Intelligent Investor UK free edition: Prepare for Dec 4, 2010
• Stock recommendations and price targets from top brokerage firms• Analysis and Views on U.K. Personal Finances and ECB Liquidity Program • U.K. New Car Registrations (November)• Alternative Networks, Treatt final results• Workplace Systems International, Plastics Capital, Sirius Real Estate, Tricorn Group interim resultsBreaking stories • U.K. Services PMI slows in November • Rio Tinto, Chinalco form JV• Qantas claims damages from Rolls-Royce over faults• Greene King confident on full year performance• Premier Foods in talks for sale of unit • Berkeley profits rise on demand• BAE keen on its unit sale • Novae returns cash to its shareholdersand much more inside.....
Content
03 December 2010
The Intelligent Investor U.K.
The Economic Monitor Series. Free Edition.
INSIDE THE REPORT
MARKETS AT A GLANCE
Stock recommendations and price targets from top brokerage firms Analysis and views on Britons personal finances and ECB liquidity program Economic Indicator Watch along with Graphs List of companies earnings which hit and miss the analysts’ expectations Important Events Scheduled on December 06
Britain's top shares were almost flat approaching midday, a fall among financials after recent gains offsetting strength in precious metals miners ahead of jobs data from the United States. The FTSE 100 was down 22.24 points, or 0.39 percent at 5,745.32. In the cash market, the yield on ten-year gilts was almost 2 basis points lower at 3.395. The spread against Bunds tightened to around 55 basis points. Sterling was up 0.5 percent against the dollar to $1.5691, keeping well above a two-month low of $1.5485 hit on Tuesday. Oil fell from two-year highs after closely watched U.S. jobs data missed expectations, while North Sea Brent crude futures held above $90 due to the extreme cold weather covering much of Europe. ICE Brent crude futures were trading at $90.61 a barrel, after briefly touching a fresh two-year high of $91.13 earlier today. Gold jumped above $1,400 an ounce to a three-week high, after U.S. jobs data disappointed the markets, knocking the dollar index down 1 percent and dampening expectations for a self-sustaining recovery. Spot gold rose to a high of $1,407.35 an ounce and was bid at $1,402.60 an ounce at 1510 GMT, against $1,384.75 late in New York on Thursday.
Economic Events & Indicators
U.K. New Car Registrations (November)
Corporate Events
Alternative Networks, Treatt final results Workplace Systems International, Plastics Capital, Sirius Real Estate, Tricorn Group interim results
STOCK INDICES
INDEX FTSE 100* FTSE Tech Mark 100* FTSE Eurofirst 300* LAST 5745.32 1944.13 1105.52 6947.72 3750.55 271.19 CHNG -22.24 -7.43 -0.66 -9.89 3.51 -0.42 % CHNG -0.39 -0.38 -0.06 -0.14 0.09 -0.15
Breaking News
U.K. Services PMI slows in November Rio Tinto, Chinalco form JV Qantas claims damages from Rolls-Royce over faults Greene King confident on full year performance Premier Foods in talks for sale of unit Berkeley profits rise on demand BAE keen on its unit sale Novae returns cash to its shareholders
DAX* CAC 40* Stoxx Europe 600 * CLOSING VALUES
CURRENCIES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) Japanese Yen (USD/JPY) LAST 1.3372 1.5715 82.71 PRIOR 1.3224 1.5599 83.89
All prices are at 11:37 AM EST
FUTURES
LAST Crude Oil Natural Gas (Jan) Gold, (Feb) Copper (Mar) 88.1 4.309 1407.2 398 CHANGE 0.1 -0.034 17.9 0.1
All prices are at 11:26 AM EST
The Intelligent Investor - U.K.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/COMPANY
Collins Stewart Amlin Lancashire Holdings Novae Holdings Investec Abcam Halma SThree Numis Aberdeen Asset Management Ashmore Berkeley BlueBay Greene King Hansard Henderson Jupiter Man Group KBC Peel Hunt Abcam Canaccord Genuity Brewin Dolphin Oriel Securities Brewin Dolphin S&P Equity Research Rio Tinto Seymour Pierce Burberry Group JP Morgan Chemring UBS DS Smith Kingfisher Mondi Sage Panmure Greene King Goldman Sachs Imagination Technologies Whitbread Millennium & Copthorne Recommends price target of 515p Raises price target to 2200p from 1750p Raises price target to 682P from 560p Buy Buy Buy 377p 1791p 562p Raises price target to 486p from 456p Hold 460p Downgrades to neutral rating Raises price target to 285p from 270p Upgrades to buy rating Raises price target to 265p from260p Neutral Buy Buy Sell 200.70p 254.90p 498p 289p Recommends price target of 3450p Overweight 2959p Recommends price target of 1200p Buy 1099p Raises price target to 5000p from 4500p Strong Buy 4415p Raises to add from hold 155p Raises target price to 216p from 206p Buy 155p Cuts to hold from buy Hold 390p Cuts to hold from add Raises to add from hold Cuts to hold from add Cuts to hold from add Raises target price to 525p from 500p Raises to buy from add Raises to hold from reduce Cuts to hold from add Cuts to reduce from hold Hold Add Hold Hold Add Buy Hold Hold Reduce 195p 364.30 840p 484p 460p 165.50p 125.80p 302.10p 288.70p Cuts to hold from buy Raises price target to 360p from 340p Raises price target to 410p from 375p Hold Hold Buy 390p 340.80p 310p Raises to hold from sell Cuts to hold from buy Raises to buy from hold Hold Hold Buy 390.30p 620p 330p
ACTIONS
RATING
LAST CLOSING
Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before taking any investment decisions.
