UK Services Growth Slows; BP Costs Rise

Arthi Gupta, Mayank Mehta and Sanjay Barot
05 Jul, 2010
New York City

The UK indexes gyrate on concerns of sustained global economic recovery. The UK services industry index falls for the third time in four months but international reserves rise in June. Lloyds Banking Group forms joint venture with Coller Capital.

[R]4:00 PM London – The UK indexes gyrate on concerns of sustained global economic recovery. The UK services industry index falls for the third time in four months but international reserves rise in June. Lloyds Banking Group forms joint venture with Coller Capital.[/R]

UK stocks traded lower after commodities declined and markets in New York were closed. European markets closed mixed and economic data in the region portrayed a mixed picture.

Gulf of Mexico oil spill disaster has cost BP Plc more than $3 billion so far. The outflow of oil from the ruptured well at the bottom of the Gulf of Mexico has increased voluminously.

In London FTSE 100 Index traded lower 0.52 or 0.01% to 4,837.57 and the pound edged lower to close at $1.514 and to close at €1.208.

The UK''s services sector activity expanded at its slowest pace in ten months in June as government austerity undermined confidence, according to a survey.

Markit Economics said the CIPS services purchasing managers'' index fell to a seasonally adjusted 54.4 in June from 55.4 in May.

The UK government''s net holdings of international reserves rose by $435 million in June to $34.8 billion, according to reports released by the Treasury today.

At the same time, the country''s gross foreign currency reserves decreased by $654 million during the month to $71.16 billion. The Bank of England''s net holdings of foreign currency and gold fell by $3.06 million in June to -$3.98 million.

The amount spent by oil giant British Petroleum to meet various expenses incurred due to the major oil rig accident in the Gulf of Mexico has crossed the $3 billion mark.

In an update on developments in its response to the worst oil slick in U.S. history, the company said the 76-day-old oil spill has so far cost it a total of $3.12 billion.

The cost includes containment costs, relief well drilling, grants to the Gulf states, claims paid, and federal costs.

Reports based on Senate subcommittee documents said BP is demanding that its partners, Anadarko and Japan''s Mitsui Oil Exploration Company, pay $400 million to recoup some of its losses caused by the accident.

Anadarko, however, has refused to accept any blame for the disaster, while Mitsui says it is yet to reach a conclusion on what happened on the Deepwater Horizon.

According to the latest estimates by US government scientists, anywhere from 35,000 to 60,000 barrels of oil per day were flowing from the leaking riser pipe. 44,500 personnel, more than 6,500 vessels, and about 110 aircraft are currently engaged in the response effort.

Lloyds Banking Group plc announced today the sale of 40 private equity investments in its Bank of Scotland Integrated Finance business to a new joint venture called Cavendish Square Partners LP. The JV is owned 70% by private equity firm Coller Capital, with Lloyds Banking Group owning a stake of nearly 30%.

The total cash consideration for Coller Capital''s majority stake is £332 million. This values the portfolio at about £480 million, which is a small premium to current book value. Subject to certain conditions, the deal is expected to complete in the third quarter of 2010.

Lloyds Banking Group said that the transaction was in line with the group''s strategy of divesting assets which are not core to its strategy.

Gainers & Losers

BP Plc, the oil and gas company rose 2.4% to 330.00 pence.

BT Group plc, the communications services company rose 0.4% to 127.10 pence.

Bunzl plc fell 0.5% to 660.50 pence after the international distribution and outsourcing company announced that it has acquired Etablissements Glorieux SA, which trades as Global Net, from Olivier and Luc Glorieux.

Genus plc fell 0.9% to 726.50 pence after the animal genetics company reported that trading in the final two months of the financial year has been in line with the board''s expectations and remains on course to deliver an improved underlying performance in the second half of the year.

Falkland Oil and Gas Limited fell 5.4% to 230.00 pence.

Lloyds Banking Group plc, the financial services group fell 1.1% to 54.12 pence.

NCC Group plc rose 6.8% to 442.00 pence after the software testing specialist said fiscal year 2010 revenues rose 15% to £53.7 million from £46.8 million a year ago. Net profit for the year rose 22% to £9.4 million or 27.0 pence per diluted share compared to net profit of £7.7 million or 22.1 pence per share a year ago.

Premier Oil plc rose 2.2% to 1,353.00 pence after the independent exploration and production company announced that the Catcher South West Appraisal sidetrack well located in the UK Central North Sea, has encountered excellent quality oil bearing Cromarty sandstones.

Rio Tinto Plc fell 2.1% to 2,873.00 pence after the mining company has finished the divestment of its Alcan Packaging business with the completion of sales of its two outstanding assets.

Serco Group plc fell 0.7% to 563.50 pence after the business services company announced that its consortium has signed a contract with the Ministry of Justice to provide and operate a new prison at Belmarsh West, London.

St. Modwen Properties plc rose 1.5% to 174.80 pence after the regeneration specialist said first half revenues rose 34.9% to £58.3 million from £43.2 million a year ago. Net profit for the first half was £26.3 million or 13.1 pence per diluted share compared to net loss of £79.9 million or 57.7 pence per share a year ago.

T. Clarke plc, the electrical engineering and contracting company rose 3.8% to 135.00 pence.

Travis Perkins plc fell 0.4% to 751.50 pence after the builder merchant and home improvement retailer agreed to acquire The BSS Group plc.