FTSE Rises 2.5%; Ocado Offering

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

The UK indexes advance after commodities and banks lifted investor sentiment. The British Chambers of Commerce reports strong economic growth in the second quarter. Ocado indicates public offering price range between 200 and 275 pence a share.

[R]4:00 PM London – The UK indexes advance after commodities and banks lifted investor sentiment. The British Chambers of Commerce reports strong economic growth in the second quarter. Ocado indicates public offering price range between 200 and 275 pence a share.[/R]

U.K. equities and Asian markets surged after China region stocks rose nearly 2%. UK contemplates limiting redundancy payments for civil servants.

In London FTSE 100 Index traded higher 124.34 or 2.58% to 4,947.87 and the pound edged higher to close at $1.516 and edged lower to close at €1.205.

The British economy will expand between 0.6% and 0.7% in the second quarter, the British Chambers of Commerce reportedly said in its quarterly economic survey released today. The economy grew 0.3% in the first quarter.

The survey found that the domestic sales balance for manufacturers rose sharply to 30 from 1 and that for service providers stood at 12, up from 6 in the first quarter. The index for manufacturers'' export sales climbed to 31 and that among service providers improved to 13 in the second quarter. BCC collected data from more than 5,600 businesses.

The BCC Chief Economist David Kern said a very tough fiscal policy is in place and this means the risks of a double-dip recession is greater. It makes it more necessary for the Bank of England to keep interest rates low.

The Bank of England is set to announce its interest rate decision on July 8. The central bank is widely expected to leave the key rate unchanged at a record low of 0.5%.

The British government is planning to limit the amount of redundancy payments made to civil servants, as part of the government''s deficit reduction plan.

The proposed bill would limit all the compulsory redundancy payments at 12 months'' pay and voluntary exits at fifteen months salary. However, accrued pension rights will not be affected by the new legislation.

The government is proposing to introduce a legislation as soon as possible to cap the payments, Minister for Cabinet Office Francis Maude said today.

""The huge deficit we inherited means there is a real urgency now for change. It is for this reason, and in the light of the current deadlock, that we have had to reluctantly start this process today,"" Maude said.

Ocado Group Plc, the online grocer announced today the price range for its initial public offering between 200 pence and 275 pence per share, valuing the company between £800 million to £1.1 billion.

The maximum number of shares in the offering is limited to 257.7 million, comprising up to 102.5 million new shares, which will result in raising net proceeds of about £200 million.

Ocado said its market capitalization at flotation would be £1.18 billion, based on the mid-point of the price range for the offering and including the new shares expected to be issued in the offering.

The company said that Goldman Sachs International, J. P. Morgan Cazenove and UBS Ltd., are acting as joint sponsors, global-coordinators and bookrunners.

Barclays Capital and HSBC Bank Plc are acting as co-bookrunners and Jefferies International Ltd., Lloyds TSB Corporate Markets and Numis Securities Ltd., are acting as managers.

British Petroleum revealed that it had spent more than $3 billion in connection with the oil spill in Gulf of Mexico that includes settlement of more than 50% of the claims for compensation.

Gainers & Losers

Anite plc fell 0.7% to 35.00 pence after the provider of information technology solutions said fiscal year 2010 revenues fell 12.5% to £78.8 million from £90.1 million a year ago. Net loss for the year was £3.4 million or 1.2 pence per diluted share compared to net profit of £36.3 million or 10.8 pence per share a year ago.

Balfour Beatty plc rose 2.7% to 243.10 pence after the contractor and infrastructure group said that trading performance continues to be consistent with expectations for the year.

BHP Billiton plc rose 4.1% to 1,754.00 pence. Chairman Jac Nasser noted in a letter to shareholders that the revised profit tax regime only applies to new iron ore and coal projects. And the effective rate is 30% which after deduction is 22.5%. The tax is calculated based on the value of the resources at the mine level and adjusted for all extraction cost.

easyJet plc rose 1.9% to 399.70 pence after the discount carrier said that the number of passengers traveled in June jumped over 9% to 4.5 million. A proportion of the number of seats available for passengers in June was 87.2%, up 0.9% points from 86.3% in the same month last year.

N Brown Group plc fell 5.0% to 242.00 pence after the direct home shopping retailer said that in the eighteen weeks ended July 3, total group revenue increased 1.1% with sales 0.1% ahead on a like-for-like basis.

PartyGaming plc rose 6.1% to 234.30 pence after the online gaming company said that overall trading since the end of April has been in-line with the board’s expectations.

Persimmon PLC rose 5.8% to 368.70 pence after the housebuilder said that sales prices and margins have continued to increase from the beginning of the year.

Punch Taverns plc rose 5.3% to 68.00 pence after the pub company said that market conditions remain challenging given the relatively weak UK consumer environment. Trading during the World Cup has been good with like-for-like sales growth over this period and remains on track to meet expectations for the financial year.

Spice plc surges 10.1% to 59.50 pence after the provider of outsourced utility support services said fiscal year 2010 revenues rose 11% to £310.7 million from £279.6 million a year ago. Net loss for the year was £56.2 million or 2.70 pence per diluted share compared to net profit of £17.2 million or 5.01 pence per share a year ago.

Spirax-Sarco Engineering plc rose 8.0% to 1,467.00 pence after the manufacturer of boiler and pipeline control valves said trading conditions continue to be positive and sales for the first half-year were ahead 8% at constant currency. Adjusted operating profit margin shows a strong improvement over the 15% in the first half of 2009 and is expected to be above 19% for the first half of 2010.

Tullow Oil plc rose 3.2% to 1,075.00 pence after the independent oil and gas company said that it has been a very good first half for Tullow and expects higher revenues for the first half, due to the increase in realized commodity prices during the year.

Ultra Electronics Holdings plc rose 2.0% to 1,560.00 pence after the defense industry supplier has been awarded a contract worth up to $650 million over seven years.

Xchanging plc rose 1.4% to 199.90 pence after the business processor has successfully won a contract renewal with the world’s largest retail organization.