DAILY EARNINGS HITS & MISSES AS ON 03 DEC, 2010
COMPANY Greene King The Berkeley Group Holdings Pursuit Holdings PERIOD H1 H1 A CURRENCY GBP GBP GBP EPS EST 23.9 31 -0.23 EPS ACT 25.1 32.8 -DIFFERENCE EPS 1.2 1.8 -REV EST (mln) --0.36 REV ACT (mln) --0.13 DIFFERENCE REV (mln) ---0.23
The Intelligent Investor - U.K.
ANALYSIS AND VIEWS
One-third of Britons think personal finances will worsen next year
By Palash R. Ghosh, IBTimes
Almost one-third (30 percent) of British people think their financial situation will worsen over the next six months, a 7 percent increase from the prior quarter, according to a quarterly survey by R3, the UK insolvency trade body. The number of people who think their financial prospects will improve has dropped from 35 percent to only 22 percent. Indeed, according to CreditAction, a British education charity, said that total personal debt at the end of October 2010 stood at 1.452-trillion pounds sterling, adding that UK individuals owe more than what the whole country produces in a year. The personal debt figure has remained above the 1.4-trillion pound figure since December 2007. (By comparison, total personal debt amounted to about 400-million pounds at the end of 1993). Or to put it another way, the average UK adult now owes about 29,833 pounds (including mortgages), which is about 126 percent of average annual earnings. Moreover, average household debt in the UK is now 57,624 pounds (including mortgages). R3’s survey also indicates that the number of people worried about their current debt levels has remained steady, with almost four in ten (39 percent) expressing concern. Regionally, people in the West Midlands are most likely to worry, with half of those surveyed saying they are worried about their debts. In London, four in ten are concerned. Credit card debts, R3 explained, continue to dominate the concerns of those who are worried about their debts. Of those concerned about their debts, over a quarter (28 percent) of people are concerned about how far they are into their overdraft. Concern about mortgage repayments has increased by 4 percent -from 19 percent to 23 percent -- since the last survey. Since we last carried out the survey, the government has issued the Comprehensive Spending Review that announced job cuts and welfare cuts, so it is unsurprising that fewer people are feeling optimistic about their financial outlook.” “In many cases of personal insolvency the contributory factor is a sudden change in circumstance, such as losing a source of income, which makes repaying outstanding debts difficult. With personal debt hitting record highs and job cuts looming, many people will be feeling vulnerable.” R3’s president, Steven Law. “I see many people who are concerned about their credit card debts as, worryingly, they rely on them for day-to-day purchases.” “Unfortunately, I fear that the number of people worrying about their levels of credit card debt is set to grow.” “The spike in the number of people worrying about their mortgage repayments “may be due to the fact that, typically, the value of a mortgage repayment tends to be higher than the monthly repayment on a credit card. The higher value of this debt may make a mortgage repayment seem more difficult to pay each month. Many may be concerned that their repayments will increase when
ANALYSIS AND VIEWS
ECB extends liquidity program into 2011; interest rates unchanged
By Amulya Nagaraj , IBTimes
The European Central Bank (ECB) left the benchmark rates unchanged for the 19th straight month, and said it would extend its longer-term liquidity tenders into the first quarter of 2011. The extension of the liquidity measures come as a relief to Europe’s debt-laden markets, most of which expected the program to be phased out early next year. The bank would maintain full allotment options for the first quarter of 2011 and would be adjusted beyond that as deemed “appropriate,” ECB President Jean-Claude Trichet in a press conference. The ECB, which began purchasing bonds through the SMP in May, has spent about 67 billion euros so far on the program. Markets were expecting the bank to increase its level of support, as the debt crisis in Europe deepens with Italy, Spain and Portugal expected to require financial assistance in the future. Earlier in the day, the ECB announced that interest rates would be left unchanged at the record low of 1 percent, as expected. Howard Archer, an economist at IHS Global Insight expects underlying inflationary pressures remain muted and are likely to remain so “given significant output gaps and spare capacity, as well as muted wage growth amid high unemployment.” The ECB expects inflation to hover around 1.9 percent for the euro area over the next few months. The low inflation rate gives the bank more room to hold the interest rates low. The ECB expects HICB inflation to remain around the 1.5 percent to 1.7 percent rate in 2010, between 1.3 percent and 2.3 percent in 2011 and 0.7 percent and 2.3 percent in 2012. Trichet forecast economic growth of the euro area to be between 1.6 percent and 1.8 percent for 2010, and between 0.7 percent to 2.1 percent in 2011. However, Trichet refused to comment on the pressure for the Securities Market Program (SMP) to be increased and said that it is “ongoing.”
