Thursday 26 August, 10:15 AM BST (Thomson Financial): European markets are
on a positive footing in the wake of gains on Wall Street overnight. Corporate
news has picked up, with Swiss Re beating expectations as first half earnings
nearly doubled to of 1.4 billion Swiss francs. Fortis has also surpassed
market forecasts as first half net income tripled to 2.078 billion euros.
Scor's first half net income came to 58.1 million euros compared to 41.9
million euros in the first half of 2003 but still fell short of expectations.
Elsewhere, shares in Ahold are falling sharply with its improved earnings
still falling short of forecasts as poor U.S. sales dampen lower interest
payments. In addition, its newly appointed chairman Karel Vuursteen has
resigned for personal reasons. Rentokil has disappointed investors as first
half pre-tax profits declined by 10.0% to 180.4 million pounds. Hotel group
Hilton has posted a 72% rise in first half pre-tax profits to 189.7 million
pounds, led by its betting and gambling operations. Hotel profits were up
19.6% but a full recovery is not envisioned before 2005.
In macroeconomic news, the German Ifo business climate index has declined
to 95.3 in August from 95.6 in July but still above forecasts. The business
expectations index dipped to 96.0 from 97.1 in July. Swedish retail sales in
July increased by 3.2% year-on-year but were still below expectations. Danish
unemployment was slightly down to 6.2% in July versus 6.4% in June but still
in-line with expectations. Meanwhile, the Confederation of British Industry
has upgraded its 2004 U.K. economic growth forecast to 3.4% from 3.2% but
downgraded its 2005 forecast to 2.8% from 3.0%, citing high oil prices and
rising U.K. interest rates.
London's FTSE-100 Index has risen by 10.20 points or 0.23% to 4421.80,
while Paris's CAC-40 Index has climbed by 22.14 points or 0.62% to 3617.40.
Milan's MIB-30 Index has gained 117 points or 0.43% to 27,077 and Frankfurt's
DAX Index is trading up by 29.80 points or 0.79% to 3818.68.
* Swiss Re beat expectations as first half earnings increased to 1.4
billion Swiss francs from 691 million francs for the first half 2003.
Annualised return on equity at 15.6% was above Swiss Re's average three-year
target of 13%. Net premiums earned declined 2% to 14.1 billion francs and the
return on investment was 5.8% compared to 4.8% last year. Property & Casualty
Business Group operating income grew by 79% to 1.5 billion francs, although
premiums earned declined by 4% to 7.5 billion francs due to fewer non-
traditional transactions. In the Life & Health Business, Group operating
income increased by 34% to 633 million francs, with premiums stable at 5.0
billion francs. Financial Services Business Group contributed operating income
of 359 million francs, up 32% year-on-year as premiums grew by 2% to 1.6
billion francs.
* Fortis managed to surpass market forecasts as its first half net income
tripled to 2.078 billion euros with earnings per share of 1.60 euros compared
to 0.52 euros last year. Net operating profit almost tripled to 1,829 million
euros. In the Banking business net operating profit increased by 36% to 1,157
million euros and in the Insurance business net operating profit increased by
800 million euros to 766 million euros.
* Scor's net income in the first half of 2004 came to 58.1 million euros
compared to 41.9 million euros in the first half of 2003, up 38.7% but short
of expectations. Operating income amounted to 70.6 million euros, an increase
of 11.4%. However, gross premiums written in the first half of 2004 totalled
1,308 million euros, down 37% year-on-year and in-line with corporate
guidance. This was largely due to the expected cutback in premiums issued by
the Large Corporate Accounts branch and to the non-renewal of a major Life
reinsurance policy booked in the first quarter of 2003.
* Ahold posted second quarter net income of 32 million euros compared to 3
million euros last year, primarily caused by lower net interest expenses
related to the early repayment of debt in the second quarter and during 2003.
Net sales amounted to 12.3 billion euros, down 4.9% year-on-year. Operating
income declined to 169 million euros from 222 million euros last year. Europe
Retail and U.S. Foodservice reported higher operating income while U.S. Retail
reported significantly lower operating income. U.S. Retail and South America
were both negatively impacted by fixed asset impairment charges. Net debt only
changed marginally in the second quarter of 2004.
* Rentokil disappointed as first half pre-tax profits declined by 10.0% to
180.4 million pounds. Earnings per share declined by 7.5% to 7.26 pence.
Turnover increased by 0.6% to 1,200 million pounds. Interim dividends per
share were up 10.3% to 1.93 pence. The company said the overwhelming common
theme was a concern at the operational issues facing the group - not the make
up of the group.
* Hotel group Hilton said its first half profit before taxation, goodwill
amortisation and exceptional items grew by 72% to 189.7 million pounds.
Turnover amounted to 5,634 million pounds compared to 3,969 million pounds
last year and the dividend per share was up to 3.60 pence from 3.40 pence
before. Ladbrokes' profit was up 51% to 153.7 million pounds with strong
performances in all channels. EGaming profits were up 95% to 12.1 million
pounds with particularly strong growth from the sportsbook and poker sites.
Meanwhile, hotel profits were up 19.6% to 67.1 million pounds. Looking ahead,
Hilton continues to see a renaissance in betting and gaming, driven by
increased TV sports coverage and innovative technology and will be fully
exploited by Ladbrokes. On the hotel front, it does not anticipate a full
recovery before 2005.
* Engineering group Tomkins unveiled first half pre-tax profits of 101.4
million pounds compared to 94.7 million pounds last year. Operating profits
before exceptional items and goodwill were up to 144.5 million pounds from 136
million pounds. Sales were slightly down to 1,548 million pounds due to
adverse currency translation effects. All three of its business groups
reported double-digit margins. The Board declared an interim dividend of 4.83
pence per share, representing an increase of 5% year-on-year.
* Process solutions group Invensys posted first half operating profits of
16 million pounds compared to 17 million pounds last year, in-line with market
forecasts. The operating margin of retained businesses was maintained at 2.6%.
Sales were slightly down to 611 million pounds from 653 million pounds last
year. Net debt was cut by 273 million pounds to 713 million pounds, and other
legacy liabilities, including pension deficits, reduced by 48 million pounds.
* ABN Amro announced the withdrawal of its ordinary share listing from a
number of stock exchanges. The shares will no longer be quoted on the London,
Frankfurt, Hamburg, Dusseldorf, Zurich and Singapore exchanges. The bank found
that the costs and requirements of these listings outweighed the benefits. The
shares will continue to be listed on the Euronext and New York exchanges. The
introduction of new trading products by the London and Frankfurt exchanges
means that it will still be possible to trade in the U.K. and Germany.
* Roche submitted a Marketing Authorisation Application to the European
health authorities for its new cancer drug Tarceva (erlotinib) for the
treatment of advanced non-small cell lung cancer. The application is based on
data from a pivotal clinical trial, which saw a 42% improvement in survival
rates compared to those on placebo.
Simon.Tse@Thomson.com; Thomson Financial
This is Thomson Financial Corporate Group's Europe Market Commentary. The
information herein is believed to be true and accurate. If you have any
questions please e-mail James Sang at james.sang@tfn.com. For more information
about Thomson Financial, please visit our web site at
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SOURCE Thomson Financial Corporate Group
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