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On Friday British Telecommunications rose 25p, or 3.1
per cent, to 837, outperforming the Dow Jones Stoxx Index's phone group, which fell 1.8 per cent. BT and AT&T have been holding talks that may lead to a merger, the Wall Street Journal reported, citing people familiar with the situation. Analysts believe that if BT was to merge with AT&T, they could build a global wireless platform which would look reasonably similar to Vodafone.
Meanwhile, the benchmark FT-SE 100 Index added 25.5 points, or 0.4 per cent, to 6543.7 points, for a gain over the week of 2.5 per cent. The FT-SE All Share Index gained 4.47 points, or 0.1 per cent, to 3135.78, its highest close since
29 March as three stocks advanced for every two that slipped in. Two other telecom companies have been making the headlines - Energis and Colt. Both provide their services to the UK large corporate market. Colt started in 1993 and built a fibre network in London. Its strategy has been to build a series of Metropolitan Area Networks in cities across Europe and to lease intercity networks off other operators.
Energis on the other hand started with a long-distance fibre backbone in the UK, based on the National Grid system. The backbone has since been expanded into Europe through acquisition. However, both Colt and Energis have seen the rationale in each other's way of thinking and agree that the future will depend on services rather than networks.
Halifax
Halifax, the banking group, announced that while the economy has remained in good health in the first six months of the year, growth in demand is slowing. This has been reflected in the housing market, where prices rose 9.2 per cent in the year to June, having previously recorded a 16.0 per cent rise in the year to January. The group's chief executive claimed that the reported results for the six months to 30 June demonstrated the leverage to be gained from applying quality management to drive performance improvement. He claimed that this was evidenced by strong core business financials, good progress on diversification and the aggressive management of costs in favour of significant investment in new channels.
Halifax reported that the new channel strategy is delivering good growth in online customer numbers as well as strong growth in sales over the phone and it is poised to deliver on its two major start ups, Intelligent Finance and esure. Both this year's acquisitions, St James's Place Capital and the UK credit card business of Bank One, emphasise once again its commitment to bringing in outstanding management to bear on its strategy.
Halifax's £341 million profit before tax contribution from the diversified businesses now represents 38 per cent of the total, up from 34 per cent in the first six months of 1999. Strong profit growth came in Long Term Savings & Protection, up 48 per cent, Consumer Credit, up 25 per cent and Personal Lines Insurance, up 15 per cent. Diversified profits were held back by Treasury & Wholesale Banking profits which fell by 21 per cent. Halifax has refocused its growth ambitions on the twin areas of Treasury and Structured Finance for better economic returns.
Profits at Halifax's Clerical Medical rose by over 50 per cent and it continued to gain share in the core Individual Financial Advisors (IFA) market. Total IFA sales were 17 per cent higher with strong growth in single premium bonds, individual pensions and particularly in group pensions. Clerical Medical has seized the initiative in the new stakeholder market through securing best advice placing on almost all key IFA panels decided to date. European business has, as expected, suffered by comparison with the exceptional increase of 75 per cent in the first half of 1999. But sales now seem moving ahead and it expects a strong performance in the second half of 2000.
Halifax's Intelligent Finance initiative is expected to be launched over the coming weeks. The banking group was undeniably disappointed by the short delay in launching Intelligent Finance. All the foundations for a very successful launch are now in place, in particular the support of some 19,000 professional advisers who have registered to sell Intelligent Finance products. Awareness of Halifax's new brand and the unique nature of intelligent banking, is perhaps best measured by the cut through that has been achieved in all media, pointing to the scale of the anticipated demand ahead of the group. Meanwhile, in February Halifax announced its plans to launch esure, the insurer for the 21st century, headed by Peter Wood. With the senior management team in place, it looks on track for launch in early 2001. Detailed analysis to identify the latent marketing opportunities for esure products within the Halifax 20 million customer base is progressing well.
Halifax Online now has banking, savings, mortgage, sharesave, sharedealing and insurance products, with the total number of online customers up 282 per cent at 242,000. Halifax online banking, now with around 133,000 customers is converting traditional customers faster than anyone else, while the 37,000 online sharedealing customers already make Halifax the third largest online broker. Web Saver, the unique Halifax online savings product, with 28,000 customers since launch in April, is now winning new customers at the rate of around 3,000 per week. Internet and phone facilities are now being made available inside branches so that staff can work with customers to help them to use these new channels. Halifax has managed to grow its loan business, but many of its competitors have done so. Analysts remain cautious as the banking group remains heavily dependent on low-margin mortgage and savings businesses.
