Another week of high volatility but value investors begin to appear
3rd August – FTSE runs into a bout of selling despite more good corporate news
London shares ran into a bout of selling after rallying well yesterday, with the FTSE 100 index down 28 points mid-morning as the oil majors drifted back on falls in crude prices. Again though there was big volume in some of this morning’s reporting stocks, with Royal Bank of Scotland initially up on figures that were above expectations, but then drifting back with the market. Operating profit was up 11% to £5.1bn for the six month to 30 June, while pre-tax profit rose 20% to £3.7bn on income up 8% to £14.7bn.
British Airways, which was fined £270m earlier this week for price collusion, also beat market estimates though it trimmed its revenue forecast for the year reflecting the ongoing problems at Heathrow and weak dollar, and the shares led the pack with a 2.5% rise mid-morning.
Anglo American announced as expected the sale of Tarmac, the building materials business plus, aswell as plans for a $4bn share buy-back, but again after an early rise the shares saw a little selling. Tomkins was the best mover outside the FTSE 100 index with a 9% rise as it shrugged off tough US housing and car markets to lift half-year pre-tax profits to £148.9m from £135.7m. SCS improved as it reported that sales have picked up in recent weeks despite wet weather and rising interest rates, though comparatives are still well behind this time last year.
6th August – Footsie opens down but fights back early on
The sharp fall at the end of trading on Friday led to an opening markdown in London shares, but there were some buyers and by mid-morning the FTSE 100 index had settled down around 40 points. Financials took another hit early on with Northern Rock and Man Group down over 2%, and miners were hit selectively aswell. One of the better performers was ICI on reports that it is to open its books to Akzo Nobel today after agreeing to a higher indicative takeover proposal, and press reports talked of a 670p per share offer after a weekend of talks.
In results, profit growth in all of its divisions helped Morgan Sindall enjoy a good first half with profits for the six months to June up by 18% to £25.2m, on turnover up 24% to £836m. Lancashire posted second quarter profits of $82.8m up from $30m previously on gross written premiums up 32.8% to $270.8m and said it was likely that a significant proportion of 2007 profits would be returned to shareholders.
Elsewhere, Tesco has intensified its efforts to win control of Dobbies Garden Centres, raising its stake as it seeks to rally shareholder support for its bid.
It had exercised a call option to buy 16.4%, taking its stake to 28.1%. Skyepharma said it may need to carry out additional clinical work for its Flutiform asthma drug to satisfy the requirements of US regulators.
7th August – Footsie follows on from explosive move in the US
There was an air of relief this morning as Wall Street saw a surge of buying towards the close last night. The FTSE 100 index was up over 60 points mid-morning, with encouraging moves in the mining sector and other oversold issues. Xstrata steadied the market with a 47% rise in first-half net profits to $3bn, in line with forecasts. The group added that it expected a better operational performance in the remainder of the year, with strong demand from Asia. Although the shares were up a little, sector peers Antofagasta, Anglo American and Lonmin led the board.
Standard Life's said that first half sales rose by 31%, ahead of forecasts, with the life group also promising a significant increase in its margins, but of more interest was any news on whether it would join the battle over the merger between Resolution and Friends Provident. At the bottom of the list though was Scottish & Newcastle which said it that hitting its targets for the year would be very challenging due to poor weather in Western Europe.
On the second line, Pendragon reported lower pre-tax profit, but the group said current trading is in line with expectations despite the slowing car sales market. Inmarsat said that profits would come in higher than previously expected this year after a record second quarter. Bellway added that net pre-tax profit would be at a record level and in line with expectations for the year end. Finally, Mouchel Parkman said it had bought HBS for £46.24m, adding that trading for the year to 31 July had been in line with expectations.
8th August – Steady start in London as financials edge again today
Yesterday’s good showing by the financials continued into today’s session in London as the market enjoyed another good opening. By mid-morning, the FTSE 100 index was up 22 points, led by Standard Life, whose results yesterday impressed the market. Second on the list was Royal Sun Alliance after it announced a better than expected H1 operating profit of £403m, despite the impact of the floods in June and July of £120m. At the bottom end of the index, the mining sector saw a little profit taking with Kazakhmys and Xstrata down on further consideration of the latter’s figures yesterday.
Elsewhere, Vodafone said that it would keep its 45% holding in US joint venture Verizon Wireless and would not exercise its option to dispose of the stake, but the shares were little changed. Severn Trent estimated that the gross cost of dealing with recent floods would be the range of £25m to £35m, but added that the costs would be partially offset by insurance cover thought to be just under half of this. Shares in Emap are strong today on reports that Guardian Media is in talks with Apax Partners about launching a joint £2bn bid.
On the second line, bid talks have ended at FKI after persistent rumours in recent weeks and the shares were down 7% mid-morning. Aquarius Platinum reported record production and earnings for the year end as it raised the dividend by 75%.
9th August - FTSE pulls back after three goods sessions
After three good days, shares in London hit the buffers this morning with the FTSE 100 index down 50 points mid-morning. Most of the earlier analysis featured another string of important corporate results.
BAe Systems announced an increase in half-year profit and said its outlook for 2007 as a whole was expected to benefit from the US-led Land & Armaments and UK Programmes & Support sectors where growth was ahead of expectations. Schroders said that half-year pre-tax profits rose to £185.6m compared to £132.3m last year. Funds under management also rose to £137.6bn at the end of the first half, up from £128.5bn previously. Results from Aviva as expected included the cost of recent wet weather with flood claims holding back another strong half for its life arm. The company sustained a further £165m of flood losses in July, which will be reported in the full year results, but overall the market was not unhappy and the shares rose slightly.
Shares in International Power were down over 4%, despite profit from operations excluding exceptionals up 6.1% but exceptional charges leading to a pre-tax loss of £53m compared with a profit of £458m last year. First Choice cautioned that margins were under pressure from higher airport taxes and fuel costs despite good demand for holidays over the summer season, with revenues cumulatively up 6% on volume growth of 3%. BPP Holdings posted lower than expected profits for the first half of the year, and also announced that it had appointed Roger Siddle as chief executive, with effect from 1st November.
Mike Estrey
Head of Research at Blue Index, the Online CFD Trading experts
09/08/2007
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