Economics
UK borrowing Government borrowing soared to record levels last month,
according to the latest public finance figures. Public sector net borrowing
in September surged to £8.1 billion, almost double the £4.78 billion figure
for the same month last year. Net borrowing for the first half of the
financial year was also a record at £37.6 billion, the highest cash total
since 1946, and up from £21.5 billion in the same period last year.
Mortgage lending suffered a further collapse last month. Figures from
the Council of Mortgage Lenders showed that the gross value of home loans
made during September by banks and building societies fell to just £17.7
billion, the lowest monthly figure for more than three and a half years. The
estimated figure for gross mortgage lending in September was down another 10
per cent from August alone, and by 42 per cent from a year before.
Global unemployment will be lifted to 210 million people worldwide by
the end of next year, its highest in a decade, thanks to the global
financial crisis, the United Nations’ International Labour Organisation
said. The ILO estimated that at least 20 million workers around the globe
will lose their jobs between now and the end of 2009.
Stock markets on both sides of the Atlantic rallied strongly on hopes
that the global financial crisis may be beginning to abate. In London, the
FTSE 100 index closed sharply up by 219.7 points, or 5.4 per cent, at
4,282.67, adding to Friday’s 5.2 per cent advance.
US fiscal stimulus Ben Bernanke, chairman of the US Federal Reserve,
told Congress that a significant new fiscal stimulus package of tax cuts or
government spending may be needed in the coming months to shore up growth.
Iceland The credit crunch claimed its first sovereign scalp as Iceland
readied itself to accept an International Monetary Fund (IMF) bailout. It is
believed to have negotiated a $6 billion (£3.5 billion) rescue package,
although the IMF has yet to make a formal announcement.
South Korea may be heading for a much harder landing than previously
feared, as the credit crunch exposes structural weaknesses in the banking
sector and slowing global demand slices into export growth. An executive at
the Asian Development Bank said that the Government’s forecast of 4.5 per
cent GDP growth for 2009 was too high and that the ADB would have to cut its
forecasts substantially.
China’s economic growth slowed in the third quarter of the year,
slipping into single digits for the first time in four years, as the impact
of an international slowdown seeped into the world’s fastest-expanding big
economy. The GDP growth rate slowed more sharply than expected to 9 per cent
in the July to September period — from 10.1 per cent in the previous
quarter.
Banking
& finance
Bonuses Stephen Green, chairman of HSBC, took a swipe at bankers’
excessive bonuses. He said that banks and regulators needed to consider
whether “badly aligned incentives” contributed to the financial crisis.
Merrill Lynch John Thain, Merrill Lynch’s chief executive, told a
conference in Dubai that thousands of jobs would be chopped after Bank of
America’s $50 billion (£29.1 billion) takeover.
French banks The top six banks are to receive a €10.5 billion (£8.1
billion) cash injection from the Government, Christine Lagarde, the Finance
Minister, said, adding that the state would subscribe to subordinated debt,
but would not take shares.
US bank deadline Henry Paulson, the US Treasury Secretary, said that
banks had until November 14 to apply for some of the $250 billion set aside
for capital injections by the Government. “A broad group of banks of all
sizes” had shown interest in the programme, he said.
American Express, the credit-card issuer, said that profit fell 24 per
cent in the third quarter as cardholders spent less and defaulted more. It
said its net income was $815 million in the July-to-September period, down
from $1.07 billion in the same period last year.
Accounting standards The International Accounting Standards Board
(IASB) and the Financial Accounting Standards Board (FASB) announced more
details of their joint approach to dealing with reporting issues arising
from the financial crisis. Plans include the rapid appointment of a
high-level advisory group.
Construction
& property
Styles and Wood Group, the store planner, said revenue for the year
ending December 31 is anticipated to be in line with expectations but that
profit before tax for the current year is likely to be only around
breakeven.
Consumer
goods
Aga Rangemaster, the maker of the classic cast-iron cooker, said that
the economic turmoil was affecting sales as consumers think twice about
spending £7,000 on a cooker. It gave warning on its second-half profits
after recent orders fell 15 per cent below last year.
LG Electronics, the Korean mobile handset maker, said its third-quarter
net profit plunged 93 per cent from a year earlier, hurt by depreciation of
the won versus the dollar, although strong sales of mobile phones boosted
its operating profit. It gave warning that fourth-quarter sales growth would
slow because of the global economic slowdown.
Engineering
QinetiQ, the defence group, has completed the acquisition of Dominion
Technology Resources, the US-based security company, after gaining approval
from American regulators. It agreed to buy the company for $104.5 million
(£61 million) in August.
Senior, the aerospace engineer, said trading in the three months to the
end of September was good, with adjusted pre-tax profits slightly ahead of
management expectations. The group, based in Hertfordshire, added that the
majority of its target markets remain healthy despite the global financial
crisis.
PV Crystalox Solar, which makes ingots and wafers for solar power
systems, said it had signed a four-year agreement for supply of
multicrystalline silicon wafers to its largest customer. Financial details
were not disclosed.
Mid-States, the environmental technology company, said Sunderland Royal
Hospital has reported significant reductions in Clostridium difficile
(C.diff) infections in wards where the company’s air disinfection technology
is in use.
Health
Novartis, the Swiss drug company, said third-quarter net profit rose 32
per cent to $2.08 billion (£1.21 billion), helped by strong sales of Diovan,
its top-selling blood pressure medicine. It raised its full-year forecast
for drug sales. The company added that it would cut 550 jobs in the United
States, about 0.6 per cent of its global workforce.
