News Column

UK MIDDAY BRIEFING: Barclays Leads FTSE 100 After Unexpected Profit Rise

July 30, 2014



LONDON (Alliance News) - Barclays leads the blue-chip index Wednesday after the bank beat consensus forecasts for its half-year adjusted profit.



Despite reporting a 6.7% fall in first-half adjusted pretax profit to GBP3.35 billion, down from GBP3.59 billion last year, the result still beat the GBP2.96 billion analyst consensus forecast provided by the bank.



Barclays said the lower reading was caused by adverse currency movements and a fall in the profitability of its investment bank, which were only partially offset by improvements in personal and corporate banking, Barclaycard and its 'non-core' division.



The adjusted figures, which strip out items including own credit, costs of provisions for mis-sold products, and goodwill impairment, were presented alongside statutory results showing a 49% increase in pretax profit to GBP2.50 billion, from GBP1.68 billion.



Chief Executive Antony Jenkins said Barclays is making "encouraging progress" in executing the plan he unveiled in May to restructure the bank into four core businesses as well as a 'non-core' entity that doesn't fit with Barclays' strategy.



The bank trades 4.50% higher at 228.93 pence per share in early afternoon trading.



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Markets: Stock indices across the UK and Europe are drifting between positive and negative territory without any clear direction Wednesday, as investors weigh up the consequences of a new round of sanctions imposed on Russia by the US and EU and await some all-important economic data to come later in the session.



Futures trading indicates that a marginally higher open can currently be expected on Wall Street, with the DJIA and the S&P 500 both pointing 0.1% higher, and the Nasdaq Composite pointing 0.2% higher following Twitter's encouraging results after the close on Tuesday.



FTSE 100: down 0.04% at 6,804.75

FTSE 250: up 0.01% at 15,688.71

AIM ALL-SHARE: down 0.1% at 770.35

GBP-USD: down at 1.6927

EUR-USD: down at 1.3400

GOLD: down at USD1,298.52 an ounce

OIL (Brent): up at USD107.61 a barrel

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Other Top UK Corporate News

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AstraZeneca said that it has entered into an agreement to acquire Spanish pharmaceutical company Almirall SA's respiratory franchise for an initial USD875 million. The deal could be worth up to USD1.22 billion including development-, launch- and sales-related milestones, AstraZeneca said, and it also has agreed to make sales-related payments to Almirall. It will fund the transaction from existing cash resources and short term credit facilities. AstraZeneca will acquire the rights to develop and commercialise the respiratory franchise, including rights to revenues from Almirall's existing partnerships and its pipeline of investigational therapies.

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ITV pledged to grow its full-year ordinary dividend by at least 20% per year over the next three years, starting from this year, as it saw pretax profit rise in the half year to end-June. The broadcaster proposed an interim dividend of 1.4 pence, up from 1.1 pence, which it said would be roughly a third of its full year dividend. ITV posted a pretax profit of GBP250 million, up from GBP179 million, as revenue rose to GBP1.23 billion from GBP1.14 billion.

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British American Tobacco reported lower profit and revenue for the first half of the year as it was hit hard by the comparative strength of sterling, although sales and profit rose at constant rates as volume declines moderated and it raised tobacco prices and further cut operating costs. The company, one of the world's biggest tobacco companies, reported a pretax profit of GBP2.61 billion for the six months to June 30, down from GBP2.99 billion a year earlier, as revenue declined to GBP6.80 billion, from GBP7.57 billion.

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Tullow Oil said it swung to a pretax loss in its first half as revenues fell, hit by exploration write-off charges it had warned about earlier this month. The company said its revenue for the half fell 6% to USD1.27 billion compared to the previous year, and its gross profit fell 12% to USD673 million, a slightly smaller fall than expected. It posted a pretax loss of USD29 million compared with a pretax profit of USD486 million previously.As expected, the company said that after mixed exploration results during the period, along with the relinquishments of certain licences as the company focused on its high-grade assets, it booked a USD402 million net exploration write off charge during the period.

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Compass Group said its outlook for the current financial year remains unchanged and positive after it booked 4.0% comparable organic revenue growth in its fiscal third quarter and 3.9% for the first nine months of the year. Its growth was driven by North America, while its emerging and fast growing markets suffered from the weakening economy in Australia. However, it also warned of the hit it is taking from the strength of sterling on its results, which are denominated in the currency. In a trading update, the company said it had continued to drive efficiencies across its business, reinvesting them in growth opportunities and in helping to manage volume declines in parts of Europe.

