UK Economy Shrinks; Barratt Loss

123jump.com Staff
25 Feb, 2009
New York City

U.K. gross domestic product declines 1.5% in the fourth quarter and the estimate of decline from a year ago was revised to a shrink of 1.9%. Barratt Developments losses rise and see no sign of turnaround in the business till the lending environment improves.

[R]1:00PM New York, 6:00PM London - U.K. gross domestic product declines 1.5% in the fourth quarter. Barratt Developments losses rise and see a no sign of turnaround in the business till the lending environment improves. Cadbury net drops 10%.[/R]

U.K stocks rose marginally led by homebuilders despite a government report that the economy shrank 1.5% in the fourth quarter of last year.

The market was made buoyant by media reports that Lloyds Banking and Royal Bank of Scotland debt and bonds may be insured by the UK in exchange for higher lending by the two lenders.

In London trading FTSE 100 index rose 0.9% or 32.54 to 3,848.98.

Of the FTSE 100 index stocks, 76 rose, and 26 declined. ICAP led advancers in the index shares with a rise of 12.4% followed by Barclays gaining 7.5%.

GDP Declines 1.5%

Office of National Statistics reported today that the country’s gross domestic product fell 1.5% in the three months to December from the previous quarter and is 1.9% lower than the same period a year earlier.

Output in industrial production slipped 4.5% in the fourth quarter from the previous three months and manufacturing sector declined 5.1% in the period.

Output of service industries declined 0.9%, while construction output tumbled 1.1%.

The ONS said GDP growth in the three months to December was revised down to a decline of 1.9% from the year-ago period from the previous estimate of a decline of 1.8%.

Growth in the volume of output in production industries was downgraded to a drop of 4.5% from 3.9% published in January, while growth in volume of output of the manufacturing industries was revised to a fall of 5.1% from 4.6%.

For the year, economic growth increased 0.7 % over 2007 from 3% in the previous year.

Separately, the statistics office said the seasonally adjusted chained volume index for the output of the service sector fell by 0.9% in the December quarter from the previous three months.

Service sector output also fell 0.2% between November and December.

In addition, output from distribution fell 2.6% in the three months to December from the previous quarter and output from hotels and restaurants decreased by 1.4 % in the quarter to December compared with the quarter to September.

Output from transport, storage and communication fell by 1.1% in the quarter to December compared with the quarter to September.

Barratt Developments Losses Rise to £592 million in H1

U.K. homebuilder, Barratt Developments reported today that it recorded a loss of £592.4 million in the six months ended December 31 from £194.6 million in the same period a year ago. The average selling prices dropped 9.7% to £160,700 from £178,000 a year ago.

Completions in the period declined 23.8% to 6,905 from 9,056 in the comparable year ago period. Barratt also said exceptional costs totaled £512 million and comprised £494 million impairment of inventories and restructuring costs of £17.5 million.

According to the homebuilder, forward sales rose to £633 million as at February 15, 2009.

Barratt Developments chief executive officer Mark Clare said, """"We’ve reduced our prices and we’re now seeing some signs of increased activity levels in terms of visitor numbers and sales. However, there will be no recovery in the housing market until the availability of mortgage finance improves. So, we are continuing to offer customers every possible assistance to move house, ranging from shared equity products to part exchange on their current home.""""

Cadbury Net Drops 10%

Cadbury Plc, the world’s largest confectionery maker said full-year revenues grew 6% to £5.4 billion from £4.7 billion, a year ago. Net profit in the full-year fell 10% to £364 million compared to net profit of £405 million, a year ago.

Cadbury Plc, in the last one year traded as high as 721.00 pence in May 2008 and as low as 445.25 pence in October 2008. Based on the yesterday’s closing price of 526.50 pence the company has market cap of £7.17 billion.


Gainers & Losers

ICAP led gainers in the FTSE 100 index shares with a rise of 12.4% followed by increases in Barclays of 7.5%, in Hammerson of 7.5%, in Wolseley Plc of 7.2% and Lloyds Banking of 6.5%.

Hammerson increased after JP Morgan Chase & Co. upgraded the stock to “overweight” from “neutral.”

Other homebuilders increased. Land Securities advanced 5.5% and British Land Co. edged up 5%.

Rexam Plc led decliners in the FTSE 100 index shares with a decline of 2.8% followed by losses in BHP Billiton of 2.3%, in Autonomy Corp. of 2.1%, in Vodafone Group of 2.1%, and Cable & Wireless of 1.9%.

Europe Markets Review

In London FTSE 100 Index closed higher 32.54 or 0.85% to 3,848.98, in Paris CAC 40 Index decreased 11.13 or 0.41% to close at 2,696.92 and in Frankfurt DAX index lower 49.54 or 1.27% to close at 3,846.21. In Zurich trading SMI decreased 20.52 or 0.43% to close at 4,702.50.