ECB President Jean-Claude Trichet
“I won’t comment on the observations of market participants.” “Inflation expectations over the medium to longer term continue to be firmly anchored in line with the governing council’s aim of keeping inflation rates below, but close to 2 percent over the medium term.” The halt on the phasing out of the program was inevitable, given the high dependence on ECB funding by banks in the more vulnerable Euro zone countries.” “However, given that the extension was the minimum was what was expected or hoped for by the markets, it is unlikely to ease tensions.”
Howard Archer, an economist at IHS Global Insight
“It was inconceivable that the ECB would do anything else but keep interest rates down at 1.0%. Not only do economic conditions in the Euro zone still warrant record low interest rates, but to have hiked rates at a time of such turmoil could only have made matters worse for Greece, Ireland, Portugal and Spain.” “The Euro zone is threatened by high unemployment, recurrent sovereign risk problems and slower global economic activity in the coming months.”
The Intelligent Investor - U.K.
TOP STORIES
U.K. Services PMI slows in November
A survey by Markit/CIPS showed that the rate of growth in the British service sector fell back slightly in November but new business picked up at its fastest rate since June. Markit/CIPS Service PMI eased to 53.0 in November from October's four-month high of 53.2 while the new business index rose to 52.4 from 52.0 in October. Employment fell at a faster rate than October. Markit economist Paul Smith said the growth in the U.K. service sector activity was solid but described the rise in new work as still lackluster as economic uncertainties undermined business and consumer spending.
Rio Tinto, Chinalco form JV
Rio Tinto and Aluminum Corporation of China have signed a non-binding memorandum of understanding for the formation of exploration joint venture in China. The new company is expected to start its operation in the first half of next year and will explore mainland China for world-class mineral deposits. Chinalco will hold a 51 percent interest in the JV and Rio Tinto will hold a 49 percent interest.
Qantas claims damages from Rolls-Royce over faults
As investigators conclude that design fault was the likely cause of a mid-air engine failure on an Airbus A380 last month, Qantas Airways is claiming damages from engine maker Rolls-Royce over faulty Airbus A380 engines and loss of business. According to the sources Rolls-Royce spokesman said the company will continue to work with the investigating authorities and the regulators to ensure compliance with safety standards. Qantas has filed claim in the Federal Court of Australia, and said Rolls-Royce was in breach of duty and may have misled the airline when it supplied engines that were defective and could not perform according to the standards guaranteed by Airbus and Rolls-Royce.
Greene King confident on full year performance
Greene King today posted a better-than-expected 17 percent rise in first half pretax profit. The company, which has around 2,500 pubs and restaurants, made a pretax profits of 73.1 million pounds ($114 million) in the half year to October 17. The company is confident of delivering strong results for the full year. Greene King said its current trading was strong with Christmas bookings comfortably ahead of last year. Chief Executive Rooney Anand expects more challenging conditions in 2011, but remains confident to trade well and deliver strong financial results.
Premier Foods in talks for sale of unit
Premier Foods, Britain's largest food producer, is in talks with two potential suitors regarding the sale of its meat-free business, including Quorn. News follows the media report which said that Nestle, the world's biggest food group, was in talks to buy the division for around 230 million pounds. The company said it has received bids from a number of parties, including multinational food groups and private equity firms. Discussions are proceeding and are at an advanced stage with two parties.
