See Search Box
lower down this column for searches of Finfacts news pages. Where there may be
the odd special character missing from an older page, it's a problem that
developed when Interactive Tools upgraded to a new content management system.
Welcome
Finfacts is Ireland's leading business information site and
you are in its business news section.
We
provide access to live business television and business
related videos from: Bloomberg TV; The Wall Street Journal;
CNBC and the Financial Times. Click image:
Markets News Tuesday: Greece to announce new austerity measures Wednesday; Pound falls for sixth day; Paddy Power issues strong 2009 results; Australia hikes benchmark interest rate to 4%
By Finfacts Team
Mar 2, 2010 - 10:07:21 AM
Olli Rehn, European Commissioner for Economic and Monetary Affairs, speaking at a press conference in Brussels, on the latest Interim Economic Forecasts, Thursday Feb 25, 2010.
In advance of a meeting Friday between Greek Prime Minister Giorgos Papandreou and German Chancellor Angela Merkel, EU Monetary Affairs Commissioner Olli Rehn said in Athens on Monday that Greece must reveal new measures “in the coming days,” to confirm that spending cuts and tax increases will meet the objective of cutting the budget deficit from 12.75% of GDP in 2009 to 8.75% in 2010.
The yield on Greece’s 10-year bonds yesterday fell 9 basis points to 6.25%, the lowest in two weeks and the head of the country's debt management agency has confirmed that Greece will sell bonds when market conditions are “favourable,” as the the government needs to raise more than €20 billion to cover bonds and notes maturing in April and May.
Following a meeting last Friday between George Papandreou and Josef Ackermann, the head of Germany's biggest bank, Deutsche Bank, speculation intensified about a bailout but Merkel poured cold water on it in an interview with ARD public television on Sunday when she denied any such plan was in the works, saying "there is absolutely no question of it" and she added: "We have a (European) treaty under which there is no possibility of paying to bail out states in difficulty."
"Greece must step up its efforts to limit its public deficit," Luxembourg Prime Minister Jean-Claude Juncker, head of the Eurogroup of Eurozone finance ministers, said in a statement to the Eleftherotypia, the Greek newspaper.
"It must focus on further spending cuts and on ways to increase revenue."
"Greece must understand that taxpayers in Germany, Belgium or Luxembourg are not prepared to correct Greek fiscal policy mistakes," he said.
Greece is expected to announce new measures Wednesday, on cut backs, a possible rise in VAT and a scaling back of public sector pay benefits.
“Either you control your debt, or your debt will control your economy,” Olli Rehn told reporters in Athens on Monday.
“This is a crucial moment for your country,” Rehn said. “Do not take these measures to please Brussels or other European partners but for the future of your country, for your schools and hospitals.”
Rehn had talks with Prime Minister Giorgos Papandreou; the finance minister, Giorgos Papaconstantinou, and the governor of the Bank of Greece, Giorgos Provopoulos.
Fears that a hung parliament could delay action on Britain's budget deficit sent jitters through the markets:The pound fell Monday in Europe, at one point dipping 3% against the dollar to $1.4784 - - its lowest level since May 2009 - -before recovering to finish at $1.4973 in London, down 1.2% from Friday. Sterling is down 7.3% against the dollar in 2009. Sterling fell for a sixth day Tuesday to $1.4912 from $1.4991 in New York yesterday.
David Cameron, the UK Tory leader said Monday: "This election was always going to be close," as a YouGov survey for the Sunday Times gives the Tories 37% of the vote and Labour 35% but under the UK's electoral system the newspaper said that this could give PM Gordon Brown 317 seats compared with the Tories' 263.
Economic View; Euro has been the focus of late, but sterling has its issues to deal with too:Goodbody chief economist, Dermot O’Leary, comments: "The most visible impact of the recent well-publicised problems in the euro-area has been on the currency, as the market frets about the ability of the bloc to deal with the fall-out from the fiscal crisis. However, the major weakness has taken place relative to the dollar, which continues to hover around the $1.35 level relative to the euro. In this context, the recent weakness in sterling is very telling, as it illustrates the uneasiness with which the market perceives the UK situation.
Over the past week, sterling has dropped from 87p to 91p. Concerns centre on a number of issues: (1) recent commentary from the Bank of England suggests that it has not yet ruled out the possibility that further quantitative easing will be introduced; (2) with a budget deficit that is similar to Greece, the UK has its own obvious fiscal difficulties that it will have to deal with over time and; (3) recent polls suggest the possibility of a hung parliament when the Election takes place over the next few months. These are far from compelling reasons to rush to buy sterling! Of course, UK authorities will welcome a fall in the value of sterling as long as it is not too abrupt, as it immediately makes its products more competitive on the international market.
These moves will not be welcomed on this side of the Irish Sea, given the difficulty that Irish indigenous exporters have been experiencing over the past two years because of weaker sterling. Unfortunately for them, however, these issues are unlikely to recede in the short-term at least."
