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Markets News Wednesday: Independent News and Media reports pre-tax loss of €31.4m for 2009; Germany moves towards Greece bailout with IMF support
By Finfacts Team
Mar 24, 2010 - 9:16:42 AM
Chancellor Angela Merkel in the German Bundestag, March 17, 2010
Independent News and Media (INM) today reported a pre-tax loss of €31.4m for 2009 compared with €161.4m reported in 2008.
INM said advertising revenue stabilised in the second half of 2009 with "market share advances achieved in advertising, circulations, online and readership in ... primary markets, producing a strong foundation for enhanced operating leverage in 2010," while some markets are already showing year-on-year operating profit growth in 2010, despite poor advertising markets. The media group said it expects an operating profit this year.
In 2009, group revenue fell 13.2% at constant exchange rates to €1.25bn, which the company described as “a comparatively resilient performance.” Operating profit dipped 35.9% to €177.2m and net debt was reduced significantly, falling to €367m before currency changes - - the decline partly resulted from an asset disposal programme which raised about €150m.
Commenting on the 2009 full year results, Gavin O’Reilly, group CEO said: “Following the successful conclusion to our complex financial debt refinancing in 2009, it is reassuring to be able to now look forward to 2010 where we will build on the underlying profitability and real progress that INM’s operations achieved in 2009, with solid market share advances and continued efficient cost management.
“Both advertising and underlying profitability in each of our geographic regions stabilised in the second half of 2009 and that trend has continued into 2010, with certain markets already showing year-on-year operating profit growth. While it is still very early in the year, if these current trends continue, we would target an improvement in operating profit for 2010. In the immediate term, vigilant cost management and further debt reduction will remain priorities and, as economies recover, we will focus on converting our leading market share positions into revenue and operating profit growth.”
Goodbody's Killian Murphy comments on the INM results: "The company generated operating profit (pre-exceptional) of €177.2m (vs. our forecast of €173.7m) with the variance being a slightly better than anticipated outturn in the Irish and UK operations. In terms of the balance sheet, the company reported net debt of €1.04bn, which was broadly in-line with our expectations. Much of the attention surrounding the company over the last few months has been regarding its asset disposal programme. Management has been in discussions with Alexander Lebedev regarding the disposal of The Independent and The Independent on Sunday titles in the UK but currently there is still no deal.
However, discussions continue and the company expects to make an announcement shortly. Management presents a positive outlook for FY10. Driven by an improving trend in both advertising and underlying profitability (which, having stabilised in H209, has continued in H110). In addition, and perhaps more encouraging, management also notes that some markets are showing operating profit growth yoy. This is in-line with our own expectations for FY10, where we are forecasting operating profit growth of 10% yoy, driven by the South African and Australasian divisions. Overall, we view these results as reassuring, given that operating profit and net debt are broadly in-line with our expectations. While we expect to make some adjustments to our forecasts for FY10, we are unlikely to change our recommendation on the stock, until greater visibility is provided regarding further asset disposals."
Irish Life & Permanent: Michael Torpey, Irish Life & Permanent Group Treasurer, has announced his intention to resign from the group in order to take up a position as Head of Banking with the National Treasury Management Agency [NTMA].
Torpey is a former Finance Director of Ulster Bank and First Active [2000 to 2008]. Between 1992 and 2000 he was Group Treasurer of what was originally Irish Permanent and which became Irish Life & Permanent plc in 1999.
Speaking today, Kevin Murphy, Group Chief Executive of Irish Life & Permanent plc paid tribute to Torpey: “Michael has made an important contribution to the Group since he rejoined us last year and we’re disappointed to see him leave. However we fully appreciate the significance of the role which he has been offered in the NTMA which testifies to his experience and skills. We wish him every success in this very important position in the years ahead.”
Google & China: Google has confirmed that it is still providing censored search services for some partners in China, after announcing on Monday it would offer unfiltered results in the country from servers in Hong Kong.
Chinese government firewalls quickly disabled searches for controversial topics from the mainland to the Hong Kong site, Google.com.hk, or blocked links to certain results, the New York Times reported Tuesday.
Two important Irish releases in next two days: Davy chief economist, Rossa White, comments - - "Meaningful Irish data have been largely absent for the last ten days. But arguably the two most important reports will be released over the next 30 hours, both sketching the picture as of the end of last year (Q4). Employment figures will probably show that the rate of increase of unemployment slowed significantly. At the same time, the economy was probably still in recession as evidenced by the volume of GNP. It is worth noting the outturn for service exports, to see whether the export-focused components of the PMIs are accurately predicting recovery.
We do not expect the economy to emerge from recession for another couple of months. By May or June, a broad range of indicators (retail sales, PMIs, industrial production) will probably point to month-on-month growth. Two sectors will lag: construction is set to remain mired for the rest of the year and indigenous industry will decline for six months yet. Yet even though somewhat outdated, Q4 national accounts will highlight that the economy was shrinking at a slow pace from Q1 2009 onwards. Most of the damage was done in the horrible 12 months to this quarter last year.