Berkeley profits rise on demand
Berkeley Group Holdings reported rise in its first half pretax profits by 18.5 percent to 61.6 million pounds ($96.1 million), compared to 52 million pounds last year. Revenues grew 16 percent to 336.2 million pounds. Its performance was lifted by resilient demand for homes in London and the South East. The house builder is confident of beating its expectations for the current year while believes that lack of credit and declining consumer confidence ahead of painful government spending cuts is likely to hold back transaction volumes, particularly outside London.
BAE keen on its unit sale
BAE Systems is having high interest in the sale of its aerospace platforms solution unit, but is uncertain on when a deal could be announced or its possible value. Andy Wrathall, director of investor relations for BAE said depending on the bids, BAE would move to sell the unit or keep it. According to the sources, the unit has attracted bids from heavyweights, including General Electric, Eaton Corp and Honeywell International. Final bids expected this month, GE and Eaton remain interested in the business that is expected to fetch up to $2 billion, according to sources while private equity firm Warburg Pincus and French aerospace and defense group Safran have also examined potential bids.
Novae returns cash to its shareholders
Novae, the British insurer firm has become the latest company in its sector to return cash to shareholders. The company has announced a 32.9 million pound ($51.4 million) capital return to boost investors' returns. Many European insurers and reinsurers have set about handing back more cash to shareholders as tougher market conditions make hoarding unused capital harder to justify. Novae's capital return will be through an issue of B shares and C shares, combined with a consolidation of its existing ordinary shares.
The Intelligent Investor - U.K.
THE NEXT TRADING DAY
Economic Events
No major economic events scheduled to be released.
Company Events
Alternative Networks, a U.K. based company engaged in offering a complete communications portfolio of fixed line, mobile, voice, data, systems and fully converged solutions, is expected to declare its final results. The company is estimated to report full year net profit (GAAP) of £6.70 million for the year ended September 2010. Revenue is expected at £95 million with full year dividend at 8.60 pence while EPS (GAAP) is estimated at 14.70 pence. Treatt, U.K. based manufacturer and supplier of ingredients to the flavor, fragrance and cosmetics industries, will announce its final results for FY 2010. Analysts expect the company to report full year profit of 29.20 pence per share, against 24.40 pence reported a year ago. Full year revenue is estimated at £62.20 million, up from £56.31 million reported a year earlier, with a net profit of £3 million. The company is expected to declare a dividend of 12.10 pence for the full year, revenue is expected at £10.8 million. Workplace Systems International will announce its first half yearly results. In its trading update the company said that the challenging trading conditions of 2009 have extended into the initial months of the current financial year. However its cash position remains healthy in spite of the impact of the quiet trading. The company says that its SaaS solution continues to attract increasing interest and the company is undertaking a number of pilot solutions in the U.K. and the U.S. which are planned to be rolled out across our customers’ estates during the second half of the current financial year. The company has also received additional orders from existing customers to facilitate their planned expansion. The Company continues to control its cost base in line with current and expected levels of trading. Analysts forecast the company to report a full year profit of 90 pence per share, while revenue is expected at £10.8 million. Plastics Capital, the manufacturer of plastic products, will announce its interim results for FY 2011. The company is expected to report full year revenue of £29.50 million, against £26.69 million reported a year ago. Analysts estimate the company to declare a full year profit of 7.54 pence per share, against 6.31 pence, reported a year ago. Sirius Real Estate, an investment and development of commercial property firm, will announce H1 results. The company is estimated to report full year profit of 22 pence per share for FY 2011, down from 44 pence reported a year ago. Analysts expect the company to announce its full year revenue of £29.96 million with pre-tax profits of £1.37 million in FY 2011. Tricorn Group is expected to release its H1 results for FY 2011. Analysts expect the company to report its full year profit of 1.40 pence per share,, against 0.45 pence reported a year ago. Full year revenue is estimated at £18.80 million, up from £15.03 million reported a year earlier, with a Net profit of £0.40 million.
ECONOMIC INDICATOR WATCH ON DEC 06, 2010
New Car Registrations (November)
Forecast: N/A, Prior: 131,495
SMMT is due to release new car registration figures for the month of November at 0930 GMT. The new car market fell for a fourth successive month, with the 22.2 percent drop in October the steepest decline since May 2009. Registrations fell to 131,495 units in October. SMMT said during the release, that market remains 4.8 percent up over the first ten months of the year, at 1,767,154 units. SMMT predicts further declines likely in remainder of year, but 2010 market to be up 1.5 percent on 2009. “There was a significant fall in October’s new car registrations, reflecting the impact of the Scrappage Incentive Scheme (SIS) at this time last year and some deterioration in consumer confidence. Total new car registrations in 2010 are forecast to be 2.026 million units, 1.5% up on 2009," said Paul Everitt, SMMT chief executive. “The industry expects the coming months to be challenging with slow, but steady, economic growth feeding through to improved confidence and demand during 2011.”
