International
Markets News: CRH to move primary listing to London; Good weather bad news for DCC
By Finfacts Team
Nov 8, 2011 - 9:12 AM

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Jean-Claude Juncker, Eurogroup president, and Olli Rehn, European commissioner, at a press briefing, Brussels, Nov 07, 2011. Rehn appears to be invoking an external power. China maybe?

CRH, which accounts for 23% of the market capitalisation of the Irish Stock Exchange, is to move its primary listing to London.

Elan the drugs firm, said last month that it will move its primary listing to New York. Overseas residents hold at least 90% of the shares in both companies.

CRH said that in recent years, as the international operations and profile of CRH plc have grown, the proportion of the group's shares held by overseas investors has increased significantly. In addition the majority of trading in CRH’s Ordinary shares now takes place on the London Stock Exchange (LSE) with trading of CRH on other London based platforms also increasing.

CRH said following preliminary discussions, the FTSE has indicated that as a result of this change CRH should be eligible for the FTSE UK Index Series provided it maintains the Premium Listing of its Ordinary shares on the LSE, trades those shares in Sterling (GBP) pence and continues to have adequate trading liquidity on the LSE. The Group believes that FTSE UK index inclusion would result in a further increase in UK and international investor awareness of CRH.

From tomorrow morning, 9 November 2011, CRH Ordinary shares listed in London will trade in Sterling (GBP) pence rather than in euro. CRH Ordinary shares will continue to trade in euro in Dublin. There will be no break in the trading of CRH Ordinary shares in either Dublin or London. CRH said there will be no impact on the amount or the timing of any dividend payments as a result of the Reclassification. The reporting currency of CRH will continue to be euro and dividends will continue to be declared in euro; existing procedures regarding currency elections will remain in force.

The FTSE Nationality Committee, which considers the qualification of shares for index eligibility, meets today. The FTSE European/Middle East/Africa Regional Committee, which considers shares for index inclusion, meets on 7 December 2011. Subject to the independent deliberations of the FTSE committees, CRH could be included in the FTSE All-Share and FTSE 100 indices from the start of business on 19 December 2011.

Commenting on these developments, Myles Lee, CRH chief executive, said:
“We believe that these listing arrangements are in the best long-term interests of CRH and will increase the Group’s attractiveness to a wider international investor base. The changes announced today represent a logical progression for CRH given the international nature of its business and the fact that the majority of trading in the Group’s shares is on the LSE. These changes will have no impact on the operations of the Group. CRH remains headquartered, incorporated and tax-resident in Ireland.”

There is no denying the fact that it diminishes the already tiny Irish Stock Exchange.

CRH also issued a trading statement this morning,

Robert Eason of Goodbody, says "CRH has released an IMS a week ahead of schedule, in which it has guided that FY EBITDA will be approximately €1.6bn (broadly flat yoy). This compares to our forecast of over €1.7bn and implies a circa 5% decline in the second half (forecast of +4%) versus a 10% increase in the first half. At a PBT level, guidance is for an increase of €20-50m on last year’s level of €658m versus our forecast of €747m (5-9% behind).

Sales growth has remained relatively robust at 4% in the third quarter (versus our H2 forecast of 3%), which compares to 2% in Q2 and 10% in Q1, so the miss is down to higher than expected margin pressures. At a divisional level, both European Materials and US distribution are in line, with the other four behind. EBITDA for European Products and Distribution are expected to grow by 10% and 20% versus our expectations of +16% and +30%, while US Materials and US Products EBITDA is expected to be -10% and +10%, respectively (versus our expectations of flat and +24%).

Overall, the results are disappointing, especially in the context of a strong first half. However, an implied 5% decline in second half EBITDA still makes it stand out from the crowd but not as much as the H1 results did."

DCC reported today that operating profit for the six months to the end of September was hit by the very mild weather in April and May, which hit the performance of its largest divison, DCC Energy.

Operating profits for the six month period fell by 14.2% to €58.3m, while pre-tax profits dipped 17.3% to €50m. Revenues rose by 10.8% to €4.395bn.

Results

David O'Brien of Goodbody comments: "DCC has reported H112 (to September end) results this morning. Operating profits decreased by 14% yoy to €58.3m (-11% on a constant currency basis), below our forecasts of €64.7m. Adjusted earnings of 47c compare to our forecast for 52c.

The Energy Division reported operating profit of €19m, down from €30m in the same period last year and compared to our forecast of €26m. This is a reflection of milder than normal weather in the UK & Ireland during the period. Guidance remains for a decline in operating profits for FY12, as management assumes a normalised winter trading period. SerCom continues to perform robustly. Operating profits have increased by 6% yoy to €15.2m, broadly in-line with our forecasts. Encouragingly, the distribution business (90% of divisional profits) continued to enjoy “good organic growth”, despite the challenging economic backdrop.

 Management expects strong operating profit growth for the full year, reflecting both acquisitive and organic growth. On an aggregated basis, the remaining businesses generated operating profits of €24.4m (+4% yoy), ahead of our estimate of €23.2m. Healthcare was broadly in-line with forecasts, while Food & Beverage and Environmental came in ahead of expectations. However, Food & Beverage will be affected by the loss of a contract in the logistics business in the full year.Management has guided for a 7.5% decline in full year operating profits and eps on a reported basis, compared to expectations for a mid-single digit decline, previously. On first glance and ahead of meeting management, we envisage pulling back our FY12 operating profit forecast by 2% to €214m (-7% yoy). While a downgrade is never ideal, we recognise that the weakness is driven predominantly by one-off’s (weather affects and loss of a contract in Food) and as such, does not damage the investment thesis. Therefore, we maintain our BUY recommendation."

