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UK stocks rose on Friday, led by Vodafone amid optimism that it will be able to fund the purchase of high-speed mobile-phone licenses and pay for network upgrades. Vodafone rose 6p, or 2.3 per cent, to 268. Its share price rose 5.3 per cent since Verizon Communications filed to sell shares in its wireless unit, of which Vodafone owns 45 per cent. The sale may raise as much as $5 billion. The benchmark FT-SE 100 Index rose 6.7 points, or 0.1 per cent, to 6563.7 for a gain of just 0.3 per cent for the week, its fourth weekly gain. Four shares advanced for every three that declined in the FT-SE All Share Index, which added 2.5 points, or 0.1 per cent, to 3154.07.
Pace Micro Technology has continued to benefit from the UK where digital TV operators have continued to give away set-top decoders for televisions. Pace is definitely making the right moves and plans to transform the set-top box into a home gate-way, as the entry point to a range of services. The box will handle all information coming into the home and distribute it to the right appliance from TV to washing machine.
Eurotunnel
Eurotunnel, the channel tunnel operator reported that revenue for shuttle services was £147 million for the six months to 30 June, an increase of 29 per cent through the growth of the freight shuttle business and higher average prices for cars and coaches. Meanwhile, retail and other revenues were down by 72 per cent to £26 million due to the impact of duty free abolition. Revenue from the railways was £104 million, an increase of two per cent, and consisted mainly of payments under the Minimum Usage Charge.
Eurotunnel also announced that financial operations in the first half were restricted to a small debt repurchase and to a small leasing operation in the UK. Interest cover from operational cash flow continued to improve. In the Freight Shuttles business Eurotunnel reported that the market has continued to grow strongly and is up 14 per cent. Its market share was 47 per cent for the first half of 2000, compared with 37 per cent for the same period last year. Following the abolition of duty free, Eurotunnel's car shuttle traffic has reduced significantly in line with the change in the market (down 20 per cent). The return to more realistic prices has generated an increase in revenues. Coach traffic was down 13 per cent, while shuttle services revenue represented 53 per cent of operating revenue.
Eurostar carried an increased number of passengers, up nine per cent compared with the same period last year. Rail freight services operated by EWS and SNCF also increased during the period, and were up nine per cent. Operating costs for the first half year were 20 per cent lower. This is due to the reduction in cost of goods sold following the ending of the duty free activity. Operating margin has therefore increased by three per cent to £157 million. Bank fees have almost been eliminated as there have been no large financial operations in the period. Analysts have seen encouraging signs from Eurotunnel albeit slower than expected, with operating profits adjusted for exchange rates up 11 per cent. However, interest charges of £166 million on the £7.1 billion debt pile resulted in a loss for the period.
Capita
Capita, the management services and contracting-out group, reported a 10 per cent increase in pre-tax profits to £ 13.8 million on a turnover of £208 million for the half-year to the end of June. Meanwhile, the board had recommended to shareholders a bonus issue of two ordinary shares of 2p each for every one share held by shareholders. The board believes that the proposed bonus issue will benefit shareholders by enhancing the marketability of shares in Capita.
There are three complementary strands underpinning Capita's strategy for growth. First, it seeks to win major contracts to deliver complex projects that utilise its considerable skills across the group and which generate high quality, recurring revenues. Secondly, each of its individual areas of business is now structured to generate incremental revenue through both new business wins and development of existing accounts. Thirdly, Capita is continuing its policy of strategic acquisitions to strengthen either the group's presence within a market or its service capability.
In the light of Capita's continued strong growth, it has recently reviewed its internal structure. The most significant changes that the group has made were first to merge its Systems and Strategic Services division with its Software Services activities to form one enlarged division. This will offer substantial benefits of scale to its customers while allowing it to consolidate areas of expertise within the company. Secondly, Capita has introduced a Commercial Services division that will house newly acquired Capita IRG Plc, its recent 31.5 per cent investment in myshares-online and its Treasury and Financial advisory businesses. The group is trading strongly, has secured a substantial volume of new business and its pipeline of opportunities remains highly encouraging.
Ellis & Everard
Ellis & Everard, the chemicals distributor, asserted that demand in the UK remained subdued as its customers, particularly in the manufacturing industry, felt the impact of the weak Euro. This led to increased competition and, although it managed to increase sales volumes, margins and profits were lower. The consolidation of all Ellis & Everard's food ingredients sales under the Fiske Food Ingredients brand is progressing well. Results from Kent Foods acquired in December, have exceeded expectations.
