UK Proposes to Ban Commissions; Stocks Weak

Darlington Musarurwa
25 Jun, 2009
New York City

UK regulator proposes to ban all commissions paid by pension, insurance and fund managers to financial advisors. Standard & Chartered reported better than expected performance in the first five months in the year. Insurance companies fell on a downgrade of Prudential.

[R]6:00 PM London, 1:00 PM New York – UK regulators proposes to ban all commissions paid by pension, insurance and fund managers to financial advisors. Standard & Chartered reported better than expected performance in the first five months in the year. Insurance companies fell on a downgrade of Prudential.[/R]

UK stocks edged lower on general weakness in the market and worries of the ongoing tussle between the Governor Mervyn King of Bank of England and Chancellor of Exchequer Alistair Darling.

In London FTSE 100 Index closed lower 27.41 or 0.64% to 4,252.57.

Financial Services Administration released new guidelines and fees for investment intermediaries. The revised guidelines ban all commissions paid by investment products companies to advisors.

The Retail Distribution Review proposals cover products from funds, pensions and insurance companies and will be in effect from the end of 2012.

The FSA estimated that one-time cost to the industry of £430 million and on-going cost of £40 million a year.

Gainers & Losers

BT Group dropped 0.4% to 103 pence after the company agreed with Tata Communications to be its international dial and other voice termination services outside the BT network. The deal expands the BT network reach.

Clinton Cards surged 25.3% to 27.25 pence after it acquired 196 Birthdays Ltd stores which is operating under administration since May.

Costain Group, the engineering and construction company increased 5.1% to 25.75 pence after it said the revenues are in line with expectations on large contracts from government.

Driver Group declined 9.4% to 67.50 pence after it confirmed first half profit to match last year results.

Insurance companies declined after Bank of America offered negative views on Prudential Plc. On the comments, Prudential, Aviva Plc and Legal & General Group dropped more than 2%.

John Menzies, the aviation company surged 17.5% to 157.50 pence after it offered profit from the first half exceed last year results.

Keller Group increased 4.6% to 565.50 pence after it reiterated that full year results are still in line with expectations as said five weeks ago.

Misys decreased 1.3% to 169.50 pence after it reported revenues and adjusted income from continuing operations increased 40%.

Office2office decreased 1.2% to 128.50 after it suggested that trading performance for the first half since January is ahead of last year and in line with management estimates.

Standard Chartered fell 2.4% to 1,167 pence despite the company offered positive review of the business in the first five months of the year.

Earnings Review

Cohort PLC, a defence and security firm said full-year revenues rose 38% to £78.6 million from £57.1 million a year ago. Net profit in the year rose 13.3% to £5.1 million or 12.46 pence per diluted share compared to net profit of £4.5 million or 12.66 pence per share a year ago.

DSG International Plc, the largest electrical retailers said full-year revenues fell 1% to £8.36 billion from £8.49 billion a year ago. Net loss in the year was £219.4 million or 10.2 pence per diluted share compared to net loss of £260.8 million or 11.9 pence per share a year ago.

DS Smith Plc, the packaging firm said full-year revenues rose 7.1% to £2.1 billion from £1.97 billion a year ago. Net loss in the year was £11.8 million or 3.0 pence per diluted share compared to net profit of £76.6 million or 19.4 pence per share a year ago.

Goldshield Group plc, a pharmaceutical and consumer health company said full-year revenues rose 15.9% to £98.5 million from £84.9 million a year ago. Net profit in the year rose 124% to £13.9 million or 39.7 pence per diluted share compared to net profit of £6.2 million or 16.9 pence per share a year ago.

Goldshield Group plc, in the last one year traded as high as 360.00 pence in June 2009 and as low as 160.25 pence in October 2008. Based on the yesterday’s closing price of 345.75 pence the company has market cap of £126.95 million.

Lees Foods Plc, a Scottish cake and sweet supplier said sales are currently 14% up on the same period last year. It expected that sales in the period January to mid-June hit £8.5 million. It expected profits for the first six months of the year to 30 June, would be ahead of the comparable figure for last year.

Micro Focus International plc, the business software company said full-year sales rose 20% to $274.7 million from $228.2 million a year ago. Net profit in the year rose 18% to $66.0 million or $31.92 per diluted share compared to net profit of $55.4 million or $26.97 per share a year ago.

Micro Focus International plc, in the last one year traded as high as 454.25 pence in May 2009 and as low as 186.25 pence in October 2008. Based on the yesterday’s closing price of 378.75 pence the company has market cap of £765.69 million.

Misys plc, the financial software firm revenue for the year to end-May rose about 40% to £695 million. Like for like revenue grew about 5% at the Banking business. Banking revenue grew 15% to £180 million and TCM revenue by 14% to £160 million.

FTSE 100 Index Movers

Of the stocks in the FTSE 100 index, 53 increased, 47 declined and 2 were unchanged.

Prudential Public Limited Company decliners in the FTSE 100 index with a loss of 2.52% followed by losses in HSBC Holdings plc of 2.44%, in GlaxoSmithKline plc of 2.39%, in Rio Tinto plc of 2.39% and in Standard Chartered PLC of 2.34%.

Petrofac Limited led gainers in the FTSE 100 index with a rise of 4.51% followed by increase in The Royal Bank of Scotland Group plc of 3.35in Wolseley PLC of 3.16%, in Standard Life plc of 2.40%, in Marks and Spencer Group plc of 2.19%.

Europe Markets Review

In London FTSE 100 Index closed lower 27.41 or 0.64% to 4,252.57, in Paris CAC 40 Index decreased 21.66 or 0.68% to close at 3,163.10 and in Frankfurt DAX index lower 35.45 or 0.73% to close at 4,800.56. In Zurich trading SMI decreased 82.12 or 1.51% to close at 5,361.30.