News Column

UK MIDDAY BRIEFING: J Sainsbury Sales Down Again, But Stock Gains

June 11, 2014



LONDON (Alliance News) - J Sainsbury Wednesday reported another drop in like-for-like sales, its second consecutive quarterly decline after nine years of unbroken sales growth.



The UK's third-largest supermarket chain by market share posted a 1.1% decline in like-for-like retail sales including VAT but excluding fuel for the 12 weeks to June 7 from the same period a year earlier. Including fuel, like-for-like retail sales fell 2.4%.



In his final call with journalists before stepping down next month, Chief Executive Justin King said the company expects customer spending to remain cautious, and as a result Sainsbury's will continue to invest in keeping its offering competitive and being "toe-to-toe" with its rivals.



"We are playing our part in this pricing skirmish. We are toe to toe with our competitors, and we have never been more competitive than we are today," King said, adding: "Our brand match is also making sure we stay competitive on brands."



Still, Sainsbury's is the biggest gainer in the FTSE 100, while Tesco and Wm Morrison Supermarkets are also higher.



Airline stocks, including International Consolidated Airlines Group and easyJet, have been hit hard across Europe after German flag carrier Deutsche Lufthansa AG reduced its profit expectations for this year and next. It warned that it was having to reduce prices on European and US routes due to weak demand, and it had also been hit by a recent pilots strike.



Rolls-Royce Holdings is also down after it said a decision by the Emirates airline to cancel an order for 70 Airbus A350 aircraft has knocked about 3.5%, or GBP2.6 billion, off its order book. The aircraft engine maker was due to provide its Trent XWB engines for the aircraft.



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FTSE 100: down 0.6% at 6,834.96

FTSE 250: down 1.0% at 16,042.48

AIM ALL-SHARE: down 0.8% at 797.15

GBP-USD: up at 1.6786

EUR-USD: down at 1.3542

GOLD: up at USD1,264.00 an ounce

OIL (Brent): up at USD110.03 a barrel

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Other Top UK Corporate News

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UK Energy regulator Ofgem has said the big energy suppliers in the UK must engage with customers over the impact of falling wholesale costs on energy prices or risk further undermining public confidence. In recent months, wholesale gas and electricity prices have dropped noticeably, with spot gas prices down 38% in early June compared with the previous year and forward prices for the coming winter down 16% for gas and 9% for electricity, according to Ofgem. Wholesale costs make up nearly half of a household energy bill and Ofgem said in a statement on Tuesday that "suppliers are yet to reduce their prices for existing customers to reflect the wholesale cost changes". The Big Six energy firms in the UK are British Gas, a subsidiary of Centrica, E.ON, EDF, Npower, ScottishPower and SSE.

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GlaxoSmithKline and Theravance announced positive results for two late stage studies of Incruse Ellipta when combined with Relvar Breo Ellipta for the treatment of chronic obstructive pulmonary disease. The two phase III studies using the combined treatment showed a "statistically significant" improvement in lung function compared with patients treated with Relvar Breo Ellipta and a placebo.

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Pharmaceuticals companyAstraZeneca said 43 abstracts reporting results of the company's research and development in diabetes have been accepted for presentation at the 74th Scientific Sessions of the American Diabetes Association in San Francisco next week. In a statement, the company said it will present clinical data from studies evaluating several approved products, including Forxiga, Bydureon, Onglyza, as well as investigational combination of saxagliptin and dapagliflozin. The sessions take place between June 13 and June 17.

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HSBC Holdings will sell its UK pensions business to Swiss Re subsidiary ReAssure Ltd, but HSBC Global Asset Management (UK) Ltd will remain the investment manager for most of the assets being sold.It didn't give any financial details for the deal, which needs to be approved by regulators.

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Media buying giant WPP said its marketing communications agency JWT has bought a majority stake in South African creative agency The Hardy Boys, a further move to increase revenue from digital media. It didn't give any financial details of the deal. The Hardy Boys' revenues for the year ended February 28, 2014 were approximately ZAR55 million, it said. The South African agency's clients include Unilever, Diageo, SA Home Loans, ADvTECH and RCL Foods, amongst others.