In the US, the fragmented nature of the chemical distribution market provides the group with an opportunity for further growth by continuing to expand its geographic coverage by capital investment as well as by acquisition.
On the e-Commerce front in Europe, Ellis & Everard seems well advanced in linking its modern computer system to a business-to-business framework that will enable ever closer links between itself, customers and suppliers. In the USA, its e-commerce investment announced in January has made good progress and its plans to invest in an ERP system are well developed. Ellis & Everard has spent £3.2 million on the acquisition of Kent Foods and Allegro. Goodwill amortised through the P&L account amounted to £1.0 million with net debt increasing slightly to £45 million leaving gearing at 36 per cent. Trading so far this year has continued to follow the recent pattern of goods demand in the USA with declining demand from the UK manufacturing industry. While the costs of restructuring its UK operations will hold back profits this year, the resulting lower cost base and benefits from the new technology is expected to leave the group soundly placed.
The group has authorised major capital projects for the relocation of its facility at St Louis, the consolidation of the Truesdale business into an expanded site at George Mann in Rhode Island, and the installation of a new software system. These projects in total over a two to three year period will cost in excess of $30 million. The US is still a very fragmented market and it is planning to increase the geographic coverage of our operations to service the growing trend of national business. In the polymers business Ellis & Everard's new commercial partnership with BASF continues to develop well.
British Biotech
British Biotech, the drug development company, announced that it is in the process of a reorganisation to exploit its development opportunities with a consequent further reduction in headcount, predominantly from research and central support. These changes will generate annualised cost savings of £8 million, which will be invested in progressing and broadening the development portfolio. The cash burn was reduced to £22.2 million (1999: £34.8 million) and comprised cash utilised by operations of £24.9 million and financing of £2.7 million principally from the issue of shares to Schering-Plough on signature of the agreement to develop and commercialise MMPIs for cancer.
British Biotech has six products in development. The company's core research capability targets metalloenzymes and is principally focused on infectious disease. Marimastat, an oral MMPI in development as an anti-cancer agent, was licensed to Schering-Plough in September 1999. Four Phase III studies, in patients with very advanced disease, have now reported, all of which failed to meet their primary end-point. Based on clinical experience with marimastat, and consistent with its mode of action, it appears that patients with less advanced disease are more likely to respond to treatment with marimastat. The patient population in two Phase III studies in small cell lung cancer represents the most suitable setting in which marimastat is being tested.
BB-3644 is a second-generation oral MMPI in development as an anti-cancer agent and is also subject to the collaboration with Schering-Plough. In preclinical models, BB-3644 shows potent anti-cancer properties without the joint-pain seen with marimastat. BB-3644 has completed a Phase Ia study in healthy volunteers which showed it to be well tolerated and orally absorbed.
A Phase Ib maximum tolerated dose trial is under way to determine whether the benefit shown in preclinical models is seen in cancer patients. If this study is positive, BB-3644 will move into Phase II trials by mid 2001.
BB-10153, a genetically engineered protein, has shown both thrombolytic (clot dissolving) and anti-thrombotic (clot prevention) properties in preclinical models. It is being developed as a potential treatment for cardiovascular disease, including heart attack and stroke. BB-10153 has completed a Phase I study. Manufacture for Phase II is under way and a partner is being sought to develop and commercialise this product.
BB-2827 is an orally-absorbed collagenase inhibitor which entered development in October 1999 for the treatment of inflammation, such as rheumatoid arthritis. A Phase I clinical study in healthy volunteers is scheduled to start later this year, while preclinical work to determine the most appropriate disease indication is undertaken.
HuN901-DM1 has been in-licensed from ImmunoGen Inc. of Boston, USA and is a humanised monoclonal antibody (huN901) targeting small cell lung cancer (SCLC) cells, coupled with a highly potent cytotoxic (cell-killing) agent (DM1). In preclinical studies, and in contrast to current cytotoxic therapy, huN901-DM1 eradicated SCLC tumours. The company expects to file an Investigational New Drug (IND) application in the USA later this year.
BB-76163 is an aminopeptidase inhibitor which entered development in May 2000 as a potential treatment for chronic inflammatory disease, such as multiple sclerosis. The preclinical studies necessary before commencing a Phase I study in 2001 are under way.
In anti-infective research, British Biotech has identified several metalloenzymes which are essential for the survival of pathogenic bacteria. The most advanced programme, focused on inhibitors of polypeptide deformylase, is in late stage research and is expected to yield a development candidate later in 2000. These inhibitors have the potential to become a new class of antibiotics
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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