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Antofagasta said its copper production rates increased in its second quarter compared to the first but were down on the previous year, while cash costs increased after it agreed bonuses with labour unions at its Esperanza mine in Chile. Antofagasta said it remains on track to meet its full year production guidance of 700,000 tonnes of copper, 270,000 tonnes of gold and 7,500 tonnes of molybdenum, and net cash costs of USD1.45 per pound.

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Building merchants Travis Perkins reported an increase in pretax profit for the first half, boosted by a combination of improving market conditions, increasing customer confidence and the successful introduction of a number of self-help initiatives. FTSE100-listed Travis Perkins posted pretax profit of GBP153.7 million for the six months ended June 30, up 14% from GBP134.7 million a year earlier, as revenue rose to GBP2.73 billion from GBP2.45 billion.

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Taylor Wimpey reported an increase in profit for the first half, buoyed by a strong housing market in London and the South East. The company posted pretax of GBP210.2 million for the half year ended June 29, up 26% from GBP166.5 million a year earlier. Pretax profit before exceptional items rose to GBP178.4 million from GBP109.0 million a year earlier. During the period 5,959 homes were built compared with 5,159 homes a year earlier. FTSE 250-listed Taylor Wimpey said Help to Buy equity loans continue to be very popular with its customers and during the first half, it completed around 42% of private homes through the scheme.

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3i Group said that it received GBP164.0 million of private equity realisation proceeds in the first-quarter, helped by market conditions creating opportunities for realisation and refinancings, with an additional GBP245.0 million expected from exits signed but not yet completed. 3i said that the mid-market private equity market remains fully-priced, which has provided it with opportunities for realisations, but continued to result in a "cautious approach" to new investment. 3i also said that the strength of sterling resulted in a GBP68.0 million foreign exchange hit in the quarter to June 30.

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Moneysupermarket.com Group said its first-half pretax profit increased by a third, boosted by revenue increases across its brands, and a gain on the sale of a stake in HD Decisions Ltd. In a statement, the price comparison website said it made a GBP26.4 million pretax profit in the six months ended June 30, compared with GBP19.8 million in the corresponding period a year earlier. Revenue increased to GBP122.4 million from GBP112.3 million. "It's been a good first half of 2014, with good revenue growth in our MoneySuperMarket, MoneySavingExpert and TravelSupermarket brands. Group revenue and profits were 9% higher than the first half of 2013," Chief Executive Peter Plumb said in a statement.

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Vedanta Resources said its revenue and earnings before interest, taxation, depreciation and amortisation increased in its first quarter due particularly to stronger sales at its oil and gas operations and copper division. The company said sales from its oil and gas division increased 3% to USD748.0 million due to higher volumes and positive oil prices, and sales from its copper division jumped 36% to USD1.02 billion with particular improvements in both India and Australia where the company achieved significantly higher copper cathode production.

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Polymetal International said its revenue fell slightly in its second quarter as lower gold and copper sales volumes hit the company, but it now expects to beat its gold equivalent production guidance for the full year.The company said its first half revenue was down 2.2% to USD724 million from USD740 million, as the company also saw a sales decrease in the first quarter compared to the previous year. Polymetal said its gold equivalent production was up 4% to 335,000 ounces during the second quarter as higher gold and silver production due to strong performance at the company's Amursk POX site, as well as as improved grades and throughput at Dukat and Omolon mines, offset planned grade erosion at Varvara and Khakanja and a 45% fall in copper production.

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Irish airline Aer Lingus Group reported higher profit and revenue for the second quarter of the year, as more passengers and higher fares more than offset a hit from industrial action by its cabin crew, and raised its guidance for the full-year as it made progress in winning back customers put off by the threat of further strikes. The airline had issued a profit warning on June 12, saying the threat of strikes had caused "significant" damage to forward bookings and trading. As a result, it lowered its expectations for 2014 operating profit to be 10% to 20% lower than the previous year. It has now reversed that, saying it again expected operating profit before exceptional items to be at least flat on last year's EUR61.1 million.

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Lonmin said it has entered into binding agreements with the Bapo ba Mogale Traditional Community in South Africa which will enable it to meet requirements under the country's Black Economic Empowerment targets. The FTSE 250-listed platinum mining company said that the community will waive its current statutory right to receive royalties from Lonmin's operating companies Eastern Platinum Ltd and Western Platinum Ltd in exchange for a lump cash royalty payment which will be used by the community to subscribe for Lonmin shares and a deferred royalty payment of ZAR20 million in each of the five years following the deal.