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Online betting company Betfair Group reported higher profit and revenue in its last financial year, prompting the company to raise its dividend 54%. For the year ended April 30, the company reported a pretax profit of GBP61.1 million, compared with a GBP49.4 million pretax loss the prior year, when it booked GBP104.5 million in exceptional expenses and charges. On a underlying basis, which strips out exceptional costs, earnings before interest, taxes, amortisation and depreciation were GBP91.1 million, up 24% from GBP73.3 million the prior year, driven primarily by cost savings. The group declared a full-year dividend of 20.0 pence per share, a 54% increase on the 13.0 pence dividend it paid out a year earlier.

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Exhibitions company ITE Group has agreed a binding contract to buy a 50% stake in Indonesian exhibitions company PT Debindo Unggul Buana Makmur from that company's founders. It didn't give any financial details for the buy, but said it expects the acquisition to boost earnings in the first full year of ownership. It added that it will finance the deal out of its existing balance sheet. ITE said the three founders will retain the other half of the business and will continue to manage it. PT Debindo Unggul Buana Makmur owns the Indobuildtech exhibitions aimed at the building and construction industries in Indonesia and the surrounding region.

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AIM MOVERS

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Octagonal has jumped after it said its main investment, a 9.97% stake in custody and clearing company Global Investment Strategy UK Ltd, had performed strongly in the past two months. Octagonal said GIS settled 12,000 transactions worth over GBP1.6 billion during April and May combined, and launched a mini prime broker service for its hedge fund clients. Greka Drilling is doing well despite saying its pretax profit fell significantly in 2013 as revenues almost halved after a major client, connected company Green Dragon Gas, reduced its drilling programme during the year. The company remains confident for the year ahead, saying that its strong backlog of USD97 million in contracted work and mobilisation orders means that it expects growth in both China and particularly India, where it wants to expand further. Getech Group is up after it won a USD2 million contract with an existing client, one of the several significant contracts it had flagged that it was working on in a trading update on Tuesday. Unitech Corporate Parks is another gainer after it signed an agreement to sell its property interests subsidiary to an affiliate of Brookfield Property Partner for about GBP205.9 million in cash, and expects to return cash to shareholders once the deal is completed. SeaEnergy is up after it entered into a joint venture with Singapore-based shipping company Go Offshore (Asia) Pte Ltd that will manage Go's vessels in UK, European and adjacent waters. SeaEnergy said its SeaEnergy Ship Management Ltd unit will take a 51% stake in the joint venture, which will be called GOSeaEnergy Ship Management Ltd.LiDCO Group is also up after saying it remains confident of meeting market expectations for its current financial year. Herencia Resources is also up after it received more high-grade drill results from the Picachos drill programme in Chile, continuing to confirm broad zones of high grade copper mineralisation at shallow depths. Quindell is a big faller after it said it won't be able to move to the London Stock Exchange's main market for the time being because it hasn't be able to satisfy some of the rules for a premium listing on that market.Berkeley Mineral Resources is another big decliner after it said the Zambian Environmental Management Agency has decided to defer its Berkeley's environmental impact statement for the Kabwe project while it consults with relevant organisations. Ferrum Crescent is down after an independent valuation of its mineral assets at the Moonlight iron ore project showed a preferred valuation of USD33.0 million, and as it said it was continuing to seek funding to conduct a bankable feasibility study for the site. StratMin Global Resources is down after it said its pretax loss widened significantly in 2013, as administrative expenses increased while the company achieved first production from its Lohorano plant. AfriAg is another faller after it raised GBP400,000 through a discounted placement of 100 million new shares, funds it will use to strengthen its balance sheet and provide working capital to investigate acquisition and investment opportunities.John Lewis of Hungerford is down after it said it continues to trade ahead of the volumes experienced last year, with dispatched sales and the forward order book up 8.9%, but warned that operating profit for its full year will be lower as it invests in new showrooms.

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Top Economics And General

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The UK jobless rate declined during the February to April period and employment increased notably, data from the Office for National Statistics revealed. The ILO unemployment rate came in at 6.6%, compared to 7.2% during November to January and 7.8% during the same period of last year. The expected rate was 6.7%. Pay including bonuses increased 0.7% from last year and that excluding bonuses gained 0.9% in three months to April, well short of the UK's April consumer price inflation rate of 1.8%. There were 1.09 million people claiming Jobseeker's Allowance in May, down 27,400 from April. Economists had forecast a decrease of 25,000.

