Economics
Mortgage equity withdrawal, when homeowners extract cash against the
value of their property, fell in the first quarter to a seven-year low as
the housing market slump deepened. The Bank of England said that equity
withdrawal fell to £5 billion in the quarter, from nearly £14 billion a year
earlier and £7.4 billion in the final quarter of last year. The decline left
equity withdrawal at the equivalent of 2.3 per cent of disposable incomes,
down from a peak of 6.5 per cent in 2007.
The construction sector continued to suffer from a drastic downturn
last month, according to the latest CIPS purchasing managers’ survey. Its
headline index of construction activity fell to 38.8 in June, from 43.9 in
May, taking it to the lowest in 11 years. Any figure under 50 indicates
shrinking activity. The construction sector has been contracting for four
months in a row.
Unemployment in Britain was forecast to rise by 100,000 over the coming
two years to a total of 1.8 million, according to a report from the
Organisation for Economic Cooperation and Development. It said that
joblessness would rise across its 32 rich nation member states by a total of
one million this year and by nearly a further two million in 2009, lifting
the average unemployment rate to 6 per cent, last seen in 2006.
Eurozone interest rates The European Central Bank is expected to press
ahead with a quarter-point increase in eurozone interest rates to 4.25 per
cent, despite political pressure for it to stay its hand. Expectations that
it would raise rates were reinforced by a warning from Jean-Claude Trichet,
its President, of a “risk that inflation could explode” if decisive action
was not taken.
Eurozone producer prices The cost of goods leaving eurozone factories
rose by 1.2 per cent in May from April’s level, to stand 7.1 per cent up on
a year earlier.
US factory orders produced their weakest performance in the three
months in May, reflecting slumping demand for cars, heavy machinery and
steel. Orders rose by 0.6 per cent, less than half the gains seen in April
and March and the poorest showing since orders fell by 0.4 per cent in
February.
Banking
& finance
Deutsche Bank has bought parts of ABN Amro’s commercial banking
business in the Netherlands from Fortis, the Belgian bank, for $709 million
(£356.2 million). This was $300 million less than the division’s net asset
value. The acquisition makes Deutsche Bank the fourth-largest commercial
bank in the Netherlands.
The Financial Services Authority, the City regulator, announced a new
regime for the disclosure of contracts for difference – popular derivatives
used by many investors to give them the effect of owning underlying shares
in listed companies but without paying stamp duty.
Lloyd’s of London Individuals who invested money through Lloyd’s
of London are facing bankruptcy after losing a court battle against the
world’s oldest insurance market. The individuals, known as names, had sued
Lloyd’s claiming that it had misled them about the exact nature of the
insurance deals that they bought into in the early 1990s.
HSBC, the banking group, has sold seven of its regional French banks to
Banque Fédérale des Banques Populaires for €2.1 billion (£1.67 billion). The
seven banks last year generated net income of €100 million.
NewSmith Capital Partners, the hedge fund, has struck a deal with
UniCredit, the Italian bank. Unicredit is buying NewSmith’s credit advisory
division and is taking a 5 per cent stake in NewSmith for an undisclosed
sum.
Construction
& property
Taylor Wimpey, Britain’s largest housebuilder, said that it had failed
to raise nearly £500 million of fresh funds. The housebuilder, which
completed more than 20,000 homes last year, said that it could not rule out
a sale of the business, either to a rival or to a private equity group, as
its share price slumped by 42 per cent to 35p.
Ennstone, the building products supplier based in Derby, said that
full-year turnover and profitability would be materially below present
market expectations in the uncertain environment and added that it had
undertaken a comprehensive review of its internal budgets.
PIK Group, the Russian property developer, said that it had acquired a
61-acre plot of land in the Rostov region and anticipated an investment of
$650 million (£326.5 million) in the project.
Consumer
goods
Tate & Lyle has sold its international sugar trading business to
Bunge, the American commodities group. The British company is selling the
unit as part of a restructuring programme aimed at reducing its exposure to
the volatile commodity markets and allowing it to concentrate on sugar
refining.
Finsbury Food Group, the AIM-listed cake maker, said that it expected a
tough trading environment over the next 12 to 18 months and added that its
full-year margins had fallen by more than £1.5 million. The company said
that strict overhead cost controls had enabled it to report strong sales and
growth across all its units, despite an upward pressure on input prices.
Vitacress Salads, one of Britain’s largest salad growers and
distributors and a leading supplier of watercress, baby leaf spinach and
rocket salad, has been purchased by RAR, of Portugal, after several months
of discussions in a deal worth about £50 million.
Engineering
General Motors Merrill Lynch, the American finance group, said that
bankruptcy was not out of the question for General Motors after the US
carmaker released grim sales figures. Merrill cut its rating from “buy” to
“underperform” and said that GM would need to raise far more cash than the
market was expecting.
RDS Northbridge Industrial Services said that it had bought the
remaining 49 per cent of the issued share capital of RDS, the precision
engineering company based in Tyne and Wear, for £1.15 million.
