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LONDON (Alliance News) - Royal Bank Of Scotland Group jumped to lead the FTSE 100 Friday after it said it expects to report a near doubling in first-half pretax profit, driven by a turnaround in impairments due to improving credit conditions in the UK and Ireland, and the performance of the part of the bank tasked with running down assets that require especially high levels of capital.
The bank surprised the market by publishing its results a week ahead of schedule - though they are still being finalised - because of the better-than-anticipated operating performance.
State-backed RBS said it expects to report GBP2.65 billion in pretax profit in the first six months of 2014, compared with GBP1.37 billion in the corresponding period last year. Total income, made up of net interest income and non-interest income, fell by 5.9% to GBP9.98 billion, but operating expenses fell to GBP7.11 billion from GBP7.75 billion, with overall headcount down by 8,000 over the past 12 months.
"The results we are posting today show the steady progress we are making as we take the steps to be a much simpler, smaller and fairer bank. These results show that underneath all the noise and huge restructuring of recent years, RBS is a fundamentally stronger bank that can deliver good results for customers and shareholders," said
The state-backed bank leads the blue-chip index, trading 13% higher at 371.98 pence per share at midday.
Meanwhile, construction companies Balfour Beatty and Carillion lead the FTSE 250 after they confirmed that they were in preliminary talks for the creation of a construction services powerhouse through a GBP3 billion combination.
A deal between the two FTSE 250-listed British construction firms, which have flagship projects such as London's Olympics Aquatics Centre and the redevelopment of Liverpool's Anfield football stadium, would put them on track to enter into the FTSE 100 index as a joint entity.
Balfour Beatty trades 7.9% at 250.50 pence per share at midday, while Carillion is up 8.5% at 367.10 pence per share.
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MARKETS: UK stock indices are trading marginally lower Friday, buoyed by the confirmation that the UK economy has now grown above its pre-recession peak, but held back by a disappointing drop in German business confidence.
The US market is called to open, with the Nasdaq Composite seen down 0.4%, as the tech-heavy index is weighed upon by poorly received results from Amazon.com.
FTSE 100: down 0.1% at 6,816.65
FTSE 250: down 0.1% at 15,730.11
AIM ALL-SHARE: down 0.01% at 773.15
GBP-USD: down at 1.6980
EUR-USD: down at 1.3451
GOLD: up at USD1,295.08 an ounce
OIL (Brent): down at USD107.03 a barrel
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Other Top UK Corporate News
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Lloyds Banking Group confirmed it is in settlement talks with a number of government agencies regarding the setting of Interbank offered rates and other benchmarks, and said that it expects to incur penalties as a result. "Lloyds Banking Group confirms that it is in late-stage settlement discussions with a number of agencies. The settlements remain to be agreed and LBG expects they will include the payment of penalties. Lloyds Banking Group will update the market on these issues as appropriate," the bank said in a statement. The statement comes after the Financial Times reported that the bank is preparing to disclose it will pay GBP200 million to GBP300 million to regulators in order to settle allegations that it manipulated the London interbank offered rate.
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British Sky Broadcasting Group said it will acquire 21st Century Fox Inc's holdings in Sky Italia and Sky Deutschland for a total of GBP4.9 billion in cash, plus BSkyB's 21% stake in the National Geographic Channel, to form a new enlarged business, as it also reported a fall in pretax profit in the year to end-June. The much anticipated acquisition will consist of GBP2.07 billion in cash and the transfer of the National Geographic stake, valued at GBP382 million, for Fox's 100% ownership of Sky Italia, plus GBP2.9 billion in cash for Fox's 57.4% stake in Sky Deutschland. BSkyB also will make an offer to the minority shareholders in Sky Deutschland at EUR6.75 per share. To part-fund the acquisitions, BSkyB announced plans to place 156.1 million new shares, around 9.99% of its existing issued share capital.
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Pearson said it has retained its outlook for the full year as first-half revenues rose marginally, and its pretax loss widened in the first half, as the company was hit by increased restructuring charges and adverse currency movements. In an interim management statement for the first-half the Financial Times owner proposed an increased interim dividend of 17 pence, up 6% on the 16 pence per share paid last year, which the company said reflects its confidence in its prospects.
