Member Info for jange

"The regulatory barriers are less material [to the potential News Corporation deal] than the Random House merger option, the exit immediate and the consideration cash." Under the terms of the deal neither Pearson nor Bertelsmann may sell any part of their shareholding in Penguin Random House for three years. Pearson also announced its nine month figures, saying it was sticking with full year sales predictions and operating profits despite tough conditions. The company said that sales were up 5% and operating profit down 5% in the first nine months of the year. Sales were driven by good growth at International Education and the FT Group and a 'resilient' performance in North American Education. The drop in operating profits reflected the sale of FTSE in 2011, acquisition integration costs and continued weakness in UK professional training, the firm said. Its Professional Education division struggled, with the take-up of new training programmes being slower-than-expected. As a result, the company expects full-year profits in Professional Education to be significantly lower than in 2011. The highlight was International Education, where sales were up 13% after nine months.

Marjorie Scardino, Chief Executive of Pearson, said the combination would "greatly enhance" Penguin's fortunes and its opportunities. The company said the combined organisation would have a stronger platform and greater resources "to invest in rich content, new digital publishing models and high-growth emerging markets". It also said there would synergies from shared resources such as warehousing, distribution, printing and central functions. But the merger was not met with quite such enthusiasm by some company analysts. There had been reports that News Corporation, owner of HarperCollins publishing house, had joined the race with a bid for Penguin worth in the region of £1bn. David Reynolds at Jefferies International said he "much preferred" this outcome to the Random House merger. "We see book publishing, like newspaper publishing as particularly challenged by digital disruption," he said.

Financial Times owner Pearson drifted lower after it announced the merger of Penguin books and rival publisher Random House. The deal would create a firm responsible for publishing a quarter of English language books worldwide. The news came as Pearson released figures that showed in the first nine months of the year Penguin revenues fell 1% compared to the same period in 2011. Under the terms of the agreement, Penguin and Random House will combine their businesses in a newly-created joint venture named Penguin Random House. However, it will not be a merger of equals, with Random House's parent firm, Bertelsmann, to own 53% of the joint venture and Pearson taking 47%. Bertelsmann will nominate five directors to the board of the new company and Pearson will nominate four.

IMPs, or Imperial Tobacco, is set to publish full year results on Tuesday and the smoke signals from the fags maker is that the performance will be quite varied by region. Tobacco net revenues are expected to be up by around 4% with particularly good performances in its Eastern Europe, Africa & Middle East and Asia-Pacific regions. However, stick equivalent volumes are expected to decline by up to 3% , the majority of which is due to ongoing market weakness in Ukraine and Poland and compliance with international trade sanctions against Syria. Adjusted earnings per share are seen rising to 199.54p from 188p the year before. Profit before tax is tipped to rise to £2,521m from £2,153m the previous year.

Positive Points: Pearson and Bertelsmann agree to combine Penguin and Random House, creating a world leading trade publisher and marks the first tie-up between the world’s six global book publishers. Management reiterated its previous full-year outlook of growth in sales and profits at constant exchange rates. This will be supported by what is traditionally busy fourth quarter in education and consumer publishing. Pearson enjoys strong global market positions. It is both the largest education company and the largest book publisher in the world. Pearson has over recent years made acquisitions in Brazil, China, South Africa, Nigeria and India. The board has previously highlighted that it was "benefiting from recent portfolio changes, using the proceeds from disposals to invest in fast-growing businesses in developing economies and digital services." The group's dividend policy remains progressive.

Negative Points: Uncertainty over potential national and local government spending cuts in the US continues to cast a shadow over the group's Education business. Textbook publishing remained generally weak, particularly in markets where purchases are publicly-funded, said the group. The weak state of the physical retail book market is a risk to the publishing industry. The outlook for advertising markets, (for the Financial Times) remains subject to macro-economic conditions. Currency volatility can work both for and against the company. With the group generating approximately 60% of its sales in the US, the movement between the pound and the dollar remains significant.