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The UK economy has surpassed the pre-recession peak it reached in January 2008, the National Institute of Economic and Social Research said in a report on Tuesday. For the three months ending May, the think tank forecasts 0.9% growth after estimating 1.1% expansion in three months through April. The latest estimate is approximately 0.2% above where it was in January 2008. The NIESR earlier projected 2.9% annual growth in 2014 and 2.4% in 2015. According to official estimate, the British economy expanded 0.8% in the first quarter of 2014 after growing 0.7% in the previous quarter.

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Global economic growth in 2014 is likely to be weaker than expected, with the poor weather in the US, financial market turbulence and the Ukrainian issue serving as drags, the World Bank said in its latest World Economic Prospects report released late Tuesday. The bank lowered its global economic growth forecast for 2014 to 2.8% from the 3.2% it estimated earlier. At the same time, the World Bank left its forecast for 2015 and 2016 broadly unchanged at 3.4% and 3.5%, respectively.

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Oil ministers of the Organization of the Petroleum Exporting Countries signalled in Vienna that they would not raise the cartel's production ceiling, despite calls to respond to growing oil demand. "Supply is in order, and demand is in order," Saudi Arabian Petroleum Minister Ali Naimi said shortly before the start of OPEC's summer ministerial meeting. "We think that maybe we would continue with the present situation," his Algerian counterpart, Youcef Yousfi, said. The International Energy Agency, which is financed by industrialized countries, said in May that growing seasonal demand would require OPEC to pump an average 900,000 barrels per day more during the third quarter than the 29.9 million bpd it had produced in April.

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Ukraine's prime minister rejected a Russian proposal to sell Ukraine gas at a discount, insisting that the contractual price be lowered. Arseniy Yatsenyuk said at a cabinet meeting in Kiev that Moscow's offer of a 100-dollar discount on its price of 485 dollars per 1,000 cubic metres of gas was a trap, the Interfax Ukraine news agency reported. "Our position remains the same: Rewrite the contract and establish market price for gas," Yatsenyuk was quoted as saying. The prime minister was speaking as another round of EU-mediated gas talks between Russia and Ukraine got under way in Brussels after the Russian energy giant Gazprom said that it had extended into next week its payment deadline for Ukraine.

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Cyprus' government said it is preparing the ground to return to international markets at least a year earlier than anticipated under its bailout programme. The Finance Ministry announced in a press release that it has appointed five international banks, among them Deutsche Bank, Goldman Sachs International, HSBC, UBS Investment Bank and VTB Capital to arrange meetings with bond investors in Europe. Finance Minister Harris Georgiades said the government will deliberate in the coming weeks on Cyprus' early return to international markets. Based on the island's adjustment programme, it had been set to return to the markets in late 2015 or early 2016.

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The EU is investigating whether US giants Apple and Starbucks were inappropriately granted tax benefits in Ireland and the Netherlands, the bloc's executive said. "In the current context of tight public budgets, it is particularly important that large multinationals pay their fair share of taxes," EU Competition Commissioner Joaquin Almunia said in a statement. The European Commission said it has concerns that the corporate income tax calculations used by Irish and Dutch authorities "could underestimate the taxable profit, and thereby grant an advantage to the respective companies by allowing them to pay less tax." The financing arm of Italian car manufacturer Fiat has also landed under the microscope, with the commission probing the tax calculation used by Luxembourg for Fiat Finance and Trade.

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Afternoon Watchlist (all times British Summer Time)

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15:30 US EIA Crude Oil Stocks change

19:00 US Monthly Budget Statement

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Thursday's Key UK Corporate Events

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Real Estate Credit Investments PCC Limited Full Year Results

WS Atkins Full Year Results

PZ Cussons Full Year Results

Pets At Home Full Year Results

Halma Full Year Results

Hardy Oil & Gas Full Year Results

Home Retail Group Interim Management Statement

Mulberry Group Full Year Results

IDOX Half Year Results

BooHoo.com Full Year Results

Eros International Full Year Results

Volex Full Year Results

Redhall Group Half Year Results



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Thursday's Key Economic Events (all times British Summer Time)

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00:01 UK RICS Housing Price Balance

00:50 Japan Machinery Orders

All Day Russia National Day

06:30 France Consumer Price Index

07:00 Germany Wholesale Price Index

07:45 France Current Account

09:00 EU ECB Monthly Report

10:00 EU Industrial Production

13:30 US Import Price Index

13:30 US Export Price Index

13:30 US Jobless Claims

13:30 US Retail Sales

15:00 US Business Inventories

15:30 US EIA Natural Gas Storage change

23:00 UK BOE's Governor Carney speech



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Source: Alliance News