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GlaxoSmithKline is facing new allegations of corruption in Syria, where it has been accused of paying bribes to secure business, Reuters reported, citing an email from a whistle-blower. The allegations related to its former consumer healthcare operations in Syria which were closed in 2012 due to the worsening civil war in the country, the report said.
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Centrica said its North American subsidiary, Direct Energy, has agreed to sell its Ontario home-services business to EnerCare Inc for CAD550 million in cash and shares. The FTSE 100-listed British energy supplier said Direct Energy has nearly 1.9 million home services contracts in Ontario, to provide a range of plumbing, heating, ventilation, air conditioning and other related services. The CAD550 payment consists of CAD450 million in cash and CAD100 million of equity in EnerCare, which is subject to a 12 to 18 month lockup.
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Vodafone Group confirmed its outlook for the 2015 financial year, as it saw trading in line with expectations in the first quarter to end-June. Revenue fell 4.4% on an organic basis, meaning at actual exchange rates and including costs for mergers and acquisitions, during the quarter. Excluding these costs and at constant currency, revenue rose 6.2%. Vodafone said that its GBP19 billion Project Spring investment programme had taken off quickly, with capital expenditure nearly doubling year on year, and its 4G coverage in Europe up 20% to 52% in the last nine months. As a result of this increased coverage, data traffic growth in Europe rose to 53% year-on-year in the first quarter from 42% in the fourth quarter of the previous year.
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Anglo American said its pretax profit jumped in its first half, despite falls in profit at its Anglo American Platinum Ltd and Kumba Iron Ore Ltd subsidiaries, as improved performance, particularly at its copper operations, helped the company. The FTSE 100 miner said its pretax profit increased by 48% to USD2.95 billion for the six months ended June 30 from USD1.99 billion the previous year with production volumes up across its portfolio except platinum, with particular development at its copper division. The company said a 3% increase in its underlying earnings, which excludes special items and remeasurements, was down to greater focus on mining processes and costs, with its copper operations recording a 20% growth in underlying operating profit to USD760 million due to lower unit costs and increased sales volumes.
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Lonmin said it expects to return to normal production rates by the end of 2014 following major strike action by platinum miners in South Africa, which ended in June. The FTSE 250 listed company said that, due to the strike, it lost production of 192,700 platinum saleable ounces in its third quarter ended June 30 but it did manage to return to some production following the re-start of its processing division in May, achieving platinum metal in concentrate production of 23,618 ounces and refined platinum production of 36,255 ounces in June.
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African Barrick Gold increased its interim dividend, as it said it swung to a pretax profit in its first half, despite a fall in revenues. The FTSE 250-listed East Africa-focused gold production company said it recovered from major impairment charges in the year-earlier period and also had reduced costs. Pretax profit of USD62.2 million for the six months ended June 30 were compared to a pretax loss of USD857.3 million the previous year. ABG declared an interim dividend of USD1.4 cents per share, an increase of 40% on its previous interim dividend, as the company changed its dividend policy to be linked to its operational cash flow.
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United Utilities said trading in its second quarter was in line with group expectations as a rise in revenue was offset by higher depreciation and other operating costs, as anticipated. In an interim management statement for the period April 1 to July 24, the company said trading remains in line with internal expectations. Revenue rose in the period, reflecting the regulated price rise, but this was partially offset by the special customer discount of around GBP20 million which has been applied to this year's bills, as previously announced.
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AG Barr said that it anticipates revenue in its half-year to come in higher than its tough previous year comparatives after maintaining value and volume growth momentum in the period. The company said that it expects half-year sales revenue of GBP135 million, up 5.6% on the previous year, the metrics of which were 5% higher than the prior year's results. AG Barr said that its growth "continues to be well ahead of the total soft drinks market performance." Citing research data by Nielsen, the company said that for the period January 26 to July 12, 2014, it saw its value increase by 1.6%, whilst volume declined by 0.3%. "Our growth is well balanced across our core brands, all of which have responded positively to increased marketing activities, in the current period," said AG Barr.
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Cable and Wireless Communications said it is on track to deliver its medium term targets, as it saw a "solid" performance in its first quarter to end-June. The telecommunications company saw mobile organic revenue flat at constant currency, as mobile revenue growth was hampered by weaker broadband and television revenue growth, and declines in fixed voice revenue. Mobile revenue, which represents 55% of the company's revenues, was up 4% in the first quarter. In its LIME business, revenue growth was driven by strong subscriber additions in Jamaica, in Cayman after the successful introduction of 4G services and in Panama.
