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The Market
Leading shares in London finished the week firmer, well below the Friday early highs, after an unexciting session, with both the peak and the trough for the day occurring in the first half-hour of trading. The Dow Jones Industrial Average's profit taking decline in the afternoon, kept UK blue chips from moving back towards their best levels, with overall interest limited by a lack of corporate news of economic data.
At the Friday close, the FTSE 100 index was 35.2 points firmer at 6,526.0 points, below its early high of 6,566.7 points, but above an opening low of 6,474.9. All the broader FTSE indices were firm, with the techMARK 100 index adding 26.03 points at 3,353.50 despite Nasdaq's decline. Volumes were fairly solid, with 1.585.9 billion shares changing hands in 106,163 transactions.
London shares opened modestly weaker in slow early trading, reflecting overnight weakness by the DJIA and the absence of anything fresh for direction. However, this caution was short lived, and some bargain hunting in technology, media and telecom issues after Nasdaq's overnight advance fuelled a swift turnaround, with the FTSE 100 index hitting its peak for the session by 8.32 am. From then on, the path trodden by the UK blue chips was well worn, with the gains gently eroded throughout the morning session.
After the swathe of important economic data released throughout the week in both the UK and the U.S., players preferred some consolidation as they digested the implications of the figures for global interest rates. There was nothing really to focus on over the early afternoon period aside from the Wall Street restart, so UK blue chips just drifted back towards opening levels.
In the event, the Nasdaq index managed a modest rally at the start, but the DJIA dropped back, under pressure from a sell-off in financial issues on nervousness about upcoming corporate results. By London's close, the DJIA was down 120.61 points at 10,594.61 points, but the Nasdaq index managed a gain of 4.01 points at 3,849.75.
Corus Group was a feature on the FTSE 100 leader-board, gaining 2-3/4 pence to 100-1/2 pence as investors welcomed the company's rationalisation plans, as the steel group made a surprise announcement that it is to cut 1,430 jobs in the UK and the Netherlands by the end of 2001. Corus said the move was warranted by fundamental changes in the market, which have been exacerbated by the strength of sterling.
Elsewhere, BOC Group moved 26 pence higher at 932 pence following a Goldman Sachs upgrade to 'market outperform' from 'market perform'. Land Securities also attracted interest - gaining 14 pence at 790 pence - after announcing a £63 million-property acquisition in the City of London, with recent sector consolidation moves adding spice.
United News & Media was lifted by a reassuring trading update, with the group reporting that current year results were 'well ahead' of last year's outcome. The firm - which highlighted continuing rapid growth in its online revenues - was recommended a 'strong buy' by SG Securities. United News & Media shares pared earlier gains, but firmed 5 to 880.
WPP Group was propelled 41 pence higher to 962 pence on news that it has acquired a 49 pct stake in U.S. marketing group UniWorld Group. Pearson shares advanced by 195 pence to 2,220 pence on press reports that the company is to push ahead with flotation plans for the merged television interests it holds along with Bertelesmann and Groupe Brussels Lambert.
BSkyB rallied from early profit taking, adding 16 at 1,320, extending yesterday's strong gains in response to the group's retention of the Premiership TV rights and following the BBC's announcement that it has been awarded a three-year viewing contract as well.
Elsewhere, selected technology and telecom issues rallied, supported by Nasdaq's rally: Energis advanced 240 pence to 3,050 pence, Colt Telecom also gained 240 pence to 2,800 pence, Logica took on 95 pence at 1,635 pence, CMG firmed 42-1/2 pence at 929-1/2 pence, and ARM Holdings added 30 pence at 690 pence. However, Psion - down 93 pence at 510 pence, Baltimore - off 75 pence at 450 pence, and Kingston Communications - down 21 pence at 600 pence missed out, suffering a sell off ahead of the demotion from the FTSE 100, which took effect at the close.
Financial issues were also weak spots, knocked by profit taking in reaction to the sell-off being suffered by their peers in New York. Lloyds TSB was amongst the worst off, down 13-1/2 pence at 649-1/2 pence, as it continued to suffer from yesterday's downgrade to 'hold' from 'buy', with a 700 pence price target. Meanwhile British Airways shed 8 pence at 363 pence, after Virgin Atlantic issued a profit warning for this year on the back of a rise in the price of aircraft fuel.
Vocalis fell back from the top of second line risers, but remained a solid 40 pence up at 282-1/2 pence, in the wake of yesterday's announcement of a U.S. joint marketing project and ahead of full year results on Wednesday. Continuing rumours that the group could be a target for Microsoft also adds interest. Elsewhere, Johnson Matthey firmed 48 pence at 940 pence, with CSFB reiterating its 'buy' rating. Schroder Salomon Smith Barney raised its rating on the stock to 'buy' from 'outperform'.
