ALO.L Share News (ALO)

LONDON (Alliance News) - Oil giant Royal Dutch Shell shocked the market Friday by warning that its profits will be well below expectations after nearly every part of its business performed below its expectations in the fourth quarter.

The profit warning has sent its shares to the bottom of the FTSE 100 and weighed on the whole sector, although it hasn't stopped the blue-chip index from making modest gains as a whole.

Shell said its upstream operations - oil and gas exploration and production - had been hit by higher exploration expenses and lower volumes, while its downstream operations - refining and processing the oil and gas - had been hit by an industry-wide fall in refining margins.

It said its upstream operations in the Americas continued to make a loss, while it has also suffered from the recent decline in the value of the Australian dollar and its operations in Nigeria continued to be hit by the costs of having to protect its assets against attack.

Fourth quarter net profit is expected to be USD1.8 billion, down from USD6.7 billion a year earlier, while 2013 net profit is expected to be USD16.4 billion, down from USD26.7 billion in 2012.

In a statement, Chief Executive Ben van Beurden said the company's 2013 performance, "was not what I expect from Shell". He said the company would now focus on improving its financial results, improving its capital efficiency and strengthening its operational performance and project delivery.

FTSE 100-listed betting company William Hill has warned that it recorded a GBP13 million loss in week two of 2014 after an unusually high number of odds-on favourites won their matches. It said it can't be sure it will make up the loss. Ladbrokes had warned of a similar hit Thursday.

The news took some of the sheen off otherwise strong trading results from William Hill, and its shares were another of the biggest fallers on the FTSE 100.

William Hill said its fourth quarter performance improved, and it continued to outperform its big rival Ladbrokes. Total net retail revenue was up 6% in the 13 weeks to December 31 compared with a 14 week period the year earlier, or up 13% on an exact 13 week basis. Its online total net revenues rise 6% and 14% over the same comparative periods.

FTSE250-listed FirstGroup said it had traded in line with its expectations overall in its fiscal third quarter, as good performances in its UK rail and bus operations and its US greyhound and First Transit units offset a slowdown in its US First Student business.

FirstGroup made no mention of its ongoing talks with shareholder Sandell Asset Management Corp, which earlier this week urged the company to reconsider its rejection of Sandell's proposal that it should break itself up and spin off its US business, selling Greyhound as part of the process.

The trading update came as the UK government said it had shortlisted FirstGroup, Keolis, and a joint venture between Stagecoach and Virgin Group, as the three final bidders for the Intercity East Coast rail franchise.

Keolis, which is 70% owned by French high-speed rail company SNCF and Caisse de depot et de placement du Québec of Canada, is bidding with Eurostar.

The Department For Transport said the remaining bidders would now have to show how they intend to use new high-tech trains on the route and how they will capitalise on government investment in the route, including GBP240 million in infrastructure projects over the next five years, to improve capacity and reduce journey times.

The latest figures from the Office of National Statistics showed that UK retail sales increased at a higher-than-expected rate in December. Retail sales, including auto fuel, increased 2.6% month-on-month in December, notably faster than the 0.3% growth expected. In November, sales recorded an increase of 0.1%. Sales, including auto fuel, grew 5.3% year-on-year compared with expectations for a 2.5% rise.

Labour leader Ed Miliband has followed up his recent attack on the big energy companies in the UK by calling for a breakup of the country's biggest banks, saying they were still failing to serve the real economy and small businesses. In a speech at a university, Miliband said Labour would break the power of HSBC, Barclays, Royal Bank of Scotland Group, Spain's Santander and Lloyds Banking Group by creating two new challenger banks from branches the big five would be forced to sell.

He directly compared the UK's banking system to the country's energy market, saying too much power lay in the hands of too few providers.

In an effort to take some of the steam out of Labour's recent focus on the cost of living, Chancellor George Osborne has cleared the way for a rise in the minimum wage to GBP7 an hour, The Times has reported.

In a surprise recommendation, Osborne said a recovering economy means employers can afford to pay the increased minimum, which currently stands at GBP6.31. The Times said the recommendation is intended to "blunt" claims from the Labour Party that millions of the British electorate aren't seeing any benefit from Britain's improving economic environment.

The independent Low Pay Commission will make a decision on the final pay rate next month.

The EU will suspend sanctions against Iran just hours after it has confirmation that Tehran has taken the necessary steps to keep its side of the nuclear deal with six world powers, according to an EU official in Brussels. Iran is due Monday to halt the enrichment of uranium above a level of 5% and to start down-blending uranium enriched to higher levels, according to the official and a Western diplomat in Vienna.

The US Senate has voted 72 to 26 in favour of a massive government spending bill that avoid another government shutdown until at least October. The USD1.1 trillion bill, which eases tough spending cuts in place since March 2013, overwhelmingly passed the House of Representatives earlier and now goes to President Barack Obama for his signature. Obama is expected to sign it by Saturday, the Washington Post reported.

The USD1.1 trillion spending bill issues money for government functions for the rest of the budget year through September, filling in the blanks of a bipartisan budget agreement reached last month.
The bill means the Pentagon will avoid a roughly USD20 billion cut, and domestic agencies will receive spending increases.

Obama has also updated Prime Minister David Cameron on a review of US surveillance programmes in the wake of revelations of the breadth of the spying, said the White House. A review panel whose advice Obama has been weighing has recommended extending privacy protections against broad surveillance to non-US citizens, altering policies on surveillance of foreign leaders and making changes to the NSA's mass collection of US telephone records.