This report is produced by International Business Times For questions or comments reach us at [email protected] For more information about our products visit www.ibtimes.com © IBTimes 2010. All rights reserved.
The Intelligent Investor U.K.
The Economic Monitor Series. Free Edition.
INSIDE THE REPORT
MARKETS AT A GLANCE
Stock recommendations and price targets from top brokerage firms Analysis and views on Britons personal finances and ECB liquidity program Economic Indicator Watch along with Graphs List of companies earnings which hit and miss the analysts’ expectations Important Events Scheduled on December 06
Britain's top shares were almost flat approaching midday, a fall among financials after recent gains offsetting strength in precious metals miners ahead of jobs data from the United States. The FTSE 100 was down 22.24 points, or 0.39 percent at 5,745.32. In the cash market, the yield on ten-year gilts was almost 2 basis points lower at 3.395. The spread against Bunds tightened to around 55 basis points. Sterling was up 0.5 percent against the dollar to $1.5691, keeping well above a two-month low of $1.5485 hit on Tuesday. Oil fell from two-year highs after closely watched U.S. jobs data missed expectations, while North Sea Brent crude futures held above $90 due to the extreme cold weather covering much of Europe. ICE Brent crude futures were trading at $90.61 a barrel, after briefly touching a fresh two-year high of $91.13 earlier today. Gold jumped above $1,400 an ounce to a three-week high, after U.S. jobs data disappointed the markets, knocking the dollar index down 1 percent and dampening expectations for a self-sustaining recovery. Spot gold rose to a high of $1,407.35 an ounce and was bid at $1,402.60 an ounce at 1510 GMT, against $1,384.75 late in New York on Thursday.
Economic Events & Indicators
U.K. New Car Registrations (November)
Corporate Events
Alternative Networks, Treatt final results Workplace Systems International, Plastics Capital, Sirius Real Estate, Tricorn Group interim results
STOCK INDICES
INDEX FTSE 100* FTSE Tech Mark 100* FTSE Eurofirst 300* LAST 5745.32 1944.13 1105.52 6947.72 3750.55 271.19 CHNG -22.24 -7.43 -0.66 -9.89 3.51 -0.42 % CHNG -0.39 -0.38 -0.06 -0.14 0.09 -0.15
Breaking News
U.K. Services PMI slows in November Rio Tinto, Chinalco form JV Qantas claims damages from Rolls-Royce over faults Greene King confident on full year performance Premier Foods in talks for sale of unit Berkeley profits rise on demand BAE keen on its unit sale Novae returns cash to its shareholders
DAX* CAC 40* Stoxx Europe 600 * CLOSING VALUES
CURRENCIES
INDEX Euro (EUR/USD) U.K. Pound (GBP/USD) Japanese Yen (USD/JPY) LAST 1.3372 1.5715 82.71 PRIOR 1.3224 1.5599 83.89
All prices are at 11:37 AM EST
FUTURES
LAST Crude Oil Natural Gas (Jan) Gold, (Feb) Copper (Mar) 88.1 4.309 1407.2 398 CHANGE 0.1 -0.034 17.9 0.1
All prices are at 11:26 AM EST
The Intelligent Investor - U.K.
STOCK RECOMMENDATIONS BY BROKERAGE HOUSES
BROKERAGE/COMPANY
Collins Stewart Amlin Lancashire Holdings Novae Holdings Investec Abcam Halma SThree Numis Aberdeen Asset Management Ashmore Berkeley BlueBay Greene King Hansard Henderson Jupiter Man Group KBC Peel Hunt Abcam Canaccord Genuity Brewin Dolphin Oriel Securities Brewin Dolphin S&P Equity Research Rio Tinto Seymour Pierce Burberry Group JP Morgan Chemring UBS DS Smith Kingfisher Mondi Sage Panmure Greene King Goldman Sachs Imagination Technologies Whitbread Millennium & Copthorne Recommends price target of 515p Raises price target to 2200p from 1750p Raises price target to 682P from 560p Buy Buy Buy 377p 1791p 562p Raises price target to 486p from 456p Hold 460p Downgrades to neutral rating Raises price target to 285p from 270p Upgrades to buy rating Raises price target to 265p from260p Neutral Buy Buy Sell 200.70p 254.90p 498p 289p Recommends price target of 3450p Overweight 2959p Recommends price target of 1200p Buy 1099p Raises price target to 5000p from 4500p Strong Buy 4415p Raises to add from hold 155p Raises target price to 216p from 206p Buy 155p Cuts to hold from buy Hold 390p Cuts to hold from add Raises to add from hold Cuts to hold from add Cuts to hold from add Raises target price to 525p from 500p Raises to buy from add Raises to hold from reduce Cuts to hold from add Cuts to reduce from hold Hold Add Hold Hold Add Buy Hold Hold Reduce 195p 364.30 840p 484p 460p 165.50p 125.80p 302.10p 288.70p Cuts to hold from buy Raises price target to 360p from 340p Raises price target to 410p from 375p Hold Hold Buy 390p 340.80p 310p Raises to hold from sell Cuts to hold from buy Raises to buy from hold Hold Hold Buy 390.30p 620p 330p
ACTIONS
RATING
LAST CLOSING
Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before taking any investment decisions.