The Smaller Caps index on Friday closed up 4.2 points at 3,330.2 pence, just shy of its earlier high of 3,332.0 pence and above it low of the day at 3,326.6. Among the Smaller Caps, Linden was a late entrant to the list of risers, 39 pence higher at 291-1/2 pence, after announcing it is in preliminary talks over the possibility of an MBO. Desire Petroleum bounced back from previous falls after drilling was suspended at its Aljubarrota No3 well in Portugal, to firm 3-1/2 pence at 23-1/2 pence, while Green Property continued to find support, firming 40 pence at 390 pence, excited by a report in the FT suggesting the Irish property group is considering privatisation.
At the close, the London techMARK 100 was up 26.03 points at 3,353.5 pence, trading with a tight range from 3,324.01 points to 3,375.62 pence just a few minutes before the market closed. On Wall Street, the Nasdaq too was hardly straying from parity.
Tech stocks were being sold or bought depending on valuation concerns as impending results triggered a selection of profit warnings, as the reality of a slowing U.S. economy continued to sink in. At 5.13 pm, the Nasdaq Composite index was up just 18.23 at 3,863.97. Back in London, the most striking features in late trading were Psion and Baltimore, which left the FTSE 100 on Friday. Both were hit hard, with Baltimore sliding 75, or 14.3 pct, to 450 and Psion - which went into backwardation just before the close - losing 93 or 15.4 per cent to 510 pence.
Similarly, Kingston Communications slipped a modest 21 pence to 600 pence. Thus, another departure from the 100 list, managed to gain 9 pence to 310 pence. In doing so it was following other telecoms stocks, where a flight to quality had been in evidence after telecoms gained strongly in New York. Colt Telecom rose 240 pence to 2800 pence, Vodafone rose 5 pence to 305 pence after a torrid couple of days, and Energis rose the same amount to 3050 pence after Donaldson Lufkin Jenrette initiated coverage this week with a "buy".
Eidos
Eidos, the computer games developer and publisher reported a 30 per cent increase in pre-tax profits to £49.3 million for the year to March 31. Nine new game titles were launched in the final quarter including Resident Evil 3, Fear Effect and Thief 2 bringing the total number of new titles for the year to twenty-four. Nine titles (including catalogue) managed to achieve sales in excess of 350,000 units.
This year also saw the release of a number of titles on the new platforms, Sega Dreamcast and Nintendo Gameboy Colour. In particular, titles from three of Eidos' key franchises (Tomb Raider, Fighting Force and Soul Reaver) were released on Dreamcast, each selling over 200,000 units. The video games market is being adversely affected by the impending launch of a new generation of gaming platforms due in late calendar 2000 and during 2001. The hiatus in demand for games software, which this transition is occasioning, is expected to continue throughout Eidos' current financial year.
Although this market environment will inevitably affect the profitability of the group in the short term, the directors are confident that the quality of the release schedule under development will continue to build the group's strength and standing within an industry which is expected to show strong growth over the medium and longer term, and the underlying potential for profit generation.
Furthermore, the composition of the Group's release schedule for the current fiscal year has significantly less reliance on the existing PlayStation platform than before as a result of increased releases for PC, Dreamcast, Game Boy Colour and PlayStation 2 platforms.
Eidos experienced softening consumer demand in key markets during the period. Against this background, the group has been satisfied with the individual performance of many of the nine new titles released in the fourth quarter. Titles bearing established brands such as Resident Evil 3, Resident Evil: Survivor and Final Fantasy VIII all enjoyed success in the retail charts, albeit at lower volumes than might previously have been expected.
The title Fear Effect emerged as an original property with strong franchise potential and the leveraging of existing properties such as Tomb Raider and Soul Reaver onto new platforms was successfully achieved. It is expected that major releases for the forthcoming year are scheduled to include further titles from the Tomb Raider, Soul Reaver and Championship Manager franchises and titles supported by major licenses such as the Olympics, 102 Dalmatians and "Who Wants To Be A Millionaire?".
In addition, Angelina Jolie, the Oscar winning actress, has been cast for the lead in the forthcoming Tomb Raider film to commence shooting this year. Sequels to Gangsters and Commandos and original titles such as Deus Ex, Hitman, Chicken Run and IGI are also scheduled for release.
Based on the profile of Eidos' current release schedule analysts believe that it is well placed to trade through the remainder of the market's transitional stage and to take full advantage of the considerable opportunities of the next generation hardware platforms.
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