Financial Highlights: Pearson increased sales by 5% in the first nine months of 2012, with good growth at International Education and the FT Group and a resilient performance in North American Education. Operating profits were 5% lower, reflecting the sale of FTSE in 2011, acquisition integration costs and continued weakness in UK professional training. As at 30 Sept, net debt stood at £1.1 billion due to acquisitions ( £499m at the beginning of the year).

Interim statement: Pearson reiterated its full year outlook of growth in sales and operating profits, in spite of challenging conditions. The company said that sales were up 5% and operating profit down 5% in the first nine months of the year. Sales were driven by good growth at International Education and the FT Group and a 'resilient' performance in North American Education. The drop in operating profits reflected the sale of FTSE in 2011, acquisition integration costs and continued weakness in UK professional training, the firm said. A separate announcement revealed Bertelsmann, the German media company and Pearson are merging Random House and Penguin, their respective publishing units, in what is seen as a response to the rapid changes seen within the evolution of ebooks. The joint venture, to be known as Penguin Random House will see Bertelsmann own 53% of the joint venture and Pearson, 47%.

Company overview Pearson is one of the world's major publishing groups, with a series of publishing brands (Penguin, Dorling Kindersley, the Financial Times, Prentice Hall, Scott Foresman, Longman and many others). The conglomerate is focused tightly on three core businesses: 1) Education 2) The Financial Times Group 3) Penguin Consumer Books. The group operates from 60 countries and has over 30,000 employees.

Matthew Walker, Analyst at Nomura He retains a 'reduce' rating and a target price of 1,250p, saying: "On balance we would see this as good news for Pearson for several reasons: 1) Investors and analysts don't like the consumer books industry which has low or no growth, high capital intensity and low margins. It has an uncertain structural future in the face of e-books and self publishing. The exit multiple for anyone buying into books is very uncertain. 2) The sales of Random House are around £1.4bn versus Penguin's sales of around £1bn, providing a reason why Bertelsmann might have a majority of the possible joint venture. Depending on certain factors, this might allow Pearson to deconsolidate Penguin. With negative organic growth, Penguin by our calculations represents a drag on organic growth of around 50 basis points. 3) There may be synergies in combining the two companies in marketing, staffing, warehousing and printing and distribution. In our view, the downside is that a joint venture is not as good as a sale, suggesting there may not be a bidder at the price required for the Penguin asset. We will review our forecasts if and when a transaction is announced and terms become clearer."

News of the possible merger between Random House Publishing and Penguin has prompted a couple of notes from brokers on Pearson. Alex DeGroote, Analyst at Panmure Gordon DeGroote has a 'hold' recommendation and 1,300p price target, saying: "We see this potential deal as a defensive industry merger, based on increased scale and cost synergies, but not overly material to the investment case." He adds: "Pearson is one of the worst performing mid/large UK media caps this year. Earnings momentum has been negative as a result of increased profit and loss spend, and the net effect of Pearson mergers and acquisitions. However, at these levels there should be some yield support for the shares. In terms of the break-up, we imagine the market expected corporate activity around the FT, rather than Penguin." Steve Liechi, Analyst at Investec Liechi maintains his 'hold' rating and 1,240p target price, saying: "We view this as a possible net positive but not a game changer - while we see some earnings per share upside via near-term merger/cost synergies in a pressured top line business, this does not imply cash returns to shareholders or re-investment in long-term growth Education assets."

TYPO BELOW....................

Gibson said: "The daily chart shows that Reckitt shares have been in a rising trend channel since this time last year, with the floor of the channel currently running through 3,600p. "While there is no end of day close back below the late 2011 uptrend line, we expect 3,900p to be hit at the turn of the year." Shares were trading down 0.67% at 3,725p in morning trade on Monday, though are still up over 1.5% over the last week.

Gibson said: "The daily chart shows that Reckitt shares have been in a rising trend channel since this time last year, with the floor of the channel currently running through 3,600p. "While there is no end of day close back below the late 2011 uptrend line, we expect 3,900p to be hit at the turn of the year." Shares were trading down 0.67% at 3,725p in morning trade on Monday, though are still up over 1.5% over the last week.