Legendary US investor Warren Buffett, chairman and CEO of Berkshire Hathaway, talks to CNBC about currencies and more:
UK housing market at a delicate tipping point: Davy analyst, Flor O'Donoghue, commented: "UK housing market bears, most definitely not an endangered species but in hiding for much of 2009 as the market showed unexpected resilience, have been given better ammunition since the start of the year. Whether the most negative sceptics will be proved correct remains to be seen, but there is little doubt that the UK housing market, at the very least, has had a sluggish start to the year.
While the UK housing market is unquestionably in a better position than this time last year (not that difficult it must be said), there is no doubt that hard-fought momentum has been lost. Bad weather, wavering consumer confidence and the imminent General Election (and increasing uncertainty about the outcome) have all been unhelpful. But what is likely to have really distorted the market was the termination of a temporary extension of the removal of stamp duty on house purchases up to £175,000. This relief lasted until the end of December, when the stamp duty threshold reverted to £125,000.
Unsurprisingly, this deadline probably prompted a front loading of activity towards the end of 2009 to avail of the temporary relief. Hence the apparent robust housing market figures for December were almost certainly artificially flattered with some inevitable payback in January. Evidence of this was January's Bank of England mortgage approval figures, which were 48,200 seasonally adjusted, down 17% on December and the weakest month since last May.
The Bank of England data are not alone: UK housing transactions slipped in January and house prices, according to Nationwide, fell for the first time in ten months. For those exposed to the UK housing market, what is worrying is the loss of momentum. As we see it, this risks a negative feedback loop, where disappointing housing figures ultimately become self-fulfilling.
From an equity market perspective, such doubts have clearly affected UK housing market sensitive stocks. The likes of the UK housebuilders, the building suppliers and the DIY operators have all underperformed so far this year and have been de-rated. Whether this loss of momentum in the UK housing market is temporary or otherwise will determine whether these stocks can recover."
The pound traded sharply lower against the dollar Monday as investors fretted over the prospect of a hung parliament after the summer's general election. Pau Morilla-Giner from London & Capital and Tom Levinson from ING discuss:
Goldman Sachs: In a filing with the US Securities and Exchange Commission on Monday, investment bank Goldman Sachs disclosed that it made at least $100m in net trading revenues on 131 days in 2009 - - about every second trading day.
Goldman said its daily “value at risk” (VAR) - - the maximum that the bank estimated that its traders could lose on a given day - - was $218m in 2009, up from $180m during the previous fiscal year, which closed in November 2008.
Goldman's earnings hit a record $13.4bn in 2009 as net revenues more than doubled to $45.2bn.
The Wall Street Journal reports that in its annual report, the New York company said "adverse publicity" could have"a negative impact on our reputation and on the morale and performance of our employees, which could adversely affect our businesses and results of operations."
The Journal said the unusual disclosure in a 12-page section of "risk factors" ranging from rocky financial markets to natural disasters is the latest sign of Goldman's whipping-boy status among rivals, lawmakers and angry Americans because of the firm's giant profits.
The European Commission is currently investigating GS' role in helping to hide some of Greece's public debt.
US markets
In New York Monday, the Dow rose 79 points or 0.76% to 10,404.
The S&P gained 1.02% and the Nasdaq rose 1.58%.
The Reserve Bank of Australia (RBA) hiked its key cash rate by 25 bps to 4% on Tuesday, in line with market expectations. Ray Attrill, global head of research at Forecast Australia, gives his instant analysis, with CNBC's Oriel Morrison:
Asia
The MSCI Asia Pacific Index added 0.7% on Tuesday and reached its highest since Jan. 25th.
The Australian dollar rose to 90.30 US cents, after the Reserve Bank of Australia raised the benchmark rate to 4.00% from 3.75%. In Sydney, the S&P/ASX 200 Index gained 0.33% after the rate increase.
The Nikkei 225 rose 0.49%; the Shanghai Composite fell 0.48%.
In Europe, the Dow Jones Stoxx 600 has dipped 0.15% Tuesday.
The ISEQ has gained 0.14% in Dublin.
CRH is off 0.46%; AIB has risen 3.51% - - the two leading members of the Irish Exchange today reported 2009 results: see links to reports in Box above.
Paddy Power is up 3.17% - - see lower end of page for details on today's results for 2009.
Property firm Blackrock International Land plc (Blackrock) announced that it has agreed the sale of a 3,700m² industrial facility at the Xerox Technology Park, Dundalk, to Galen (Chemicals) Ltd, a subsidiary of global pharmaceutical company, Warner Chilcott, for a consideration of €2.9 million.
Warner Chilcott has announced plans to create a new corporate headquarters at the property with the assistance of IDA Ireland. The facility being acquired is part of a 17,000m² industrial complex owned by Blackrock at this location.
