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Blue chips in London closed the Friday trading session in negative territory, prompted downwards by significant falls on Wall Street after stronger-than-expected US GDP data for the second quarter, which analysts said has introduced a fifty per cent chance of a 25 basis point hike at the next FOMC meeting on 22 August.
Annualised US GDP was up 5.2 per cent in the period - well above even the most bullish of market estimates - while first quarter data was revised down to 4.8 per cent from the previous 5.5 per cent and the price deflator rose 2.5 per cent, in line with estimates.
The FTSE 100 index closed 16.4 points off, well below its intra-day high of 6,390 points and just above its low of 6,332.6 points. The FTSE 250 closed down 26.5 points at 6746.1 points. Volume was 1.513 billion shares in 93,613 transactions.
Leading shares edged higher in opening trade on Friday, shrugging aside the shake-out on Nasdaq overnight and sharp falls in Tokyo, as any further weakness was used to move into selected "old" and "new" economy issues. Early gains in London were further strengthened in midday trading ahead of the release of key US GDP figures, as the 'old/new' economy pattern took effect again.
Mid-afternoon trade saw leading shares firm but off their highs, taking heart from a solid performance on Wall Street in opening trade, as stronger-than-expected data was offset by a downward revision to first quarter numbers.
A handful of tech and telecom stocks continued their gains at close - though Nasdaq suffered from a dramatic fall in its last session before the weekend - with Invensys gaining 6-1/4 pence at 244-1/4 pence and Telewest 4-3/4 pence firmer at 183-1/4 pence as ABN Amro moved the stock to 'undervalued' from 'hold'. Over the past week, Telewest shares have fallen around 30 per cent after it warned of the impact of the delay in set top box deliveries.
Kingfisher firmed 13 pence to 575 pence as SG Securities continued to highlight its attractions, while Royal & Sun Alliance firmed 9-1/2 pence to 409 pence as Cazenove advised clients move into the stock ahead of upcoming figures. Drugs stocks also saw good gains, as Glaxo Wellcome rose 35 pence to 1945 pence, and merger partner SmithKline Beecham rose 21 pence to 873 pence. HSBC Securities has moved both stocks to a 'hold' from 'reduce' - saying it prefers them to rival AstraZeneca.
BAA rose 10-1/2 pence to 531 pence after in line figures and news that recovery at its retail operations is ahead of schedule. The airports operator said that trading in July so far is "satisfactory". Dresdner Kleinwort Benson was a fan, while ABN Amro sees the stock as 'undervalued'.
Elsewhere, forecast-busting results from US oil giants Exxon and Texaco and a rise in the price of crude helped to underpin BP Amoco - 10-1/2 pence higher at 592 pence. Meanwhile, Lloyds TSB reversed earlier losses to rest 10-1/2 pence higher at 596-1/2 pence after an upbeat analysts' meeting in the wake of in-line interim results and an upbeat statement on prospects into the second half.
But margins concerns remain, as does the feeling in some parts of the market that, with Lloyds' growth seen largely organic in coming months, there is a danger its current rating may still be too high. Dresdner Kleinwort was an outright seller, while Bear Stearns sees the stock as a little more than a hold given its fairly demanding rating.
United News headed the FTSE 100 index decliners, with over 12 per cent wiped off its market capitalisation as its bid premium disappeared after the £1.75 billion agreement to sell its broadcasting assets to rival Granada Media.
This deal was seen as finally ending the prospect of a full take-over of United News, and its shares fell 115 pence to 830 pence. Granada Media rose 30 pence to 615 pence on the news. Carlton Communications - which only last week called off its planned merger with United News - shed 34-1/2 pence to 789 pence.
The slide in Nokia following its third quarter profit warning - continued to propel other TMT stocks downwards, as the Nasdaq index suffered massive losses in its pre-weekend session: in the UK Energis was hard hit, losing 49-1/2 pence to 536 pence, while Colt Telecom shed 161 pence to 2180 pence. Market heavyweight Voadfone Airtouch remained weak, pulling the wider market in its wake, down 11-1/2 pence at 280 pence, on U.S market and debt exposure.
Smaller Cap stocks finished sharply lower, following its blue chip counterparts sharply lower as Wall Street went into free-fall. The FTSE Smaller Cap index closed 9.9 points lower at 3,387.6 points - its low of the day and well below its early high of 3,394.1.
Cash shell Internet Direct continued to dominate Smaller Cap risers, soaring 15-1/2 pence, or around 30 per cent, to 68-1/2 pence - on Investors Chronicle 'buy' advice - with the magazine highlighting its significant cash holdings and the strength of its board, who have already proved themselves to be adept at dealmaking.