UK taxman’s new project team turns base metals into gold - - Hard on the heels of last week’s HMRC (Revenue & Customs) announcement of a new 200-strong ‘affluent team’ of specialist tax inspectors is a promise of a new sector specific taskforces aimed at scrap metal dealers, the construction industry and landlords. 

Starting in Scotland, Inspectors will seek to tackle tax evasion by checking in intensive bursts of compliance activity whether such traders are deliberately hiding income or boosting expenditure. The checks on landlords will start in the North West and North Wales, while the construction industry across the UK will be scrutinised.

Mike Down, Tax Investigations Partner at accountants Baker Tilly said: “This teamwork approach is becoming increasingly widespread and HMRC now seems to be in full flow in coming up with new team-based initiatives.”

As well as the ‘Managing Deliberate Defaulters’ programme, under which expert groups robustly scrutinise and follow up on the returns and records of previous tax evaders, new teams this year include other taskforces looking at restaurants and fast food outlets and the Offshore Co-ordination Unit, which has started a project to investigate 6,000 UK holders of Swiss bank accounts.

Mindful of the need to deploy its expert investigation resource cost-effectively, HMRC hopes those with tax issues will come forward voluntarily. Down continues:

“HMRC wants people to ‘walk-in with their tax disclosures. They will be more lenient on those who own up.  However tax defaulters caught out by the new teams can expect to suffer the full force of HMRC’s new powers and penalties regime, including the threat of being publicly “named and shamed.”

Italy's debt fears take centre stage:

Economic View 1: Yields increase for the EFSF; Juliet Tennent, accountant at Goodbody, comments  -- "Yesterday, the EFSF revived the €3bn bond issue that it postponed last week amidst the uncertainty caused by the Greek political debacle. The bonds, with a 2022 maturity, priced at almost 90bps more than the last bond of a similar maturity that was issued back in June.

EU Finance ministers are currently holding meetings to thrash out the manner in which the EFSF will be leveraged and the uncertainty surrounding the future shape of the facility is no doubt weighing on the minds of investors. In addition, the threat to the AAA rating of France, on which the EFSF’s rating also depends, has seen yields rise recently for both.

The funds raised by the EFSF yesterday were on behalf of Ireland and the additional yield that the EFSF paid will be passed on to the sovereign. It is therefore in Ireland’s interests that the current uncertainty surrounding the shape of the EFSF is resolved as soon as possible."

Economic View 2: Consumer weakness persists in the UK; Juliet Tennent added - - "Data from the UK this morning continued to paint a negative picture of the consumer, with the BRC showing that following a flattish outcome for the three months to September, the value of like-for-like sales fell by 0.6% in October, weaker than the -0.2% expected. In addition, as inflation is running at 5.2% yoy this shows that sales volumes continue to contract.

The RICS House Price Balance remained firmly in negative territory in October at -24%, slightly behind expectations of -23%, with prices rising in London and falling everywhere else. While both the New Instructions (3%) and the New Buyer Enquiries (7%) components improved modestly in the month they remain low suggesting that the lack of activity in the UK housing market, as seen in the low volumes of mortgage approvals since the beginning of the year, is set to continue.

As consumers in the UK face continued tight credit conditions, uncertainty in the face of austerity plans, real incomes being eroded by inflation and a deterioration in the labour market, it is likely that housing market indicators and retail sales in the UK will remain under pressure for the foreseeable future."

Irish Financials: 67 % of Lloyds Irish loan book now impaired; Colm Foley of Goodbody comments  -- "Lloyds has released a Q3 IMS this morning reporting a profit before tax of £1,748m for the first 9 months of the year, compared to £2,488m for the same period last year. However we are more interested in the commentary on the Irish business.

The level of impaired loans for Ireland increased by a further £2.9bn, resulting in 67% of the total Irish loan portfolio now being classified as impaired. Provisions as a percentage of impaired loans were 58.1% at the end of September, up from 53.7% for the same period in FY10. The increased impairment charges have been attributed to the continued falls in the commercial real estate market.

The figures from Lloyds show the continued deterioration of credit quality in the economy. BOI will provide a further update on November 18 on the state of the market."

US Markets

In New York Monday, the Dow added 85 points or 0.71% to 12,068.

The S&P 500 gained 0.63% and the Nasdaq rose 0.34%. 

Asia Markets

The MSCI Asia Pacific dipped 0.8% Tuesday.

Japan's Nikkei 225 fell 1.27%; China's Shanghai Composite slid 0.24%; Australia's S&P/ASX 200 added 0.48% and the Bombay Stock Exchange Sensex 30 index in Mumbai fell 0.26%. South Korea's Kospi dipped 0.93%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.78% in early trading Tuesday.

The ISEQ has risen 0.31% in Dublin.

CRH is up 1.20% and DCC is down 1.69%.


European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3746 and at £0.8566.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Monday this week, the BDI fell 18 points or 1.00% to 1,766.

Crude oil for November 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $95.61 up 9 cents from Monday's close. In London, Brent for November delivery is trading on the International Commodities Exchange at $114.66. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is at $19.

Gold spot price

The spot price of an oz of gold is trading in New York is at $1,789.00 per oz, down $6.60 from Monday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 6.

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