Marina Devitt of Goodbody commented: "Blackrock International Land (BLK) released its FY09 results this morning, revealing a 60% decline yoy in basic NAV per share to 10.32c from 25.71c in FY08 (down 36% versus our forecast of 16.14c). Adjusted EPS was -15.4 cent versus our -9.6 cent forecast, from -12.8 cent in FY08. The decline in NAV was mainly driven by a 28% decrease in the valuation of the portfolio to €244m (from €340m in FY08 and versus our forecast of €272m). FX translation adjustments added €6m to the value of UK properties during the period due to the performance of sterling versus the euro. Net property income fell 1.4% yoy to €13.6m (€13.7m in FY08 and versus our forecast of €12.4m). This performance compares favourably with a 20% decline in the benchmark IPD index for rents in Ireland and a drop of 9% in the UK. Administrative expenses were down 12% from €5m to €4.4m. There were no lessee defaults and no significant leases expire until 2011. Net debt came in at €181.4m (up 4% yoy from €174m) versus our expectation of €178m. The LTV ratio stood at 73% (versus 50.5% in FY08 and our expectation of 61.5%."
Mobile telephony content company Zamano reported today that profit after tax improved to €1.1 million (2008: loss €3.8 million) due to lower interest costs and no impairment charge in 2009.
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
The BDI rose 22 points or 0.8% to 2.760 on Monday.
The index rose 27 points or 1.0% on Friday to 2,738. In the Financial Times on Wednesday, Feb 17th, Javier Blaswrote that the weakness in the Baltic Dry Index, long seen as an indicator of global economic activity, does not reflect a downturn in global trade. Instead, the measure of freight costs is showing a strong supply of new vessels that helps explain the 40% drop in three months. “New supply is astonishingly high and it is overwhelming the otherwise robust demand for bulk commodities from China,” he wrote. “On the other hand, bullish investors should be cautious of any near-term turnround. Rather than a sign of stronger economic activity and commodities demand, it is likely to reflect cancelled orders, scrappage and port congestion.”
Paddy Power today reported pre-tax profits of €67.2m for the year ending December 2009, a fall of 15% from the €79m reported in 2008 in what the company termed a "cracking year for punters."
Davy analyst David Jennings commented:"Paddy Power has issued a strong set of full year results that are 2% ahead of our forecasts and 5% ahead of consensus, reporting EBIT of €66.7m (Davy: €65.3m) and EPS of 120.7c (Davy: 118.1c).
Performance in the online division and Australia stood out, while the backdrop in Irish retail remained challenging. In the online (ex-Australia) division, operating profit grew 7% to €45.7m versus our forecast of €44.1m. The underlying momentum in the business remained strong with sportsbook amounts staked up 31% in constant currency terms, coinciding with an 18% increase in online customers. Sportsbook gross win was down 6% to €55.3m due to a significant fall in the gross win margin (6.9% in 2009 versus 9% in 2008). Gaming gross win grew 11% to €52.5m, helped by strong growth in games, bingo and financial spread betting. Growth in these areas more than offset a difficult poker environment. Operating profit as a percentage of gross win remained at 42% in the online division, among the highest in the industry. This points to the continued strong cost discipline within the business.
EBIT in Irish retail came in at €16.3m, €2.7m behind our forecast of €19.0m. In analysing the numbers, it is clear that a combination of continued intensive price competition and unfavourable sports results had a significant impact here. The gross win margin for the year came in at 11.2%, implying a gross win margin in the second half of just 10.4%. That represents the lowest gross win margin recorded in Ireland by the company since IPO (by almost a full percentage point). Nonetheless, the company is maintaining its 11-13% guided range for the business going forward. Cumulatively, we estimate that gross win per shop in Paddy's Power's Irish estate has fallen 27% since the peak in 2007, while latest market share data available to the company suggest that it has increased its market share to 32% from 25% three to four years ago. Against this backdrop, it is no surprise that shop closures continue apace in the Irish market. Latest estimates suggest 120 shops have closed since the peak with approximately 1,230 open today.
This set of results gives us our first look at Paddy Power Australia, and the early signs are encouraging. On a pro-forma basis, gross win grew 41% year-on-year (yoy) to €31.8m, while EBIT came in at €4.6m (post once-off costs of €2.2m). This compares with our forecast of €2.0m on a consolidated basis. The two Australian brands combined grew active customer numbers by 76% yoy in Q4. This compares with 25% growth at Centrebet.
Growth in the UK retail business accelerated in 2009 with 25 new shops added across nine cities. EBIT came in at €1.3m, a little ahead of our forecast of €700,000. Average EBITDA per shop in the most mature 60 shops grew 7% in constant currency terms in 2009, an encouraging result as we look at further development in the UK.
In terms of outlook, the company has said that performance year-to-date has been satisfactory. We will review our own forecasts after discussions with management but are unlikely to make material changes at this point (possibly an upgrade of 1-2%). As things stand, we are 12% above consensus. We remain comfortable with our 'outperform' recommendation on the stock."