DAILY EARNINGS HITS & MISSES AS ON 03 DEC, 2010
COMPANY Greene King The Berkeley Group Holdings Pursuit Holdings PERIOD H1 H1 A CURRENCY GBP GBP GBP EPS EST 23.9 31 -0.23 EPS ACT 25.1 32.8 -DIFFERENCE EPS 1.2 1.8 -REV EST (mln) --0.36 REV ACT (mln) --0.13 DIFFERENCE REV (mln) ---0.23
The Intelligent Investor - U.K.
ANALYSIS AND VIEWS
One-third of Britons think personal finances will worsen next year
By Palash R. Ghosh, IBTimes
Almost one-third (30 percent) of British people think their financial situation will worsen over the next six months, a 7 percent increase from the prior quarter, according to a quarterly survey by R3, the UK insolvency trade body. The number of people who think their financial prospects will improve has dropped from 35 percent to only 22 percent. Indeed, according to CreditAction, a British education charity, said that total personal debt at the end of October 2010 stood at 1.452-trillion pounds sterling, adding that UK individuals owe more than what the whole country produces in a year. The personal debt figure has remained above the 1.4-trillion pound figure since December 2007. (By comparison, total personal debt amounted to about 400-million pounds at the end of 1993). Or to put it another way, the average UK adult now owes about 29,833 pounds (including mortgages), which is about 126 percent of average annual earnings. Moreover, average household debt in the UK is now 57,624 pounds (including mortgages). R3’s survey also indicates that the number of people worried about their current debt levels has remained steady, with almost four in ten (39 percent) expressing concern. Regionally, people in the West Midlands are most likely to worry, with half of those surveyed saying they are worried about their debts. In London, four in ten are concerned. Credit card debts, R3 explained, continue to dominate the concerns of those who are worried about their debts. Of those concerned about their debts, over a quarter (28 percent) of people are concerned about how far they are into their overdraft. Concern about mortgage repayments has increased by 4 percent -from 19 percent to 23 percent -- since the last survey. Since we last carried out the survey, the government has issued the Comprehensive Spending Review that announced job cuts and welfare cuts, so it is unsurprising that fewer people are feeling optimistic about their financial outlook.” “In many cases of personal insolvency the contributory factor is a sudden change in circumstance, such as losing a source of income, which makes repaying outstanding debts difficult. With personal debt hitting record highs and job cuts looming, many people will be feeling vulnerable.” R3’s president, Steven Law. “I see many people who are concerned about their credit card debts as, worryingly, they rely on them for day-to-day purchases.” “Unfortunately, I fear that the number of people worrying about their levels of credit card debt is set to grow.” “The spike in the number of people worrying about their mortgage repayments “may be due to the fact that, typically, the value of a mortgage repayment tends to be higher than the monthly repayment on a credit card. The higher value of this debt may make a mortgage repayment seem more difficult to pay each month. Many may be concerned that their repayments will increase when
ANALYSIS AND VIEWS
ECB extends liquidity program into 2011; interest rates unchanged
By Amulya Nagaraj , IBTimes
The European Central Bank (ECB) left the benchmark rates unchanged for the 19th straight month, and said it would extend its longer-term liquidity tenders into the first quarter of 2011. The extension of the liquidity measures come as a relief to Europe’s debt-laden markets, most of which expected the program to be phased out early next year. The bank would maintain full allotment options for the first quarter of 2011 and would be adjusted beyond that as deemed “appropriate,” ECB President Jean-Claude Trichet in a press conference. The ECB, which began purchasing bonds through the SMP in May, has spent about 67 billion euros so far on the program. Markets were expecting the bank to increase its level of support, as the debt crisis in Europe deepens with Italy, Spain and Portugal expected to require financial assistance in the future. Earlier in the day, the ECB announced that interest rates would be left unchanged at the record low of 1 percent, as expected. Howard Archer, an economist at IHS Global Insight expects underlying inflationary pressures remain muted and are likely to remain so “given significant output gaps and spare capacity, as well as muted wage growth amid high unemployment.” The ECB expects inflation to hover around 1.9 percent for the euro area over the next few months. The low inflation rate gives the bank more room to hold the interest rates low. The ECB expects HICB inflation to remain around the 1.5 percent to 1.7 percent rate in 2010, between 1.3 percent and 2.3 percent in 2011 and 0.7 percent and 2.3 percent in 2012. Trichet forecast economic growth of the euro area to be between 1.6 percent and 1.8 percent for 2010, and between 0.7 percent to 2.1 percent in 2011. However, Trichet refused to comment on the pressure for the Securities Market Program (SMP) to be increased and said that it is “ongoing.”
