News Column

TOP NEWS: HSBC And Intertek Post Declines In Interim Profit

August 4, 2014

Arvind Bhunjun



LONDON (Alliance News) - The following is a summary of top news stories Monday.

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COMPANIES

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HSBC Holdings PLC reported a decrease in first-half pretax profit that was worse than analysts expected, with the banking group continuing its efforts to replace revenue from businesses it has sold or discontinued. In a statement, HSBC said it made a USD12.34 billion pretax profit in the six months ended June 30, compared with GBP14.07 billion in the corresponding period last year. A group of 15 analysts polled by the bank had forecast on average a USD12.46 billion pretax profit in the first half. Chairman Douglas Flint said the result was achieved while the group continues to invest significant time and resources in re-shaping to meet the heightened and evolving expectations of its regulators.

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HSBC is also urging the UK government to delay a deadline for ringfencing the lenders' retail and investment banking operations, Sky News reported on Sunday. According to the article, Flint has written to Chancellor George Osborne and Bank of England Governor Mark Carney to warn about potential implications of a competition probe into the banking sector which the UK's Competition and Markets Authority wants to pursue. Citing Whitehall sources, the report said that Flint has used the letter to ask for a delay to the 2019 timetable for bank ring-fencing

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Quality-testing company Intertek PLC reported lower profit for the first half of the year as the strength of sterling hit revenue earned abroad, but it predicted organic revenue growth in the second half of the year and beyond. The company reported a pretax profit of GBP119.8 million for the six months to the end of June, down from GBP127.9 million a year earlier, as revenue declined to GBP1.02 billion, from GBP1.08 billion. Revenue would have increased 2.9% at constant exchange rates, thanks to acquisitions, with organic revenue at constant rates down 0.5%. It said sterling's strength knocked GBP89 million off its revenue.

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Aviva PLC is planning to cut millions of pounds from its annual tax bill, the Financial Times reported online on Sunday. According to the FT, new Finance Director Tom Stoddard has pledged to cut tax expenses under the next stage of the insurer's turnaround. The newspaper cited comments made by Stoddard at a recent investor day at which he said the insurer has been too focused on producing pretax operating profit.

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esure group PLC said its pretax profit edged up by 0.4% in the first half amid intense competition in the group's motor and home markets, while it complemented an increase in its interim dividend with the declaration of a special dividend. esure increased its interim dividend to 3.6 pence from 2.5p, and also said it will pay a 1.5p per share special dividend, increasing the total to 5.1p. In a statement, esure, the owner of the Sheila's Wheels brand, said it made a GBP57.1 million pretax profit in the six months ended June 30, compared with GBP56.9 million in the corresponding period last year. Total income increased by 1.4% to GBP286.2 million, as earned premiums, net of reinsurance, increased to GBP245.5 million from GBP240.2 million.

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Alent PLC said its pretax profit increased in its first half, and it proposed to pay out a GBP42 million special dividend, as a reduction in revenue was offset by lower costs and expenses. The advanced surface-treatment plating chemicals and electronics assembly materials company said its pretax profit increased 3.7% to GBP41.8 million for the six months ended June 30, from GBP40.3 million in the previous year.

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Data-centres provider TelecityGroup PLC posted rises in revenue and pretax profit in its first half on the back of strong demand in the European data-centre market. The firm said revenue rose 9.3% to GBP174.1 million, from GBP159.3 million a year earlier, with adjusted earnings before interest, taxation, depreciation and amortisation up 11% to GBP81.6 million against GBP73.8m in 2013. On the back of the results, the company lifted its dividend by 29% to 4.5 pence from 3.5 pence a year ago.

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Ultra Electronics PLC reported lower profit and revenue for the first half of the year, but reiterated that its defence markets are stabilising and it expects to "broadly" meet expectations for the full year because revenue will be weighted towards the second half. The defence, aerospace, security, transport and energy technology company reported a pretax, pre-items pretax profit of GBP50.5 million for the six months to end-June, down from GBP55.4 million a year earlier, as revenue declined to GBP341.0 million, from GBP367.7 million. Its pretax profit rose to GBP45.8 million, from GBP39.6 million, but this was mostly down to a GBP3.0 million profit on fair value movements on derivatives, compared with the GBP7.7 million loss it booked a year earlier.

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KellerGroup PLC reported a 21% increase in pretax profit for the first half, despite tough market conditions in Canada, a market it has targeted over the last 18 months. The FTSE 250 engineering contractor posted pretax profit of GBP32.5 million for the six months ended June 30, up from GBP26.8 million a year earlier, as revenue rose 22% to GBP788.2 million from GBP644.6 million. Keller said all four of its divisions achieved strong revenue growth compared with the same period a year ago, despite an adverse currency translation impact. On the back of this, the company increased its interim dividend 5% to 8.4 pence from 8.0 pence a year earlier.

