Economics
The construction sector suffered a slump last month, according to the
latest CIPS purchasing managers’ survey. Its headline index of activity
dropped from 46.1 in April to 43.9 for May, on a scale where any figure
below 50 indicates contraction. The index for housebuilding fell to 32.7, a
record low, from 40.3.
Merger activity abroad by British companies fell in the first quarter,
with British groups spending £15.5 billion on foreign takeovers, down from
£25.8 billion in the previous three months. Takeovers by British businesses
of other UK enterprises rose to £3.6 billion, from £3.3 billion. The value
of foreign takeovers of UK companies jumped to £19.9 billion in the first
quarter, the highest since spring 2007, from £9.2 billion in the previous
three months.
Eurozone growth in the first quarter was revised up from an initial
estimate of 0.7 per cent to 0.8 per cent. The upgrade was driven by stronger
investment activity by companies and an increase in German construction.
European Central Bank Jean-Claude Trichet, President of the European
Central Bank, in unusual remarks in Barcelona, said that with finite global
resources the world was “pushing at the boundaries of development”.
US factory orders increased in April by 1.1 per cent, while factory
orders excluding transportation equipment rose by 2.6 per cent. Orders for
March were revised up to 1.5 per cent overall and 2.6 per cent excluding
transportation.
The dollar rose on the foreign exchanges after Ben Bernanke, Chairman
of the US Federal Reserve, issued a groundbreaking warning over the
inflationary impact of the currency’s steep slide in an apparent attempt to
halt its decline.
Oil prices fell in response to Mr Bernanke’s comments. Benchmark US
light crude fell by $2.20 to $125.56 a barrel, while benchmark North Sea
Brent crude dropped $2.19 to $125.83.
Banking
& finance
Lehman Brothers is preparing to raise an estimated $4 billion (£2.03
billion) as Wall Street’s smallest independent brokerage seeks to repair the
multibillion- dollar hole in its balance sheet from the credit crunch. It is
expected to announce a rights issue with the release of its second-quarter
results later this month.
The Financial Services Authority said that it planned to prevent
insurance companies paying compensation out of their multibillion-pound
inherited estates. The regulator also wants to make the rules retrospective
to cover compensation payments made in the future for past mis-selling.
Bradford & Bingley and Citigroup and UBS, its underwriting
advisers, have been accused of failing B&B shareholders and of damaging
the City’s reputation of because of the former building society’s botched
capital-raising.
Euler Hermes, the world’s biggest credit insurer, said that the tougher
economic trading conditions meant that there was a 15 per cent greater
chance of retailers being unable to pay their suppliers than was the case a
year ago.
Construction
& property
May Gurney, the Norfolk-based construction group, reported a 12 per
cent increase in full-year underlying pre-tax profits to £18.7 million. It
said that it was confident of progress despite the economic slowdown and its
orders stood at more than £1 billion.
Network Housing, which owns and manages nearly 18,000 social housing
properties in the South-East and Greater London, has raised £350 million
with Lloyds TSB and Barclays to refinance £240 million of debt and provide
£110 million for new developments.
Consumer
goods
LVMH Bernard Arnault, the French luxury goods billionaire, has put
together a consortium including LVMH, the handbags and watches group, to
acquire Princes Yachts International, the luxury motor yacht maker, for an
estimated £200 million.
Engineering
Umeco, the aerospace and defence engineering group based in
Warwickshire, said that demand for composite materials from Airbus, Boeing
and Forumla One racing teams had left it well set for further growth as it
met forecasts with a 20 per cent rise in full-year underlying profits.
General Motors may sell off its Hummer people carrier after the car
manufacturer acknowledged that higher fuel prices were likely to be
permanent.
Smiths Group, the engineering business, said that it could relocate its
headquarters away from Britain for tax reasons and that it planned to cut 65
jobs by the end of the year.
Toyota, the Japanese carmaker, reported a 7.9 per cent fall in its
American sales in May to 257,404 vehicles, compared with the same month last
year, and said that its Toyota-brand sales were down by 6.3 per cent. Sales
for its luxury Lexus brand fell by 19.6 per cent.
Honda Motor, the Japanese carmaker, said that its American sales rose
by 11.3 per cent in May and added that sales of its compact Civic sedan rose
by 28.3 per cent to a record 53,299 in the month.
Nissan, the Japanese carmaker, has been granted £6.2 million by the
British Government to build a compact sport utility vehicle at its plant in
Sunderland from 2010.
Health
AOI Medical, the AIM-listed company that focuses on orthopaedic devices
for the spine and trauma markets, said that it had started clinical trials
on its Ascendx VCF Reduction System to improve on treatments for spine
fractures caused by disease.
Industrials
Evonik CVC Capital Partners, the global private equity group, is set to
pay €2.4 billion (£1.9 billion) for a stake of about 25.1 per cent in
Evonik, the German chemicals group, sources said.