ECB President Jean-Claude Trichet
“I won’t comment on the observations of market participants.” “Inflation expectations over the medium to longer term continue to be firmly anchored in line with the governing council’s aim of keeping inflation rates below, but close to 2 percent over the medium term.” The halt on the phasing out of the program was inevitable, given the high dependence on ECB funding by banks in the more vulnerable Euro zone countries.” “However, given that the extension was the minimum was what was expected or hoped for by the markets, it is unlikely to ease tensions.”
Howard Archer, an economist at IHS Global Insight
“It was inconceivable that the ECB would do anything else but keep interest rates down at 1.0%. Not only do economic conditions in the Euro zone still warrant record low interest rates, but to have hiked rates at a time of such turmoil could only have made matters worse for Greece, Ireland, Portugal and Spain.” “The Euro zone is threatened by high unemployment, recurrent sovereign risk problems and slower global economic activity in the coming months.”
The Intelligent Investor - U.K.
TOP STORIES
U.K. Services PMI slows in November
A survey by Markit/CIPS showed that the rate of growth in the British service sector fell back slightly in November but new business picked up at its fastest rate since June. Markit/CIPS Service PMI eased to 53.0 in November from October's four-month high of 53.2 while the new business index rose to 52.4 from 52.0 in October. Employment fell at a faster rate than October. Markit economist Paul Smith said the growth in the U.K. service sector activity was solid but described the rise in new work as still lackluster as economic uncertainties undermined business and consumer spending.
Rio Tinto, Chinalco form JV
Rio Tinto and Aluminum Corporation of China have signed a non-binding memorandum of understanding for the formation of exploration joint venture in China. The new company is expected to start its operation in the first half of next year and will explore mainland China for world-class mineral deposits. Chinalco will hold a 51 percent interest in the JV and Rio Tinto will hold a 49 percent interest.
Qantas claims damages from Rolls-Royce over faults
As investigators conclude that design fault was the likely cause of a mid-air engine failure on an Airbus A380 last month, Qantas Airways is claiming damages from engine maker Rolls-Royce over faulty Airbus A380 engines and loss of business. According to the sources Rolls-Royce spokesman said the company will continue to work with the investigating authorities and the regulators to ensure compliance with safety standards. Qantas has filed claim in the Federal Court of Australia, and said Rolls-Royce was in breach of duty and may have misled the airline when it supplied engines that were defective and could not perform according to the standards guaranteed by Airbus and Rolls-Royce.
Greene King confident on full year performance
Greene King today posted a better-than-expected 17 percent rise in first half pretax profit. The company, which has around 2,500 pubs and restaurants, made a pretax profits of 73.1 million pounds ($114 million) in the half year to October 17. The company is confident of delivering strong results for the full year. Greene King said its current trading was strong with Christmas bookings comfortably ahead of last year. Chief Executive Rooney Anand expects more challenging conditions in 2011, but remains confident to trade well and deliver strong financial results.
Premier Foods in talks for sale of unit
Premier Foods, Britain's largest food producer, is in talks with two potential suitors regarding the sale of its meat-free business, including Quorn. News follows the media report which said that Nestle, the world's biggest food group, was in talks to buy the division for around 230 million pounds. The company said it has received bids from a number of parties, including multinational food groups and private equity firms. Discussions are proceeding and are at an advanced stage with two parties.
Berkeley profits rise on demand
Berkeley Group Holdings reported rise in its first half pretax profits by 18.5 percent to 61.6 million pounds ($96.1 million), compared to 52 million pounds last year. Revenues grew 16 percent to 336.2 million pounds. Its performance was lifted by resilient demand for homes in London and the South East. The house builder is confident of beating its expectations for the current year while believes that lack of credit and declining consumer confidence ahead of painful government spending cuts is likely to hold back transaction volumes, particularly outside London.
