisher cut its full-year guidance, in part following the disposal of PowerSchool, FT Group and The Economist Group. Pearson also warned of challenging market conditions.

“Since the sale of [the Financial Times], Pearson generates almost all of its revenues from its education business,” said Ipek Ozkardeskaya, market analyst at London Capital Group, in a note. “With so little diversification, investors are now questioning whether the decision to sell FT was a good idea and whether the cyclical character of the education business could further damage the company’s value.”

/zigman2/quotes/204954587/delayed PSON 788.60, -4.00, -0.50%

But topping the blue-chip index was ARM Holdings PLC , with shares of the Apple Inc. (NAS:AAPL)  supplier finishing up 6.5%. The chip designer reported a rise in third-quarter revenue and profit, boosted by demand for a new chip used in smartphones and digital TVs.

Merlin Entertainments PLC closed 4.7% higher for the FTSE 100’s second-biggest gain. The operator of theme parks and China Media Capital said they’re setting up a joint venture to develop a Legoland Park in the Shanghai area and explore other opportunities to develop visitor attractions in China.

Other movers: Sky PLC  shares gained 2.5% as the broadcaster reported a better-than-expected 10% rise in quarterly operating profit before exceptional items, a closely watched measurement of Sky’s main business performance.

Reckitt Benckiser Group PLC  also rose 2.5% after the maker of Durex condoms, Clearasil acne treatment and other consumer products raised its full-year like-for-like revenue forecast.

Home Retail Group PLC (LON:UK:HOME) dropped the most on the midcap FTSE 250 (FTSE:UK:MCX)  index. Shares were knocked down 16% after the owner of electronics seller Argos and home-improvement retailer Homebase warned it expects full-year profit to be slightly below the bottom end of market expectations.

“It’s fairly unprecedented for a retailer to warn on profits before the holiday season which can make or break a year,” said Jasper Lawler, market analyst at CMC Markets, in a note. “The profit warning demonstrates a clear lack of confidence in the strategy for Argos and Homebase over ‘Black Friday’.

Back within the FTSE 100, outsourcing services provider Bunzl PLC (LON:UK:BNZL)  said third-quarter revenue rose 4%, at constant exchange rates. Underlying revenue was at the same level as last year and in line with the previous three months. Its shares finished down 2.5%.

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