Outokumpu, the Finland-based stainless steel maker, is to invest €420
million (£330.2 million) to double production at its ferrochrome plant
in Tornio, northern Finland. The new capacity of 530,000 tonnes was
scheduled to be available in 2011.
Leisure
Orient-Express Hotels, the hotel and luxury train operator, could face
fresh pressure from investors to explore strategic options after DE Shaw and
CR Intrinsic Investors agreed to combine their holdings, making them the
biggest shareholder with a combined stake of 13.1 per cent.
Media
Taylor Nelson Sofres and GfK, of Germany, have agreed a merger to
create a market research company with a market value of about $4 billion
(£2.03 billion). Last month TNS rejected a $2 billion takeover proposal from
WPP, the advertising group.
Natural
resources
Amec, the oil services group based in London, has agreed a deal with BP
International to provide engineering and management services for offshore
developments.
Expro International, the oil services group based in Berkshire that is
the target of a bid battle between Halliburton, the US energy services
company, and a consortium led by Candover, the European private equity
group, said that it was continuing talks with Halliburton.
TNK-BP, the Anglo-Russian oil group, said that management had
recommended almost halving the dividend for 2007 to $2.6 billion (£1.32
billion), from $5 billion in 2006, despite a 25 per cent rise in net
operating profits. The move prompted speculation about new divisions within
the joint venture between BP and a group of Russian businessmen.
Kuwait Petroleum Corporation said that it was considering Royal Dutch
Shell, the Anglo-Dutch oil and gas company, and Dow Chemical, the US group,
as possible partners in a refinery that it intended to build as a joint
venture with Sinopec in the southern Chinese province of Guangdong.
Retailing
Ann Summers, the so-called “pleasure retailer” best known for its sex
toys. said that it planned to distance itself from its more exotic
merchandise and focus on luxury lingerie in an attempt to widen its customer
base.
Support
services
Hogg Robinson, the business travel and corporate services group in
which BCD, its Dutch rival, has built a 16 per cent stake, said it was
confident of achieving growth in the coming year.
Jarvis has secured the final stage contract for the Rugby Station
remodelling project estimated to be worth more than £40 million.
The Law Society, the professional trade body for all solicitors in
England and Wales, has been hit with a £275,000 fine over its complaints
handling system, its second such fine relating to complaints in two years.
G4S The cash service unit of G4S, the security services group, along
with the GMB union, has launched a fund to provide financial assistance to
employees who suffer serious injury as a result of a criminal attack at
work.
Technology
XploiTe, the AIM-listed IT services group, said that it had won a £3.7
million five-year contract from a European bank to provide infrastructure
management.
Yahoo! Carl Icahn, the activist investor, said that he would look to
oust Jerry Yang as Yahoo!’s chief executive if his proxy fight to take
control of the company’s board is successful. His comments came a day after
a shareholder lawsuit against Yahoo! was unveiled, providing new details on
its negotiations with Microsoft, including a Yahoo! severance plan that
would have added to Microsoft’s costs.
Flomerics, the software group based in Surrey, has again urged its
shareholders to take no action on the 104p-per-share offer from Mentor
Graphics, the electronic design systems company.
Telecoms
Sepura, which makes radio handsets used by the London police, said that
its full-year pre-tax profits had risen to £11.9 million, from £7.2 million
last time.
Reliance Communications Ken Costa, the veteran London-based banker, has
been appointed by Reliance Communications, the second-largest Indian mobile
phone company, to advise on its negotiations with MTN, Africa’s largest
wireless group.
Orange Tom Alexander, the new chief executive of Orange, is expected to
announce several hundred job cuts as he sets out a revival plan for the
mobile phone and broadband operator.
Transport
Ryanair, Europe’s biggest budget airline, has refused to accept that
high oil prices mean an end to the era of low-cost travel despite predicting
that its own fares would rise by about 5 per cent this year. It said rising
fuel bills would force its competitors to increase their fares, driving more
passengers to the no-frills carriers.
Network Rail faces losing its monopoly over Britain’s rail
infrastructure if it fails to meet tough new targets to improve punctuality
and reduce costs, according to the Office of Rail Regulation.
Utilities
United Utilities shareholders are set to receive a £1.5 billion
windfall in August, the company said, as it reported a 4.8 per cent fall in
its full-year pre-tax profits to £478 million. The shareholder boost,
equivalent to 170p a share, will be funded from the sale last December of
United Utilities Electricity, the group’s electricity supply network.
E.ON UK Paul Golby, chief executive of E.ON UK, said that consumers’
bills would continue to rise as the power industry faced higher wholesale
prices and costs of up to £100 billion to build new power stations.
Severn Trent, the water utility, was guilty of “sophisticated
dishonesty” over how it reported official water statistics, the Old Bailey
heard in a case brought by the Serious Fraud Office.
Ofgem Three of the UK’s energy providers face the prospect of a
regulatory crackdown after it emerged that Ofgem, the energy regulator, is
investigating claims that customers using prepaid meters were being
persuaded to switch to more expensive services.