BAE keen on its unit sale
BAE Systems is having high interest in the sale of its aerospace platforms solution unit, but is uncertain on when a deal could be announced or its possible value. Andy Wrathall, director of investor relations for BAE said depending on the bids, BAE would move to sell the unit or keep it. According to the sources, the unit has attracted bids from heavyweights, including General Electric, Eaton Corp and Honeywell International. Final bids expected this month, GE and Eaton remain interested in the business that is expected to fetch up to $2 billion, according to sources while private equity firm Warburg Pincus and French aerospace and defense group Safran have also examined potential bids.
Novae returns cash to its shareholders
Novae, the British insurer firm has become the latest company in its sector to return cash to shareholders. The company has announced a 32.9 million pound ($51.4 million) capital return to boost investors' returns. Many European insurers and reinsurers have set about handing back more cash to shareholders as tougher market conditions make hoarding unused capital harder to justify. Novae's capital return will be through an issue of B shares and C shares, combined with a consolidation of its existing ordinary shares.
The Intelligent Investor - U.K.
THE NEXT TRADING DAY
Economic Events
No major economic events scheduled to be released.
Company Events
Alternative Networks, a U.K. based company engaged in offering a complete communications portfolio of fixed line, mobile, voice, data, systems and fully converged solutions, is expected to declare its final results. The company is estimated to report full year net profit (GAAP) of £6.70 million for the year ended September 2010. Revenue is expected at £95 million with full year dividend at 8.60 pence while EPS (GAAP) is estimated at 14.70 pence. Treatt, U.K. based manufacturer and supplier of ingredients to the flavor, fragrance and cosmetics industries, will announce its final results for FY 2010. Analysts expect the company to report full year profit of 29.20 pence per share, against 24.40 pence reported a year ago. Full year revenue is estimated at £62.20 million, up from £56.31 million reported a year earlier, with a net profit of £3 million. The company is expected to declare a dividend of 12.10 pence for the full year, revenue is expected at £10.8 million. Workplace Systems International will announce its first half yearly results. In its trading update the company said that the challenging trading conditions of 2009 have extended into the initial months of the current financial year. However its cash position remains healthy in spite of the impact of the quiet trading. The company says that its SaaS solution continues to attract increasing interest and the company is undertaking a number of pilot solutions in the U.K. and the U.S. which are planned to be rolled out across our customers’ estates during the second half of the current financial year. The company has also received additional orders from existing customers to facilitate their planned expansion. The Company continues to control its cost base in line with current and expected levels of trading. Analysts forecast the company to report a full year profit of 90 pence per share, while revenue is expected at £10.8 million. Plastics Capital, the manufacturer of plastic products, will announce its interim results for FY 2011. The company is expected to report full year revenue of £29.50 million, against £26.69 million reported a year ago. Analysts estimate the company to declare a full year profit of 7.54 pence per share, against 6.31 pence, reported a year ago. Sirius Real Estate, an investment and development of commercial property firm, will announce H1 results. The company is estimated to report full year profit of 22 pence per share for FY 2011, down from 44 pence reported a year ago. Analysts expect the company to announce its full year revenue of £29.96 million with pre-tax profits of £1.37 million in FY 2011. Tricorn Group is expected to release its H1 results for FY 2011. Analysts expect the company to report its full year profit of 1.40 pence per share,, against 0.45 pence reported a year ago. Full year revenue is estimated at £18.80 million, up from £15.03 million reported a year earlier, with a Net profit of £0.40 million.
ECONOMIC INDICATOR WATCH ON DEC 06, 2010
New Car Registrations (November)
Forecast: N/A, Prior: 131,495
SMMT is due to release new car registration figures for the month of November at 0930 GMT. The new car market fell for a fourth successive month, with the 22.2 percent drop in October the steepest decline since May 2009. Registrations fell to 131,495 units in October. SMMT said during the release, that market remains 4.8 percent up over the first ten months of the year, at 1,767,154 units. SMMT predicts further declines likely in remainder of year, but 2010 market to be up 1.5 percent on 2009. “There was a significant fall in October’s new car registrations, reflecting the impact of the Scrappage Incentive Scheme (SIS) at this time last year and some deterioration in consumer confidence. Total new car registrations in 2010 are forecast to be 2.026 million units, 1.5% up on 2009," said Paul Everitt, SMMT chief executive. “The industry expects the coming months to be challenging with slow, but steady, economic growth feeding through to improved confidence and demand during 2011.”
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