US Secretary of State John Kerry has called for the Syrian opposition to take part in a peace conference in Switzerland next week amid questions about whether they will attend. He urged the main opposition group to vote in favour of participating in the talks that he stressed were, "the only way to bring about an end to the civil war that has triggered one of the planet's most severe humanitarian disasters and which has created the seeding grounds for extremism."

An explosion at an anti-government march in the Thai capital injured at least 31 protesters participating in a Bangkok "shutdown" campaign, hospital sources said. The device was thrown into the midst of a march in central Bangkok, and exploded about 100 metres behind protest leader Suthep Thaugsuban, who was not wounded.

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FTSE 100: Up 0.1% at 6,823.67
FTSE 250: Down 0.2% at 16,176.14
AIM ALL-SHARE: Up 0.1% at 885.27
GBP-USD: 1.6442
EUR-USD: 1.3589
GOLD: USD1,241.00 an ounce
OIL (Brent): USD106.32 a barrel

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KEY UK CORPORATE NEWS:

FTSE 100: Shire has sold its Dermagraft living skin substitute assets to the US's Organogenesis Ltd, as it said the prospects of the product had been "significantly" reduced. It will take a USD650 million loss on the disposal. Massachusetts-based Organogenesis will make no upfront payment for the assets but will pay up to USD300 million in milestones payments should it meet certain performance criteria in the next four years. Aviva has entered a joint venture with PT Astra International Tbk to create a life insurer - Astra Aviva Life - in Indonesia. PT Astra International Tbk, Indonesia’s largest publicly listed company with a market capitalisation of about USD25 billion, and Aviva have formed the 50-50 joint venture in order to sell life insurance products in Indonesia. Aviva said Astra Aviva Life will become the life insurer of choice for Astra and its subsidiaries. London Stock Exchange Group said that Sherry Coutu and Joanna Shields will join its board as non-executive directors with immediate effect.

FTSE 250: Russian Steel maker Evraz said production of crude steel and steel products increased slightly in 2013 after production was flat in the fourth quarter, but it reported sharp falls in prices of steel products. In its latest production results, Evraz said production of crude steel rose 1% in the whole of 2013, and production of steel products was up 2%, after output of both stayed flat in the fourth quarter compared with a year earlier. However, it warned that prices for all its steel products fell for the year, even though prices for semi-finished products and railway products rose in the fourth quarter. Private equity investor SVG Capital said it will benefit to the tune of GBP85.6 million after Lavena Holding 1 GmbH, a company controlled by Permira IV and KKR funds, realised the rest of its holding in ProSiebenSat 1. Media. SVG has a direct interest in Permira IV. Spectris said that it was pleased with its fourth-quarter performance, despite expecting an adjusted operating profit slightly below the previous year. Its reported and like-for-like revenue rose 3% in the quarter. Synergy Health said that it is trading in line with expectations for the full-year, at it saw revenue rise 8.4% in the nine months to December 29. The outsourced healthcare services company posted revenue of GBP286.9 million for period, up from GBP264.7 million in the previous year. The company saw revenues decline 4.2% in Europe and the Middle East, but grow 1.4% in the UK and Ireland and 6.6% in Asia and Africa. Fidelity European Values said it would sub-divide its shares to allow holders who invest through monthly savings plans to do so more efficiently. The trust said it has a large number of private investors who invest through regular monthly savings and who reinvest their dividends. However, many were unable to invest a notable portion of the amounts they wanted to each month because the share price had rocketed to GBP15.52 a share in the 12 years since its launch at GBP1 a share. They are having to rollover some of the planned investments to the following month.

AIM: Brainjuicer Group shares are up after the online market researcher said its revenue increased 17% to over GBP24 million for the full-year, reflecting "encouraging" trading during the second half. As a consequence, pretax profit for the year will be approximately GBP3.5 million compared with GBP1.5 million in 2012, substantially beating current market expectations. Shares in Leni Gas & Oil are also up. The company said its application for a Certificate of Environmental Compliance for its planned drilling campaign of 30 new wells at the Goudron Field has been approved by authorities in Trinidad and Tobago. Enegi Oil shares were boosted after the oil and gas company has extended Period I of Exploration License EL1116, in Newfoundland, by 12 months. At the other end of the market, Edenville Energy shares have dropped after the African coal exploration and development company said it has completed a placing of more than 1.4 million shares, raising gross proceeds of GBP1 million. The placing will allow the company to accelerate the development and strategic partnership plans for its Rukwa coal-to-power project, a proposed 100 mega watt plus power station. Also down is Alecto Minerals. The group has announced that it has raised GBP1.5 million before expenses through a placing of 100 million new shares to fund the advancement of its main Kossanto Gold Project in Western Mali. Both placings were done at well below the share price ahead of the deals.

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AFTERNOON WATCHLIST: US Housing Starts, US Industrial Production, US Reuters/Michigan Consumer Sentiment Index Preliminary

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Monday's Key UK Corporate Events

City of London Investment Group Interim Results
InternetQ Trading Update

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Saturday's Key Economic Events

01:30 China House Price Index

Monday's Key Economic Events

All Day US Martin L. King's Day
00:01 UK Rightmove House Price Index
02:00 China Gross Domestic Product
02:00 China Industrial Production
02:00 China Retail Sales
02:00 China Urban investment
04:30 Japan Capacity Utilization
04:30 Japan Industrial Production
07:00 Germany Producer Price Index
23:50 Japan Adjusted Merchandise Trade Balance
23:50 Japan Exports
23:50 Japan Imports
23:50 Japan Merchandise Trade Balance Total

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By Steve McGrath and Alice Attwood; stevemcgrath@alliancenews.com; @SteveMcGrath1;
aliceattwood@alliancenews.com; @AliceAtAlliance

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