Health
AstraZeneca, the Anglo-Swedish pharmaceuticals group, has secured the
sales of Seroquel, its treatment for schizophrenia and bipolar depression,
until 2011, as a US court stopped cheaper copies coming to the market. Its
shares rose as it announced that it would not have to go to a full trial to
defend its Seroquel patent from Teva, the Israeli generics company, and
Sandoz, the generics arm of Novartis, the Swiss drugs maker. Seroquel
generated revenues of £2 billion last year.
Industrials
Umicore, the Belgian speciality materials group, has agreed to buy
India’s Anandeya Zinc Oxides Private in Goa for $10 million (£5.02 million).
The company said that the new group would be fully integrated into its zinc
chemicals business to support growth.
Leisure
William Hill, the bookmaker, and Codere, the gaming company based in
Madrid, said that they had sold their Italian joint venture company William
Hill Codere Italia to Intralot Italia for €5.5 million (£4.38 million).
Starbucks, the American coffee bar operator, is set to report its first
fall in profits for eight years after the company revealed that it would
close 600 underperforming US coffee shops and cut up to 12,000 full and
part-time positions. The job cuts are expected to reduce the company’s
workforce by about 8 per cent.
Media
DIC Entertainment, the American children’s brand management company,
said that it remained fully committed to pursuing the merger with Cookie Jar
Entertainment, a Canadian group, despite a legal challenge to the deal.
Aegis, the media company, said that it had acquired Steadman Group, an
African research agency, to bolster the African operations of its Synovate
unit. It said that Steadman, based in Nairobi, Kenya, had gross assets of
$3.3 million (£1.65 million).
Reed Elsevier has been forced to offer a loan to would-be buyers of its
£1 billion-plus business magazines division in an attempt to kick-start an
auction of the unit.
Taylor Nelson Sofres WPP, the advertising and marketing company, must
bid for Taylor Nelson Sofres (TNS), the market research group, by July 9 or
walk away, the Takeover Panel said. TNS has opened its books to WPP but
would prefer a merger with GfK, of Germany.
Natural
resources
TNK-BP BP’s Russian joint venture partners have called an extraordinary
board meeting aimed at dislodging Robert Dudley as chief executive of
TNK-BP. The AAR consortium, which represents the four Russian oligarchs who
own 50 per cent of TNK-BP, said that the meeting would take place in Moscow
on Monday.
Cambrian Mining, the AIM-listed group, said that it had sold 36.5
million units in Xtract Energy to Wasabi Energy, the investment group, for
£1.24 million and would distribute most of the remaining shares of Xtract to
its own shareholders. Cambrian has also been given certain rights over some
of Wasabi’s coal-related assets.
Sibir Energy, the Russian oil producer, said that the Russian Federal
Anti-Monopoly Service had approved the transfer of shareholdings from the
company’s own Moscow Oil and Gas Company and Gazprom Neft to Moscow NPZ
Holdings. Sibir said that after the transfer, Moscow NPZ Holdings would
control 90.02 per cent of the voting shares of the Moscow Oil Refinery.
Retailing
Marks & Spencer Sir Stuart Rose faces an unprecendented backlash at
Marks & Spencer’s annual meeting next week after triggering a £1.2
billion slide in the high street retailer’s share price with an unexpected
profit warning. Sir Stuart, executive chairman, of M&S, blamed a
deterioration in consumer confidence for a 5.3 per cent fall in
like-for-like sales across the business in the 13 weeks to June 28 – its
worst performance since 2005.
Support
services
John Wood Group, the energy services provider, has reaffirmed its
upbeat view for the year and said that all of its divisions were performing
well and that it expected its full-year results to be ahead of expectations.
Amec, the engineering support srvices group, said that it had appointed
Ian McHoul as its chief financial officer. Mr McHoul was previously finance
director at Scottish & Newcastle, the brewing group.
Technology
Redknee Solutions, the communications software maker, said that it had
received an American patent for its telecoms subscriber profile management
system. It is one of 40 patents issued or pending applications.
Amstrad Sir Alan Sugar, the multimillionaire star of The Apprentice television
series, has stepped down as the chairman of Amstrad, the computer company
that he founded in 1968. Sir Alan sold the company to BSkyB, the satellite
broadcaster, for £125 million last year. News Corporation, parent company of The
Times, has a 39.1 per cent stake in BSkyB.
Telecoms
LM Ericsson, the Swedish telecoms group, said that it had won an order
from Digicel, the Caribbean telecoms operator, to supply an energy efficient
GSM network coverage for the more remote areas of Surinam, in South America.
Transport
Eurostar, which operates passenger services through the Channel Tunnel,
said that it was adding extra trains on the London-to-Paris route to meet
increasing demand and added that there was growth of more than 100 per cent
in journeys from some regions north of London.
British Airways is said to be close to seeking clearance from US
competition authorities for a three-way operational merger with American
Airlines and Iberia. The deal would allow the companies to combine nearly
all aspects of their operations including sales, purchasing and marketing,
leading to lower costs and greater economies of scale.
Utilities
E.ON, the German utility, has pulled out of the ten megawatt Ferndale
wind farm in Rhondda because of potential noise pollution created by the
project. The wind farm received planning permission in 2005.
Severn Trent Ofwat, the water regulator, confirmed that it had fined
Severn Trent, the water utility, £35.8 million for providing false
information and for delivering poor service to its customers.
