UK Retail Sales Ease; GSK Swings to Profit, BP Hikes Dividend

Arthi Gupta
07 Feb, 2012
New York City

The UK indexes slid and crude oil was in focus as the European markets turned cautious as Greek negotiations dragged on. Retail sales in the United Kingdom eased in January. BP quarterly net soared 38% and GlaxoSmithKline swung to profit.

[R]4:30 PM London – The UK indexes slid and crude oil was in focus as the European markets turned cautious as Greek negotiations dragged on. Retail sales in the United Kingdom eased in January. BP quarterly net soared 38% and GlaxoSmithKline swung to profit.[/R]

The UK indexes slid on the ongoing Greek crisis and merger deal between Glencore and Xstrata faced resistance from key investors. Crude oil market was volatile as tension rose in the Middle East after the U.S. imposed tighter and wider sanctions on Iran.

French President Sarkozy and German Chancellor Angela Merkel in a joint interview with ""France 2"" television warned the Greek politicians needed to come to a resolution soon as time was running out.

Greece is on the verge of a default if it is unable to repay €14.5 billion in bonds on March 20 however investors anticipate a last minute deal at the end of this week to avoid involuntary default.

EU officials set February 15 as the deadline for the approval of austerity measures. However Greek political parties are at odds in agreeing to labor reforms demanded by the troika. At least three separate strikes were called in Athens today and most of the transportation network was grounded to a halt.

In London trading FTSE 100 Index declined 14.30 or 0.3% to 5,878.33 and the pound edged higher to $1.5825.

UK Retail Sales Ease

Retail sales in the United Kingdom decreased 0.3% in January on a like-for-like basis compared to the 2.3% rise in January 2011, the British Retail Consortium reported today.

The BRC-KPMG Retail Sales Monitor reported total sales rose 2.1% on year.

Non-food non-store sales climbed 11.3% on year in December 2011 compared to an 18.5% on-year gain in December 2012.

Glencore and Xstrata Confirm Agreement

Switzerland based Glencore International agreed to acquire London listed Xstrata for £39.1 billion in the largest mining industry merger.

Glencore valued the Xstrata at 1,290 pence a share and it will control 55% of the newly merged entity Glencore Xstrata International Plc. The combined entity will have $209 billion in revenues and will rival with the two largest Australian mining giants BHP Billiton and Rio Tinto.

The merger values each Xstrata share at 1,290.10 pence, representing a premium of approximately 15.2% to Xstrata’s closing share price of 1,119.50 pence on February 1, the last business day prior to the announcement by Xstrata that it was in discussions with Glencore.

However, the deal is far from done and may face intense antitrust scrutiny from regulators in Australia, UK, EU and Switzerland.

The combined company will have 15% share of world zinc market and 32% share of thermal coal market. However, two key minority investors voiced their reservation for the deal and held out for higher price from Glencore.

Gainers & Losers

BP plc fell 1.6% to $46.10 after the oil and gas explorer reported fourth quarter total revenues and other income grew 15% to $96.34 billion from $83.99 billion in the comparable period. Profit for the quarter increased 38% to $7.69 billion or 39.99 cents a share from $5.57 billion or 29.28 cents a share last year.

For the full-year 2011, total revenues and other income advanced 25% to $386.46 billion from $308.93 billion. Profit for the year was $25.7 billion compared to a loss of $3.72 billion last year.

The company announced a 14% increase in its quarterly dividend to 8 cents per share for the fourth quarter.

GlaxoSmithKline plc declined 1.8% to 1,394 pence after the healthcare group reported fourth quarter turnover declined 3% to £6.98 billion from £7.20 billion in the year-ago period. Net profit in the quarter was £1.25 billion or 24.9 pence per share compared to loss of £690 million or 13.4 pence per share in the year-ago period.

For the full year, revenue fell 3.5% to £27.4 billion from £28.4 billion in the prior year. Net profit for the period more than trebled, to £5.26 billion last year from £1.63 billion in 2010.

The company said it intends to make share repurchases of £1 billion to £2 billion in the year.

Lloyds Banking Group PLC gained 0.1% to 35.34 pence after the financial services group announced plans to cut 1,000 jobs in the UK, as well as closing some of its offices, according to the bank''s employee union Accord.

The bank intends to reduce annual costs by £1.5 billion within the next three years.

The Sage Group PLC climbed 0.1% to 303.40 pence after the business software group announced that through its subsidiary Sage Pay Europe it has acquired Integral Computers, a cardholder present payment processing provider based in Ireland for a cash consideration of up to €20 million or £16.7 million.

Xstrata PLC plunged 5% to 1,198.50 pence after the diversified mining company said fiscal year 2011 revenues rose 11% to $33.88 billion from $30.50 billion in the previous year and annual profit grew 22% to $5.71 billion or $1.93 per share.