SmithKline Beecham
SmithKline Beecham (SB), the Pharmaceutical group, reported pre-tax profits of £857 million for the six months to 30 June. SB's sales were driven, once again, by continued growth from Seroxat/Paxil, the selective serotonin reuptake inhibitor, Augmentin, the broad-spectrum antibiotic and new product sales rose 33 per cent and accounted for 31 per cent of Pharmaceuticals sales. In addition, SB's Consumer Healthcare business also performed well.
Avandia continued to make steady gains in the US marketplace, helped in part by the withdrawal of Rezulin from the market. Avandia continues to be the most prescribed glitazone in the US. Its strong efficacy and safety profile are reflected in its excellent uptake - more than three million prescriptions have been written for more than one million patients.
Pharmaceuticals sales rose nine per cent and trading profit increased 16 per cent. Pharmaceuticals R&D expenditure increased nine per cent, accounting for 18 per cent of Pharmaceuticals sales. SB's US sales were adversely impacted by the wholesaler stocking in anticipation of price increases that occurred in the second quarter of 1999. The products most affected were Paxil, Augmentin and Relafen. The reported sales increases for Paxil and Augmentin were four per cent and five per cent, respectively, while Relafen's reported sales decreased 41 per cent. SB's international sales rose 16 per cent, as trading conditions improved in several markets. Latin America and the Middle East saw sales rise 27 per cent and 55 per cent, respectively.
Key product approvals and filings also marked the second quarter for SB. The European Committee for Proprietary Medicinal Products adopted a positive opinion to recommend marketing authorisation for Infanrix PeNTa and Infanrix HeXa. Both vaccines protect infants against dipththeria, tetanus, pertussis, hepatitis B and poliomyelitis, with Infanrix HeXa providing additional protection against disease caused by Haemophilus Influenzae type B.
In the UK SB filed Factive, the enhanced-affinity quinolone antibiotic for community-acquired pneumonia, acute exacerbations of chronic bronchitis, acute sinusitis and uncomplicated urinary tract infections. In the US, SB submitted a Supplemental New Drug Application to market Paxil for generalised anxiety disorder. Additionally, SB recently received its first world-wide approvals for generalised anxiety disorder in the Czech Republic and Romania. Consumer Healthcare: In the US, SB's sales rose 11 per cent, helped by the launch of Tagamet HB 200 Liquid and Aquafresh dental gum and dental lozenges. In international markets, Consumer Healthcare sales grew 10 per cent, and in Europe, three per cent. Worldwide sales of Oral Care products rose eight per cent to £166 million/$255 million, fuelled by strong sales of Aquafresh, Odol and Dr Best. World-wide, sales of the Aquafresh product line advanced 17 per cent. Nutritional Healthcare products rose nine per cent to £139 million. Sales for both Lucozade and Horlicks rose 10 per cent while Ribena grew two per cent. SB's chief executive claimed that the company's performance was in line with the earnings growth target announced in 1999 and reflected continued momentum as the company moves towards the completion of its merger with Glaxo Wellcome.
Reuters
Reuters, the information provider, announced a 50 per cent per cent rise in profits before tax to £450m for the half-year to 30 June. This included gains on disposals by the Greenhouse Fund of £42 million. These offset the £41 million of business transformation costs. These costs are expected to be £150 million for the full year. A follow-on issue of Tibco Software Inc. shares earlier this year (in which Reuters did not participate) caused Reuters to book a profit of £160 million.
During the first half of the year Reuters moved from net cash of £41 million at the end of 1999 to net debt of £92 million. This reflected higher levels of investment in the core business and the Greenhouse Fund, a number of acquisitions, including the Yankee Group, and the costs of the business transformation programme.
Reuters' acquisitions programme is steadily enriching its content assets, particularly in the area of respected research. Other new ventures and partnerships such as Radianz (global financial communications network) and Sila (enabling products for mobile devices in Europe) look either on schedule or ahead of it.
Meanwhile, Reuters has reached agreement in principle with Tibco Software Inc. in its role as an internet infrastructure company; Equant, the data networking service provider; and Yahoo! Inc. to sell a compelling package of software, content and communications offerings to service the growing demand for enterprise information portals. Reuters promised that it shall be providing details of this interesting opportunity when they are finalised.
Losses from new ventures were minimal in the first half of the year and are likely to be higher in the second half as these businesses continue to implement their launch strategies. In Reuters Financial, increased investment is being made in editorial content, especially in the US. Installations of new systems were lower in the first half, as expected, due to the millennium changeover. Reuters systems sales are starting to show good signs of improvement with a number of significant orders now in negotiation.
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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