Scottish & Newcastle
Scottish & Newcastle, the brewing, pubs and holiday parks group, reported a 19 per cent decline in pre-tax profits to £262 million on a turnover of £3.57 billion. Despite these results the chief executive claims that the group is focusing on its core growth areas and playing to its strength.
Scottish & Newcastle has increased the proportion of the estate that is branded to 41 per cent. Sales in its branded pubs continued to perform strongly up by 20 per cent with Chef & Brewer its leading pub restaurant brand achieving sales growth of 33 per cent and growth in like with like sales of 12 per cent. Food sales growth of 14 per cent was again well ahead of the market up by 8 per cent.
Scottish & Newcastle's increasing presence in the buoyant lodge sector resulted in room sales growing by 24 per cent with the average room rate rising by 8 per cent. Like-for-like sales on an uninvested basis were down by 3 per cent and on an invested basis were up by 0.3 per cent. The reshaping of the estate in the year just ended and a further, but less extensive, programme of disposals planned for the current financial year will increase the focus of its estate on growth sectors.
The integration of the Greenalls estate is now complete and Scottish & Newcastle is very confident it will deliver the synergy savings identified at the time of acquisition. In Scottish & Newcastle's Lodges business a further 22 units had opened during the year to 30 April, and other openings scheduled for 2000/2001 will increase the group's total portfolio to over 130 units with more than 8,000 rooms. The national coverage that its extended portfolio provides will increase the level of referral business and enable the group to increase sales significantly by bringing occupancy levels and room rates in to line with the market leaders.
Scottish & Newcastle's Scottish Courage business, turnover growth was affected by the disposal in 1998/99 of Moray Firth Maltings and Holsten UK and the acquisition of International Wine Services in 1999/2000. On a comparable basis turnover grew by 4.7 per cent and operating profit by 5.8 per cent with particularly strong contributions from Scottish Courage Brands, its take home division and Waverley, its wines and spirits subsidiary. Total Scottish Courage volume sales grew by 1 per cent. Total volume in the UK beer market declined by 0.5 per cent with the on trade down by 3.5 per cent but the take home sector with some benefit from the Millennium was up by 7.6 per cent.
Scottish Courage outperformed in both sectors of the market with its on trade volumes down by only 2.7 per cent and take home volumes up by 11.3 per cent. As a result it has again increased market share up by 0.5 per cent. Over the last 3 years Scottish Courage has now increased market share by 2.2 per cent. Its key brands all continued to grow volume ahead of their respective market segments. Although the market place remains very competitive, profit margins increased by 0.3 per cent, benefiting in particular from the strength of the group's brands which has brought growth in achieved sales value.
On the International front, Scottish & Newcastle's key brands continued to achieve strong sales growth. Driven by the continuing success of Newcastle Brown Ale, volume sales in the USA increased by 13 per cent. In Europe, Scottish & Newcastle increased sales volumes of Foster's Lager by 15 per cent as we benefited from our long term commitment to building a premium brand.
In the Center Parcs business, refurbishment initiatives in Belgium, Netherlands and Germany drive up occupancy, achieved tariffs and operating profits. The UK sustains high occupancy levels with increased capacity and grows tariffs by 8 per cent. Double digit tariff growth in France. On a constant currency basis annual turnover was ahead by 8.3 per cent and operating profit by 16.5 per cent. Each country contributed to this growth.
The integration of Greenalls and the wide ranging cost reduction initiatives implemented within Scottish Courage have resulted in exceptional costs for redundancy and other charges arising as a result of reorganisation. In view of the planned disposal of Pontin's, the Directors have carried out an impairment review, as a result of which the balance sheet carrying value has been written down by £42.5 million. A loss of £35 million arose on the disposal of properties including the Retail outlets sold following the Greenalls acquisition. Net debt increased to £1.844 billion. At the year end, balance sheet gearing was 79 per cent and interest was covered 5.5 times.
While the start of the year has been confused as usual by the vagaries of the weather and sporting events, the anticipated out-turn for the current year remains in line with expectations. The strategic initiatives announced in the last twelve months will substantially change the shape of Scottish & Newcastle's business. Inevitably the accelerating pace of change is a challenge for the group in the current year, but equally offers tremendous opportunities.
Please note that the value of investments, and income (if any) yielded by them, may fall as well as rise, and you may not recover the full amount of your original investment. Past performance is not necessarily a guide to the future.
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