Ark Therapeutics Group, a healthcare group focused on vascular disease
and cancer, has won reimbursement approval from the NHS for KerraMax, its
dressing for leg ulcers, and plans to launch it on November 1.
Industrials
Mondi, the paper producer, forecast a 10 to 15 per cent drop in annual
underlying operating profit as the gloomier economic outlook hit its
business. Mondi said that although underlying operating profit rose 2 per
cent in the nine months to the end of September, it dropped 10 per cent in
the third quarter against a year earlier as business slowed in its European
and international subsidiaries.
TyraTech, the pesticide company, has received a legal claim from
Molecular Securities, a US-based financial advisory company, alleging that
TyraTech owes it $2.8 million (£1.6 million). TyraTech has a contract with
Molecular but rejects the claim.
Leisure
William Hill, the bookmaker, reported a 9 per cent increase in gross
profit in the 15 weeks to the middle of October, helped by Hull’s surprise
victory over Arsenal. The betting chain reassured investors that its
earnings could hold up in a recession. It has also struck a deal with
Playtech, the software company, to bolster its online gaming and sports
betting operations.
PartyGaming, the online gaming company, said it has licensed branded
slot games from Cryptologic, including Marvel’s The Fantastic Four, Hulk,
and Spider-Man, as well as Bejewelled, Cubis, and Street Fighter. These
games will be added to PartyCasino.com, PartyBingo.com and other gaming
sites in the coming months.
Tom Aikens Two London restaurants jointly owned by the Michelin-starred
chef have gone into administration. Tom Aikens and Tom’s Kitchen will both
continue to trade after a management buy-out by TA Holdco, funded by a
private investor.
Media
UBC Media, a supplier of audio content and data software to the radio
industry, expects turnover to be 15 per cent down for the six months to
September 30, in line with forecasts at the end of August. The commercial
division has been hit by difficult market conditions, with revenues from
radio advertising down in line with the rest of the market.
Natural
resources
Chromex Mining, which develops chromite mining and processing
facilities, has more than doubled its resource estimate for its Stellite
mine in South Africa to 31.9 million tonnes of chromite. It said it now
controls more than 40 million tonnes of chromite.
Minera IRL said it had recovered all capital and pre-development costs
for the Corihuarmi gold mine in Peru in less than seven months after
start-up. The company said its sales from 37,864 fine ounces of gold and
5,899 fine ounces of by-product silver was $33.6 million (£19.6 million) to
the end of September.
Herencia Resources, the mineral explorer and developer, said the total
mineral resource tonnage at its Paguanta project in northern Chile has
increased by 26 per cent.
Retailing
Asda has overtaken Primark to become Britain’s second-biggest clothing
retailer in volume terms. Industry statistics show that Asda’s George
clothing brand had a 9.5 per cent market share in the 24 weeks to September
16, above Primark at 9.3 per cent. Marks & Spencer was top with 10.1 per
cent.
Co-operative Group The Co-op is being forced to sell 126 Somerfield
stores by the Office of Fair Trading (OFT). The OFT said that while the
Co-op’s recent £1.57 billion acquisition of Somerfield did not give rise to
competition concerns at a national level, there were issues in local
markets.
JJB Sports, the troubled sports chain, has secured a £3.4 million cash
injection by issuing shares worth 5 per cent of the company to Mike Ashley’s
Sports Direct. The placing, 11.9 million shares at 28.5p, raises Sports
Direct’s stake in JJB to 21 per cent.
Support
services
Payzone, the Irish cash machine operator, said operational issues with
its ATMs had been resolved. One-off costs from restructuring and writedowns
will leave the company with pretax losses of €39.2 million (£30.4 million).
Begbies Traynor, the corporate insolvency specialist, said that the
number of distressed UK businesses had more than doubled since the start of
the year, with 4,566 companies facing “critical” problems in the third
quarter, compared with 791 in the same period last year.
Technology
Research in Motion Shares in the BlackBerry maker dropped as much as 10
per cent after an analyst report said that “sell through” trends of
BlackBerry phones in North America and Western Europe have been “slightly
disappointing”. Early sales of the BlackBerry Pearl Flip have been tepid at
best, according to a note issued by Pacific Crest Securities analysts.
Ericsson, the wireless equipment maker, reported a 28 per cent fall in
third-quarter net profit to SKr2.8 billion (£218 million) as it was hit by
restructuring charges as part of its cost cutting programme. The results,
reported four days ahead of schedule, were better than expected.
Fidessa Group, the trading systems provider, said it continues to make
good progress across all regions and that trade is in line with management’s
expectations. It added that it is seeing good demand for its products and
this has delivered strong revenue growth.
Telecoms
France Télécom has acquired a 53 per cent stake in Hits
Telecom, the Ugandan mobile phone operator, for an undisclosed sum and will
launch services under its Orange brand in the coming months. The group will
invest $200 million (£116 million) to roll out the network over the next
three years.
Transport
The Air Transport Users Council, an air passenger watchdog, has urged
the Government to take steps to cover all travellers affected by airline
failures. The group has written to Geoff Hoon, the Transport Secretary,
asking him to consider extending protection schemes so that they cover
scheduled airline passengers.
Utilities
Veolia, the French water and waste management group, cut its outlook
for its investments and operating cashflow in 2008 because of the economic
slowdown.
Kedco, the Irish green energy producer, has started trading on AIM. The
company, which generates electricity from food and wood waste, hopes the
listing will raise its profile and make it easier to attract investment.
Gasrec, the privately held liquid biomethane fuel group, has installed
London’s first biogas fuelling station at the London Borough of Camden’s
York Way depot. This will support its commercial trial of biomethane-powered
street cleaning vehicles.
