UK Manufacturing at 16-Year High

Arthi Gupta
08 Sep, 2010
New York City

The UK indexes traded higher after home prices rose in August and the economy expanded at a slower pace in the quarter to August. Vodafone agreed to sell China Mobile stake for

[R]4:00 PM London – The UK indexes traded higher after home prices rose in August and the economy expanded at a slower pace in the quarter to August. Vodafone agreed to sell China Mobile stake for £4.3 billion. Dana Petroleum proposed to buy certain assets of Petro-Canada UK for £240 million.[/R]

Irish consumer confidence indicator fell in August and the UK economy expanded at a slower pace in the quarter to August.

In London, FTSE 100 Index traded higher 31.67 or 0.59% to 5,439.49 and the pound edged higher to close at $1.5477.

The UK economy expanded 0.7% sequentially during the three-month ending August, slower than the revised 1.3% growth recorded during the May to July period, the National Institute of Economic and Social Research said today.

The annual rate of growth, according to the institute, was 2.7% during the three months through August, slower than the upwardly revised 5.3% growth during the three months ending in July. In the second quarter, GDP rose 5% annually.

The UK home prices rose for the second consecutive month in August, according to a survey conducted by Lloyds Banking Group Plc''s Halifax division.

Home prices recorded a modest 0.2% monthly growth in August compared to a 0.7% increase in July. Year-on-year, home prices rose 4.6% in August as against 4.9% in July.

The UK manufacturing output rose for a third month, lifting the annual growth to a near 16-year high in July.

The UK manufacturing output recorded an annual growth of 4.9% in July compared to the 4% growth in June, the Office for National Statistics said in a report today.

In manufacturing, output increased in nine of the 13 sub-sectors and fell in four sub-sectors. The largest increases in output were in the machinery and equipment industries, which rose 17.7%.

Industrial output growth also accelerated on a yearly basis in July to 1.9% from 1.3% in June.

The British Retail Consortium - Nielsen Shop Price Index increased 1.7% in August from a year earlier, faster than the 1.5% rise in July. Food inflation increased to 3.8% in August from the July reading of 2.5%, the highest since July 2009. Non-food inflation declined 0.5% in August from 1% in July.

The Recruitment and Employment Confederation and KPMG Report on Jobs survey found that demand for staff moderated in August, with weaker increases recorded for both permanent and temporary workers.

Pay pressures also weakened, with permanent staff salaries rising at the slowest rate for seven months, while temporary staff pay growth was at a five-month low.

The Irish consumer confidence indicator dropped again in August, a latest report from the KBC Bank Ireland and the Economic and Social Research Institute showed today.

The ESRI/KBC consumer sentiment index declined to 61.4 in August, compared to 66.2 in July.

Vodafone plc agreed to sell its entire 3.2% interest in China Mobile Limited for £4.3 billion, or $6.6 billion, before tax and transaction costs. Vodafone agreed to sell its entire stake of 642.87 million shares.

Vodafone expects to return around 70% of the net proceeds from the sale to shareholders by way of a share buyback, while the remainder will be used to reduce the group''s net debt.

Commenting on the transaction, Vittorio Colao, Chief Executive of Vodafone said, ""Today''s transaction achieves a near doubling of Vodafone''s original investment in China Mobile and combines our stated portfolio strategy with ongoing cooperation with China''s leading telecommunications company.""

Goldman Sachs, Morgan Stanley and UBS are acting as lead managers and Bookrunners.

BAE Systems plc agreed to acquire OASYS Technology LLC, a U.S. manufacturer of electro-optical systems and sub-assemblies based in Manchester, New Hampshire.

Under the deal, the company will pay cash consideration of $25 million at closing, while a potential earn out of up to $30 million.

The acquisition is conditional upon receiving certain U.S. regulatory approvals and is expected to close in the fourth quarter of 2010.

Galapagos NV, the Belgium-based biotechnology company agreed to acquire GlaxoSmithKline Plc''s state-of-the art research centre in Zagreb, Croatia. The arrangement is expected to be effective as of September 9.

Terms of the deal include acquisition of research centre along with transfer of about 130 staff. In addition, Galapagos will provide R&D services to GSK under a three year fee-for-service contract to the value of €14 million.

Dana Petroleum (E&P) Limited, reached an agreement with Petro-Canada UK Limited, a wholly owned subsidiary of Suncor Energy Inc. to acquire Petro-Canada UK''s interests in certain UK assets for a cash consideration of £240 million or about $372 million.

The board expects the acquisition to enhance earnings per Dana share in the first full year and that the enlarged group capital expenditure would increase to about £400 million for 2011.

BP plc, in a report on causes of the Gulf of Mexico tragedy, said that no single factor caused the Macondo well tragedy. Rather, a sequence of failures involving a number of different parties led to the explosion and fire which killed 11 people and caused widespread pollution in the Gulf of Mexico earlier this year.

The report concluded that decisions made by ""multiple companies and work teams"" contributed to the accident which it says arose from ""a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces.""

Gainers & Losers

Barratt Developments plc slumped 3.07% to 101.10 pence after the homebuilding company reported fiscal year 2010 revenues fell 11% to £2.04 billion from £2.29 billion in the prior-year period. Net loss for the year narrowed 75% to £118.4 million or 14.5 pence per share, compared to £468.6 million or 89.1 pence per share last year.

Bioquell plc fell 2.65% to 110.00 pence after the company engaged in the design, manufacture and supply of bio-decontamination and containment equipment, related products and services said it has been awarded a £3.6 million defense contract relating to the supply of CBRN filtration systems to an existing customer in the Middle East.

Dana Petroleum plc gained 0.06% to 1,809.00 pence after the independent oil company rebuffed an 1,800 pence per share offer made by Korea National Oil Corporation for all the issued and to be issued shares of Dana and its convertible bonds as inadequate and failed to recognize Dana''s existing value and strategic importance to KNOC.

Telit Communications plc climbed 1.96% to 57.10 pence after the wireless communications technology group reported first-half revenue surged 61% to $59.62 million from $36.93 million last year. Net profit in the period was $1.10 million or $0.014 per share versus a loss of $2.62 million or $0.059 per share in the prior year.

The Berkeley Group Holdings plc edged higher 0.36% to 841.00 pence after the residential property developer continued to perform strongly during the period from May 1 to August 31 and maintained forward sales above £600 million. The company added that it is confident of growing earnings per share by 10% in the current financial year.

Thorntons plc plunged 5.00% to 80.75 pence after the confectioner fiscal 2010 revenue declined 0.1% to £214.55 million from £214.81 million in the prior year. Net profit in the year increased 20.5% to £4.35 million or 6.5 pence per share from £3.61 million or 5.4 pence per share last year.