UK Indexes Down 2.2%; Micro Focus Plunges

Arthi Gupta
11 Aug, 2010
New York City

The UK indexes drop after the BoE forecasted inflation above 2% and weak economic growth outlook. The jobless allowance claimants fell 3,800 and consumer confidence plunged in July and mortgage lending rose in June. Balfour Beatty secured construction contract at Heathrow Airport of

[R]4:30 PM London – The UK indexes drop after the BoE forecasted inflation above 2% and weak economic growth outlook. The jobless allowance claimants fell 3,800 and consumer confidence plunged in July and mortgage lending rose in June. Balfour Beatty secured construction contract at Heathrow Airport of £460 million.[/R]

In London, FTSE 100 Index traded lower 118.63 or 2.21% to 5,257.79 and the pound edged lower to close at $1.5683.

The Bank of England raised its inflation forecast today and projected a weaker outlook for economic growth.

The BoE Governor Mervyn King said the British economy is facing a difficult rebalancing away from private and public consumption and towards net exports. He further added it would take several years before the economy adjusts back to anything that can remotely be called as normal.

The BoE said in its quarterly Inflation Report that GDP growth is estimated to slow in the third quarter after expanding 1.1% in the second quarter of this year and economic growth to average around 3% in two years. In May, the central bank projected more than 3% growth in 2011.

The Bank of England said in its August Inflation Report today that inflation will likely remain above the 2% target until the end of 2011 due to the rise in the VAT rate from next year, before heading down in 2012.

The bank''s monetary policy committee said, however, that the prospects for inflation were ""highly uncertain"" and that they were ""ready to respond in either direction"" with monetary policy. It forecast inflation to be around 1.4% in two years'' time on market rates.

The number of jobless allowance claimants in the UK fell 3,800 to 1.46 million in July, according to data published by the Office for National Statistics today.

The statistics office also said the unemployment rate remained unchanged at 7.8% in the three months to June period with the number of unemployed totaling 2.46 million.

Consumer morale in the UK slumped to its lowest level in more than a year in July, according to the results of a new survey released today. Nationwide Building Society''s consumer confidence index fell to 56 in July from an upwardly 63 in June.

British home purchase lending increased significantly in June, according to a report released by the Council of Mortgage Lenders today.

Lending for remortgage also increased modestly in June. There were 27,000 loans for remortgage, worth £3.4 billion, up from 26,000 in May 2010, but down from 34,000 in June 2009.

There were 136,000 home purchase loans worth £19.7 billion for the second quarter. This is 20% higher by volume and value than the first quarter.

Balfour Beatty plc announced the signing of the £460 million construction contract to deliver the second phase of a satellite building to support Heathrow Airport''s new Terminal 2 - T2B for BAA.

Balfour Beatty said it would combine its design, construction, ground engineering, specialist mechanical and electrical expertise and the professional services capabilities of Parsons Brinckerhoff to deliver the project.

The company has delivered the first phase of T2B ahead of program in November 2009. Balfour Beatty added that it would incorporate an underground link from the satellite to the main building of the new Terminal 2 development and a large baggage facility in the basement which would be subject to fit-out in the future. Construction work is due to commence in October 2010.

Additionally, Balfour Beatty announced that it reached financial close on the £230 million PPP street lighting contract for Coventry City Council.

The company added that the 25-year concession would involve the design, installation and maintenance of 33,000 street lights and 6,000 signs and bollards, during the 5-year capital investment period, and the ongoing maintenance of all existing and new equipment. Balfour Beatty would invest equity of about £6 million into the concession.

Gainers & Losers

Balfour Beatty plc dipped 0.84% to 260.70 pence after the support services group and building contractor said group revenue for the first half-rose 4.8% to £4.60 billion from £4.39 billion in the comparable period. Pre-tax profit in the period including exceptional items and amortization gained 24.6% to £81 million from £65 million last year.

Grainger plc dropped 0.96% to 113.20 pence after the residential property firm stated total sales pipeline to the end of July 2010 decreased 14% to £154.8 million, compared to £180 million last year.

Micro Focus International Plc plunged 27.14% to 305.30 pence after the software firm said that its overall performance for the three month to July 31 was below management''s expectations, caused by the delayed timing of significant transactions beyond the end of the first quarter together with continued weakness in the higher volume low value deals across its three lines of business.

Shire Plc edged lower 1.99% to 69.78 pence after the specialty biopharmaceutical company announced the divestiture of its brain stimulant medicine Daytrana to Noven Pharmaceuticals, Inc., granting Noven global marketing rights for the medicine, effective October 1, 2010.

Standard Life plc tumbled 3.23% to 209.40 pence after the insurer stated first half total net revenue surged 145% to £4.88 billion compared to £1.99 billion in the prior-year period. The company''s IFRS pre-tax operating profit from continuing operations for the first-half rose 10% to £182 million from £166 million in the previous year.

The Directors proposed an interim dividend for 2010 of 4.35 pence per ordinary share.

S&U PLC gained 2.82% to 519.25 pence after the after the consumer and motor finance provider reported that trading for the six months ended July 31, 2010 was in line with market expectations and the company plans to issue its interim results on September 23, 2010.

Thomas Cook Group plc declined 1.85% to 180.50 pence after the provider of leisure travel services said it expects underlying operating profits for the full year, excluding the impact of the volcanic ash cloud, to be at the lower end of market expectations.

The Group noted total financial impact from Icelandic volcanic ash disruption is currently estimated at £81.9 million compared with its original estimate of £60 million - £80 million.