Tesco Sales Rise 7%; Higher Bank Bonuses

Arthi Gupta
05 Oct, 2010
New York City

The UK indexes closed higher tracking gains in the U.S. and European markets. UK government net reserves rose in September. Moody

[R]4:30 PM London – The UK indexes closed higher tracking gains in the U.S. and European markets. UK government net reserves rose in September. Moody’s warned Ireland of possible rating downgrade. Harbinger sold 14.1% stake in Inmarsat to raise £410 million. Tesco reported 7.1% increase in first-half sales.[/R]

The UK bank bonus payout estimated at £7 billion in 2010. Irish services sector contracted in September.

Irish services sector contracted for the first time since March as a slowdown in the wider economy led to a drop in new business, the Markit Economics said today.

The NCB services purchasing managers'' index fell to a seasonally adjusted 48.8 in September from 52.9 in August.

In London, FTSE 100 Index traded higher 78.44 or 1.41% to 5,634 and the pound edged higher to close at $1.5874.

British Chancellor George Osborne on Monday announced two significant reforms to the UK welfare system, including a cap on household benefit payments and withdrawal of child benefits for high earners, as additional measures to reduce spending.

Osborne said scrapping the child benefit for high income families will save around £1 billion a year from the welfare bill. Further, the chancellor said household benefit payments will be capped on the basis of median earnings after tax for working households from 2013. But, households with disabled people will continue to get this benefit.

The UK''s Institute of Directors reported that the Bank of England needs to expand its quantitative easing by £50 billion to a total £250 billion given the weakness of money supply growth and softening of a range of economic indicators.

Rating agency Moody''s warned the Republic of Ireland''s increasingly fragile fiscal position and weak economic prospects could bring its sovereign bond ratings down within three months.

Moody''s said it was placing Ireland''s Aa2 rating under review for a possible downgrade, but any action would likely be only by one notch. The agency further stated that it was forced to review Ireland''s rating after the government raised its estimate of the total costs of bailing out of the nation''s troubled banking sector.

Moody''s also placed on review for possible downgrade the Aa2 rating of Ireland''s National Asset Management Agency, whose debt was fully and unconditionally guaranteed by the government of Ireland.

City workers'' bonus payments in 2010 will be £7 billion, the Centre for Economics and Business Research said today. The latest payout amount is smaller than last year''s £7.3 billion.

The temporary bank payroll tax introduced in 2009 on bonuses exceeding £25,000 is now expected to earn £3.5 billion for the government, meaning available bonus pots are actually greater than previous forecast, CEBR said.

Markit Economics and the Chartered Institute of Purchasing and Supply said today that the British service sector activity growth picked up in September. The seasonally adjusted headline business activity index rose to 52.8 in September from August''s reading of 51.3.

Markit said the modest growth in business activity was due to a further slowdown in growth of inflows of new work.

The UK government''s net reserves rose by $1.93 billion in September, bringing the end-September total to $37.46 billion compared with $35.52 billion at end-August, according to data released from HM Treasury today.

Gross reserves increased to $77.11 billion in September, from $73.25 billion at the end of August. The gross reserves represent the government''s holdings of foreign currency assets, the IMF position and gold holdings.

Harbinger Capital Partners LLC, the privately owned hedge fund sold a 14.1% stake in mobile satellite communications services provider Inmarsat plc at 630 pence per share to raise about £410 million.

The company sold 65 million ordinary shares in Inmarsat held by its affiliated investment funds, Harbinger Capital Partners Special Situations Fund, L.P. and Harbinger Capital Partners Master Fund I, Ltd.

Gainers & Losers

British Airways Plc surged 4.27% to 249.30 pence after the airline reported a 1.3% increase in September traffic to 9.95 billion revenue passenger kilometers from 9.83 billion revenue passenger kilometers a year ago.

Crawshaw Group plc slumped 6.12% to 11.50 pence after the meat retailer reported first-half sales declined 0.7% to £9.4 million from £9.47 million in the same period last year. Profit in the period was £147,000 or 0.250 pence per share, compared to a loss of £86,000 or 0.16 pence per share last year.

Northern Foods plc fell 1.64% to 45.00 pence after the food producer in its interim management statement for the first-half said same stores sales increased 3.0%. Second quarter same stores sales increased 7.1%, reflecting a strong performance in bakery and chilled products.

Tesco plc climbed 0.22% to 431.30 pence after the British supermarket chain reported a higher profit for its first-half, reflecting strong sales growth mainly in Asia and the United States.

In the first-half, the company''s revenue, excluding VAT, rose 7.1% to £29.76 billion from £27.78 billion in the prior year. Including VAT, group sales climbed 8.3% to £32.91 billion. Profit before tax for the 26 weeks ended August 28 rose 12.5% to £1.60 billion from £1.42 billion in the previous year.

The company also announced a higher interim dividend and said it is on track to create 16,000 new jobs this year, including 9,000 in the UK.

TUI Travel plc soared 3.97% to 225.40 pence after the travel operator said summer 2010 traded “well” since its last update in August and the company is “confident” that full-year results will be in line with its previous guidance.

Through September 26, on a constant currency basis, total sales in the UK increased 13% and total customers count increased 2%, while average selling prices rose 10%. The Northern Region experienced a 13% growth in sales and a 4% improvement in customers and average selling prices grew 9%.

Westmount Energy Limited slumped 3.06% to 95.00 pence after the investment holding company reported fiscal year 2010 income was £4.33 million or 58.76 pence per share, compared to a loss of £1.72 million or 23.62 pence per share in the previous year.