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FidessaGroup PLC reported a 3.9% fall in half-year pretax profit, with growth at constant currency more than offset by sterling strength. In a statement, the trading software and services group said it made a GBP19.7 million pretax profit in the six months ended June 30, compared with GBP20.5 million in the corresponding period last year. Revenue fell to GBP137.1 million from GBP139.3 million, while operating expenses fell to GBP117.4 million from GBP118.6 million. Fidessa increased its interim dividend to 13.1 pence from 12.5p.

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MARKETS

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UK stocks are mixed, with indices trading in fairly tight ranges, as the state bailout of Portugal's troubled Espirito Santo Bank appears to have returned calm to the market following last week's sell-off, while the mid-morning release of results from HSBC has provided a boost for the FTSE 100.

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FTSE 100: up 0.3% at 6702.36

FTSE 250: down 0.3% at 15356.93

AIM ALL-SHARE: down 0.6% at 758.13

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The currency market has remained relatively stable amid the UK Construction and eurozone PPI data, with the pound and euro both currently trading flat against the dollar.

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GBP-USD: flat at USD1.6819

EUR-USD: flat at USD1.3419



GOLD: flat at USD1293.39 per ounce

OIL (Brent): down at USD104.79 a barrel



(changes since end of previous GMT day)

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ECONOMICS AND GENERAL

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UK construction activity grew at the fastest pace since 2007, exceeding the consensus estimate, led by increased house building work, results of a survey by the Chartered Institute of Purchasing & Supply and Markit Economics showed. The Markit/CIPS Construction Purchasing Managers' Index, or PMI, came in at 62.4 in July, marking the sharpest rise in construction since the summer of 2007 and exceeding the 62 reading expected by economists. The current score marked the fifteenth consecutive month of growth in construction. Residential construction activity recorded the steepest rise since November 2003 as funding conditions were favorable and demand for new housing starts remained strong.

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Eurozone producer prices continued to decline in June, but at a slower pace from prior year, Eurostat reported. Producer prices were down 0.8% year-on-year in June, following May's 1% decline. Producer prices were expected to drop again by 1%. Excluding energy, producer prices slipped 0.1% annually compared to a 0.2% drop in May. On a monthly basis, overall producer prices increased in June after decreasing every month of the year. Producer prices rose 0.1%, offsetting the 0.1% fall in May.

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The EU approved a plan to bail out Portugal's ailing Banco Espirito Santo (BES), with the rescue expected to amount to EUR4.9 billion. "The adoption of this resolution measure is adequate to restore confidence in financial stability and to ensure the continuity of services and avoid potential adverse systemic effects," the European Commission, the EU's executive, said in a statement. "A disorderly resolution of BES could create a serious disturbance in the Portuguese economy," it added. The move comes two and a half months after Portugal exited a national bailout programme financed by the eurozone and the International Monetary Fund.

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A seven-hour humanitarian ceasefire called by Israel went into effect in most of the Gaza Strip on Monday, after an attack that killed 10 people at a UN-run school. The temporary ceasefire was to last from 10am until 5 pm in the entire enclave except for the area east of the town of Rafah in southern Gaza - a focal point of fighting since a botched attempt by Palestinian militants to snatch a soldier there on Friday. The Israeli army said it would "respond to any attempt to exploit this window to harm Israeli civilians and soldiers," a military statement said. Hamas, the Islamist movement in de facto control of Gaza, said the ceasefire was designed to "divert attention from the Israeli massacres" in the Gaza Strip.

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Rain and landslides blocking key roads hampered efforts to evacuate some 57,000 people left homeless by an earthquake that killed at least 391 in south-western China. Many among the estimated 1 million people affected by Sunday's 6.5-magnitude quake in Yunnan province felt hundreds of aftershocks by Monday morning. Rivers had been blocked by landslides in some areas, bringing the threat of floods, state media said.

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The outbreak of Ebola in West Africa is out of control, the director of the US Centers for Disease Control and Prevention (CDC) said Sunday. But but he also said he was confident that it can be stopped. "We know how to stop Ebola now," Tom Frieden said in an interview with ABC News. He added that the government-funded CDC is "surging" its response to the outbreak and will send 50 public health employees to Guinea, Liberia and Sierra Leone to help stop the outbreak within the next 30 days.

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Australian popstar Kylie Minogue and 1960s diva Lulu headlined the closing ceremony at the 2014 Commonwealth Games in Glasgow on Sunday, bringing 11 days of sporting achievements to an end. More than 4,000 athletes from 71 countries took part in the 20th edition of the Games, breaking more than 140 Commonwealth and several world records.

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