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AIM MOVERS
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Shares in Accsys Technologies are up, even though an arbitration tribunal has ruled that terminating Diamond Wood China Ltd's Accoya Wood exclusive licence was invalid, as the tribunal said that Diamond Wood can only claim for limited damages, if any, up to a maximum of EUR250,000. Belgravium Technologies is also trading higher; the company said it has seen trading in line with its expectations in the first half of 2014, as trading picked up significantly in the second quarter after a slow start. At the other end of the market sits Cyan Holdings. The lighting technology company said it has raised GBP3.5 million before expenses via a share placing of 1 billion shares at 0.35 pence each, and 500 million warrants at 0.60 pence each; it will use the proceeds from the placing for general working capital, business development, customer deployments and further product development work.
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Top Economics And General
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The UK economy expanded as expected in the second quarter underpinned by services and manufacturing, data showed. Gross domestic product grew 0.8% sequentially in the second quarter, the same rate as seen in the first three months of the year, preliminary data from the Office for National Statistics said today. The growth figure also matched economists' expectations. GDP was estimated to be 0.2% above the peak in the first quarter of 2008. GDP grew 3.1% from the same quarter a year ago, also in line with forecast.
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UK house prices rose at the slowest rate in more than a year in July, the results of a survey by Hometrack showed. House prices increased 0.1% month-on-month in July, which was slower than the 0.3 rise in June. The results of a survey by Markit Economics and Knight Frank released last week showed that current house price sentiment rose at a slower pace in July.
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Germany's business confidence declined for a third successive month in July and at a faster-than-expected pace, reports said, citing the survey results from the Ifo Institute. The Ifo Business Climate Index fell to 108, which was worse than the 109.4 score forecast by economists. In June, the index had eased to a six-month low of 109.7. The current conditions index dropped to 112.9, also much below economists' expectations for a print of 114.5. In June, the reading was 114.8.
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Israel's security cabinet on discussed a new ceasefire proposal for Gaza from US Secretary of State John Kerry, Israeli radio reported, as the fighting in the Gaza Strip intensified. The violence has spread to the West Bank, where at least two Palestinians were killed by Israeli forces during protests against the offensive in Gaza. Dozens were arrested and injured. More than 820 Palestinians have been killed in Gaza since the start of the Israeli offensive two weeks ago. In Israel, 32 soldiers and three civilians have died.
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The Japanese government was to consider imposing additional sanctions on Russia following the downing of Malaysia Airlines flight MH17, a news report said. The move was endorsed at a National Security Council meeting attended by top officials including Prime Minister Shinzo Abe, the Kyodo News agency reported, citing a government source. Japan will decide details of additional sanctions after the EU steps up its own sanctions against Russia, Kyodo reported.
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A piece of the fuselage of Malaysia Airlines flight MH17 and more bodies have been found in a wooded area at the crash site in Ukraine, Australian media reported. "We found human remains yesterday and more again today," Michael Bociurkiw, Organization for Security and Co-operation in Europe spokesman, told the Sydney Morning Herald. Bociurkiw visited the site in Donetsk with investigators from the Netherlands, Malaysia and Australia. The visit was the first for the team from Australia. Thirty-seven Australian nationals and residents were on the plane.
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French soldiers stationed in Mali have found wreckage belonging to an Air Algerie plane that disappeared from radar, airport officials said overnight, with all on board feared to have been killed. The Air Algerie plane disappeared from radar 50 minutes after take-off Thursday while flying over Mali's restive Gao region.
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Afternoon Watchlist (all times British Summer Time)
13:30 US Durable Goods Orders
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Monday's Key UK Corporate Events
XP Power Full Year Results
Forbidden Technologies Half Year Results
Eco Animal Health Full Year Results
Filtronic Full Year Results
Great Portland Estates Interim Management Statement
Goodwin Full Year Results
Aberdeen Asset Management Interim Management Statement
Cranswick Interim Management Statement
Hiscox Half Year Results
JKX Oil & Gas Half Year Results
National Grid Interim Management Statement
Reckitt Benckiser Half Year Results
Energy Assets Group Interim Management Statement
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Monday's Key Economic Events (all times British Summer Time)
14:45 US Markit Services and Composite PMI
15:00 US Pending Home Sales
15:30 US Dallas Fed Manufacturing Business Index
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