UK Debt Alarm; Stocks, Pound Fall

Darlington Musarurwa
21 May, 2009
New York City

UK stock investors stayed on the sideline after S&P sounded rating alarm but the government completed its debt offering. UK retail sales edged up in April. British Land dropped 8% after it reported larger than expected loss. Cable & Wireless declined 10% on income fall and insider stock sale.

[R]6:00PM London, 1:00 PM New York – UK stock investors stayed on the sideline after S&P sounded rating alarm but the government completed its debt offering. UK retail sales edged up in April. British Land dropped 8% after it reported larger than expected loss. Cable & Wireless declined 10% on income fall and insider stock sale.[/R]

Investor sentiment was on the edge after S&P lowered its view on the UK debt and put it on a debt watch with ‘negative’ outlook.

Despite jitters from arising from the prospect of a downgrade the Debt Management Office completed the £5 billion offering.

The ONS reported, UK retail sales in April increased 0.9% from March and gained 2.6% from a year ago. The sales increase was supported by 1.5% rise in food stores sales and 2.8% increase in non-food stores with textiles and footwear sales leading.

The FTSE 100 index declined 2.8% or 122.94 to 4,345.47 and the pound declined but regained most of its 0.8% loss against dollar and euro. The pound closed at $1.566 and at 1.1418 euros.

Gainers & Losers

The British Land Company dropped 8.2% to 380 pence after it reported revenues declined 19% and net loss of £3.88 billion or £614 per diluted share.

Cable & Wireless Plc declined 10% to 142 pence after it reported annual revenues increased 12% and net income declined 16%. The talk of one of the directors selling £5.5 million also hurt the stock.

HSBC Plc declined3.8% to 540.50 pence after the S&P rating outlook was revised. Standard Chartered Plc dropped 4.2% to 1,206 pence and Royal Bank of Scotland fell 6% to 39.90 pence.

ICAP Plc declined 9.1% to 376.25 after the chief executive sold 15 million shares at 390 pence to pay for the tax liability arising from the recent option grants.

Vodafone Group plc fell 4.3% to 113.80 pence after HSBC analyst lowered its view on the company. Fitch Ratings also lowered its outlook to negative on the worries that current cash flow may decline in the next two to three years.

Earnings Review

The British Land Company PLC, the largest office developer in London said full-year net rental income fell 19% to £453 million from £561 million a year ago. Net loss in the year was £3.88 billion or £614 per diluted share compared to net loss of £1.56 billion or £251 per share a year ago.

Business Post Group plc, a provider of delivery services for parcels, mail and palletized goods said full-year revenues rose 7.6% to £385.7 million from £ 358.6 million a year ago. Net profit in the year fell 4% to £9.3 million or £16.8 per diluted share compared to net profit of £9.7 million or £17.5 per share a year ago.

Cable & Wireless plc, an international telecommunications company said full-year revenues rose 16% to £3.65 billion from £3.15 billion a year ago. Net profit in the year fell 12.8% to £143 million or £5.8 per diluted share compared to net profit of £164 million or £6.8 per share a year ago.

Intec Telecom Systems plc, British billing firm said first-half revenues rose 40% to £80.3 million from £57.2 million a year ago. Net profit in the year rose 371% to £6.88 million or £2.15 per diluted share compared to net profit of £1.46 million or £0.46 per share a year ago.

Investec plc, an international specialist banking group said full-year net interest income rose 19% to £694.03 million from £583.42 million a year ago. Net profit in the year fell 25.4% to £292.02 million or £36.1 per diluted share compared to net profit of £391.56 million or £54.0 per share a year ago.

Mitchells & Butlers plc, an operator of managed pubs and pub restaurants said first-half revenues rose 3% to £1.02 billion from £995 million a year ago. Net loss in the year was £6 million or £1.5 per diluted share compared to net loss of £87 million or £21.6 per share a year ago.

Scottish and Southern Energy plc, an energy company said full-year revenues rose 66.6% to £25.42 billion from £15.26 billion a year ago. Net profit in the year fell 87% to £112.3 million or £12.8 per diluted share compared to net profit of £872.9 million or £101.0 per share a year ago.

QinetiQ Group plc, the U.K. defense technology company said full-year revenues rose 18% to £ 1.62 billion from £1.37 billion a year ago. Net profit in the year rose 97.4% to £93.6 million or £14.3 per diluted share compared to net profit of £47.4 million or £7.2 per share a year ago.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 4 increased, 97 declined and 1 were unchanged.

Kazakhmys Plc decliners in the FTSE 100 index with a loss of 9.56% followed by losses in Cable & Wireless Plc, of 9.55%, in Eurasian Natural Resources Corporation Plc, 9.27%, in ICAP Plc of 9.10% and in The British Land Company Plc of 8.21%.

Tullow Oil Plc led gainers in the FTSE 100 index with a rise of 3.59% followed by increase in Lonmin Plc of 0.95%, in GlaxoSmithKline Plc of 0.47%, in AstraZeneca Plc of 0.42%, in TUI Travel Plc of 0.00%.

European Markets Review

In London FTSE 100 Index closed lower 122.94 or 2.75% to 4,345.47, in Paris CAC 40 Index decreased 85.96 or 2.60% to close at 3,217.41 and in Frankfurt DAX index lower 138.27 or 2.74% to close at 4,900.67. Markets of Switzerland are closed today.