Galvan Research has labelled consumer goods giant Reckitt Benckiser as a 'buy' after the company surpassed expectations in the third quarter. "Time and time again the excitement hungry City has downplayed the fundamentals at Reckitt's, only to be surprised when the group goes on to beat expectations," said Galvan's head of research Andrew Gibson. "On this basis alone, and backed by the reiteration of FY 2012 guidance, Reckitt shares are rated a 'buy' at Galvan Research, a view also supported on a technical level with a charting breakout towards 3,900p." The The Cillit Bang, Vanish and Nurofen manufacturer reported some strong third-quarter results last Wednesday which were "underpinned by an excellent performance in emerged markets and an improved performance in Europe North America." Net revenue in the three-month period was down 1% at £2,422m, but up 4% at constant exchange rates. For the full-year, the company said it still expects like-for-like net revenue growth of 200 basis points above the market growth rate. "We now expect market growth to be at the top end of the 1-2% range," said Chief Executive Rakesh Kapoor.

Panmure Gordon has reiterated its positive stance on insurance giant Standard Life ahead of the firm's third-quarter trading update on Wednesday. "Standard Life's share price has performed well since the better than expected H1 Results. The shares are up 38% YTD [year to date] and we believe that they will continue to rally given the 16% embedded value discount that the shares are trading at (sector 13% discount)." With the "growing and attractive" dividend yield of 5.1% compared favourably with the 4.9% sector average, the broker has retained its 'buy' rating and 325p target price for the stock.

South African operation disruptions, production curtailments and a Chief Executive Officer (CEO) exit all add to near-term risks for Anglo American, according to Nomura which has slashed its estates for the mining group. "We have cut our near-term earnings forecasts by ~20% on average and now sit ~7% below consensus on average on the back of lower iron ore price forecasts and lower production. Looking forward, Q4 is likely to yield further production disappointments," Nomura said. Its price target for Anglo American has been reduced from 2,100p to 2,000p, accordingly. A 'neutral' rating for the stock has been retained. Galvan Research has labelled consumer goods giant Reckitt Benckiser as a 'buy' after the company surpassed expectations in the third quarter. "Time and time again the excitement hungry City has downplayed the fundamentals at Reckitt's, only to be surprised when the group goes on to beat expectations. On this basis alone, and backed by the reiteration of FY 2012 guidance, Reckitt shares are rated a 'buy' at Galvan Research, a view also supported on a technical level with a charting breakout towards 3,900p," said Galvan's head of research Andrew Gibson.

Panmure Gordon has reiterated its positive stance on insurance giant Standard Life ahead of the firm's third-quarter trading update on Wednesday. The broker estimates that worldwide life and pension sales will come in at £14,401m PVNBP [present value of new business premiums] for the first nine months of the year, down 7% year-on-year. For the third quarter alone, they are expected to be flat at £4,324m PVNBP. "This level of new business growth is a relative improvement from that reported in Q1 2012 at £5040m PVNBP (-13%) and Q2 2012 at £5,037m PVNBP (-10%)," said analyst Barrie Cornes. Analysts' forecasts for the nine-month period range between £14,101m and £14,877m so the broker is very close to the consensus estimate. Panmure expects assets under administration (AUM) to register £210.2bn at September 30th (consensus: £209.2bn), up from £198.4bn at the start of the financial year. However, worldwide long-term savings net flows for the nine months to the end of September are expected to be down 36% on the year at £2.15bn "reflecting the impact of slowdown in the economy and investment markets", Cornes said. "Standard Life's share price has performed well since the better than expected H1 Results. The shares are up 38% YTD [year to date] and we believe that they will continue to rally given the 16% embedded value discount that the shares are trading at (sector 13% discount)." With the "growing and attractive" dividend yield of 5.1% compared favourably with the 4.9% sector average, the broker has retained its 'buy' rating and 325p target price for the stock.

Trans-Siberian Gold: Seymour Pierce maintains buy rating.

Smith & Nephew: Exane BNP Paribas ups target from 725p to 775p, outperform rating kept.