Thursday 26 August, 5:00 PM BST (Thomson Financial): European markets
ended the day higher, led by the media sector on news that Vivendi Universal
had received permission from the French government to file under a new tax
regime that will save around 3.8 billion euros over the coming years. Shares
in ITV outperformed the sector in the wake of a bullish outlook from a leading
broker. Technology stocks were also strong, led by Atos Origin after a leading
broker said it expects robust earnings ahead of its first quarter results. The
auto sector was higher, with shares in DaimlerChrysler up on news that
Mitsubishi Motors will continue alliance projects with the German automaker;
contrary to press reports of a potential scale down.
Among the insurers Swiss Re and Fortis produced better-than-expected first
half earnings. Scor's first half net income increased but still fell short of
expectations. Elsewhere, shares in Ahold fell sharply as improved earnings
still fell short of forecasts as poor U.S. sales dampened lower interest
payments. In addition, its newly appointed chairman Karel Vuursteen resigned
for personal reasons. Rentokil also disappointed investors as first half pre-
tax profits declined by 10.0% to 180.4 million pounds. Hotel group Hilton
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 declined to
95.3 in August from 95.6 in July but was still above forecasts. The business
expectations index dipped to 96.0 from 97.1 in July. Meanwhile, 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. In the U.K., the
Confederation of British Industry upgraded its 2004 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 interest rates.
London's FTSE-100 Index rose by 42.30 points or 0.96% to 4453.90, while
Paris's CAC-40 Index climbed by 34.58 points or 0.96% to 3629.84. Milan's MIB-
30 Index ended up by 124 points or 0.46% to 27,084 and Frankfurt's DAX Index
gained 43.40 points or 1.15% to 3832.28.
* Swiss Re beat expectations as first half earnings increased to 1.4
billion Swiss francs from 691 million francs for the first half of 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, with its first half net
income tripling 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
still 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 but
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 and earnings per share declined by 7.5% to 7.26
pence. Turnover increased by 0.6% to 1,200 million pounds and the interim
dividends per share was 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 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, 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.
* Greek telecom incumbent OTE reported a 62% drop in second quarter net
profit mainly due to a continuing fall in fixed-line revenue and higher
operating expenses. Net profit fell to 45 million euros in the three
months ended June 30 from 117.7 million euros a year earlier, below market
forecasts. Earnings before interest, tax, depreciation and amortization
(EBITDA) fell to 451.1 million euros from 485.9 million euros a year
earlier. Revenues rose 5.7% to 1.3 billion euros helped by strong mobile
sales and Romanian unit Romtelecom helped compensate for a fall in local
fixed-line revenue.
* Vivendi Universal has received permission from the French government to
file under a new tax regime that will save around 3.8 billion euros over
the coming years. The French Finance Ministry said as a result of the new
tax status, Vivendi had made a pledge to help create 2,100 new jobs in
distressed regions of France over the next five years.
* 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.
* Shares in Roche ended higher after the company 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.
* The U.S. Department of Justice approved Syngenta's acquisition of
Advanta, one of the world's leading seed companies, as announced on 12
May. The transaction is expected to close during the third quarter of
2004.
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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