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AIM MOVERS

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President Energy shares have risen after it decided to take full ownership of the Puesto Guardian Field in Argentina, buying the 50% it doesn't own for an initial cash payment of USD5 million, to be followed by a further USD1.9 million in cash payments over two years. Frontier Developments also trades higher after it released the first phase of the Beta development of its forthcoming Elite: Dangerous game on schedule. Tissue Regenix Group is up after it received approval from the Medicines and Healthcare Products Regulatory Agency to start the first UK clinical trial of its dCELL meniscal device for knee repairs. At the other end of the market, shares in Altona Energy have dropped after the company said its negotiations over the Arckaringa joint venture deal are continuing in China.

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Top Economics And General

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Eurozone economic confidence rose unexpectedly in July, driven by an improvement in industrial sentiment, survey data revealed. The economic confidence index rose to 102.2 in July from revised 102.1 in June, figures from European Commission showed. Economists had forecast the score to fall to 101.9 from June's originally estimated value of 102. Meanwhile, confidence in services fell to 3.6 from 4.4 a month ago. The decline in services confidence was caused by managers' significantly lower demand expectations and more muted assessments of the past business situation which more than outweighed a more positive stance on past demand.

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The EU and US ratcheted up pressure on Russia Tuesday with the toughest round yet of sanctions against Moscow for its involvement in Ukraine. EU ambassadors agreed to impose economic sanctions on Russia over its involvement in Ukraine - the toughest restrictive measures pursued by the bloc so far. Details of the EU sanctions are to be finalized by Thursday and should enter into force by the end of that day, diplomats said. Shortly after the EU announcement, the US upped its own sanctions against Bank of Moscow, Russian Agricultural Bank, and VTB Bank OAO, a ship builder and the energy sector.

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Industrial output in Japan was down 3.3% on month in June, the Ministry of Economy, Trade and Industry said on Wednesday. That was well shy of forecasts for a decline of 1.2% following the 0.7% increase in May. On a yearly basis, industrial production added 3.2% - also missing expectations for 5.2% but up from 1.0% in the previous month. Upon the release of the data, the METI downgraded its assessment of output, saying that industrial production has weakened. The METI had previous held that output had been flat.

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At least 20 people were killed and more than 50 injured when Israeli tanks shelled a school used as an emergency shelter by refugees in Gaza, the Health Ministry said. Ministry spokesman Ashraf al-Qedra said tanks shelled the school run by the United Nations Relief and Works Agency in the northern Gaza refugee camp of Jabalia early Wednesday. Witnesses told Gaza radio stations that several tanks hit the al-Hussein school where scores of civilians had taken refuge after fleeing their homes during Israeli airstrikes.

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Afternoon Watchlist (all times British Summer Time)



13:00 Germany Consumer Price Index

13:30 US Gross Domestic Product Price Index Preliminary

15:30 US EIA Crude Oil Stocks change

19:00 US Fed Interest Rate Decision

19:00 US Fed's Monetary Policy Statement



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Thursday's Key UK Corporate Events



AstraZeneca Half Year Results

Communisis Full Year Results

F&C Asset Management Full Year Results

Rolls-Royce Holdings Half Year Results

Thomas Cook Group Interim Management Statement

Merlin Entertainments Half Year Results

Intu Properties Half Year Results

Royal Dutch Shell Q2 Results

Centaur Media Half Year Results

Promethean World Half Year Results

Lloyds Banking Group Half Year Results

Investec Half Year Results

Laird Half Year Results

Xchanging Half Year Results

Diageo Full Year Results

Greencoat UK Wind Half Year Results

Essentra Half Year Results

Millennium & Copthorne Hotels Half Year Results

Bodycote Half Year Results

BT Group Q1 Results

Colt Group Q2 Results

Kazakhmys Q2 Results

Torotrak Interim Management Statement

BG Group Half Year Results

Creston Interim Management Statement

Weir Group Half Year Results

Centrica Half Year Results

BAE Systems Half Year Results

Countrywide Half Year Results

Management Consulting Group Half Year Results

Spirent Communications Half Year Results

Inchcape Half Year Results

Schroders Half Year Results

TSB Banking Group Half Year Results



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



All Day G20 Meeting

00:05 UK Gfk Consumer Confidence

00:50 Japan Foreign bond investment

02:30 Japan Labor Cash Earnings

06:00 Japan Housing Starts and Construction Orders

07:00 UK Nationwide Housing Prices

07:00 Germany Retail Sales

07:45 France Consumer Spending

08:55 Germany Unemployment Rate

10:00 EU Consumer Price Index

10:00 EU Unemployment Rate

12:30 US Challenger Job Cuts

13:30 US Jobless Claims

14:45 US Chicago Purchasing Managers' Index

15:30 US EIA Natural Gas Storage change



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Contact: +44 203 668 7440; newsroom@alliancenews.com; @AllNewsTeam






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