It will not feel like the recession has ended until the unemployment rate peaks. By late summer, things will be feeling better. It has sort of gone unnoticed that the estimated unemployment rate reached 12.4% last August and was only one-fifth of a percentage point higher six months later in February. The true unemployment rate will become known with the release of today's household survey. Employment was still shrinking in Q4, but the pace of decline perhaps slowed to an 18-month low. That helps limit the rise in unemployment, which was probably further tempered by significant labour force decline quarter-on-quarter."
The euro hit a 10-month low against the dollar Wednesday. But Magnus Prim, chief strategist, Asia at SEB, tells CNBC's Patricia Szarvas & Chloe Cho that the euro is likely to make a bounce back from these levels:
Economic View; Euro under pressure again as IMF assistance looks to be needed: Goodbody chief economist, Dermot O'Leary comments --"The latest news in the drama around Greece is that Germany has got its way and the IMF will have to be part of any aid package should the need arise.
There has been bitter disagreement between euro-zone members over the appropriate way in which to tackle the problems in Greece, with countries led by France pushing for an internal solution, while Germany, Italy and the Netherlands have espoused the need for the IMF to be involved. Based on reports ahead of a possible emergency meeting of euro-zone heads before the main EU summit (being called by Sarkozy), there have been concessions on both sides. Germany will only support EU assistance if three conditions are met: (1) its access to financial markets become exhausted; (2) the IMF makes a substantial contribution and; (3) sanctions against countries who show fiscal indiscipline are increased.
All of this has to be confirmed of course, but it is likely that European officials will be on the wires over the coming days stressing the cohesion and solidarity that is being shown. The truth is though that there has been little of that shown over recent weeks. A telling sign is the drop in the value of the euro over the past 24 hours. On the news that the IMF will need to be involved in any rescue, the euro has fallen to $1.342 relative to the dollar, putting it at its lowest level since May 2009. The fact that the EU cannot sort its own problems indicates that this weakness may continue."
Irish employment data: "Elsewhere, the release of Q4 employment date is the highlight for Ireland to day, while the UK budget will get the attention across the water. The monthly Live Register has revealed that the unemployment rate has stabilised over recent months in Ireland, but today’s report will tell us whether this is down to an improving underlying jobs picture or simply an increase in outflows from the labour force, either through a return to education or higher outward migration. While the number of people unemployed matters in terms of the public finances, it is the number of employed that matters for economic growth."
China will get away with a 3% appreciation in the yuan, says Phillip Chan, director at Shenyin Wanguo Securities. He explains his rationale, with guest host Jonathan Fenby, China director at Trusted Sources, CNBC's Karen Tso & Martin Soong:
US
In New York Tuesday, the Dow added 103 points or 0.95% to 10,889.
The S&P 500 gained 0.72% and the Nasdaq climbed 0.73%.
Asia
The MSCI Asia Pacific rose 0.2% Wednesday, boosting the index to a two month high.
The Nikkei 225 rose 0.38%; the Shanghai Composite added 0.12%; Australia’s S&P/ASX 200 Index rose 0.34% and India's Sensex Index advanced 0.23%.
China requires evidence of a “very certain” recovery before it scale back stimulus measures introduced during the crisis, People's Bank of China Governor Zhou Xiaochuan has said.
“If you can be sure about the recovery, and then some of the extraordinary stimulus policies can gradually fade out,” Zhou said in an interview in San José, Costa Rica. “On the other hand, you should know that it’s not a w-shape recovery,” with a renewed slowdown following the current rebound, he said.
Bloomberg reports that China will balk at allowing the yuan to appreciate if the US labels the country a currency manipulator next month, said Donald Straszheim, director of China research at International Strategy & Investment Group.
The Treasury Department is “seriously considering” labeling China a currency manipulator in an April 15th report and make it easier for companies to seek import duties, US Senator Charles Schumer said yesterday. China has kept the yuan at 6.83 per dollar since mid-2008 to shield exporters from the global recession and a contraction in world trade.
In Europe, the Dow Jones Stoxx 600 has risen 0.47% Wednesday.
The ISEQ has advanced 0.12% in Dublin.
Aer Lingus has climbed 4.84% and AIB has gained 3.08%.
No movement so far on INM.
Alistair Darling will be dusting off the famous red briefcase as he prepares to give what could be his last ever budget Wednesday. George Buckley from Deutsche Bank considers what to expect from the UK budget:
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
On Monday, the BDI fell 42 points or 1.24% to 3,337; on Tuesday, the BDI dipped 57 points or 1.71% to 3,280.
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.”
Goodbody's Ken Darmody comments: Irish Financials; EU decision on rescue plan for Anglo and Nationwide due next week - - "Press reports this morning suggest that the European Commission will next week deliver its verdict on the ‘rescue aid’ for both Anglo Irish and Irish Nationwide. The timeline of the announcement looks to have been brought forward to allow the government inject the necessary capital into both banks once the NAMA haircuts are known and before their results are released. The verdict next week, if it comes, will likely be an interim review ahead of the final announcement later on in the year.
It was envisaged that the EU would revert first on AIB & BOI, however, the deterioration in the loan losses at both Anglo and INW may have prompted the EU to an earlier conclusion (recent commentary indicated that Anglo could record a pretax loss of €12bn in the 15 months to last December, driven by €14bn of credit losses). Within the article, it is once again highlighted that the capital required for the Irish financials may be higher as the financial regulator insists that they hold higher levels of equity reserves. With the EU decision pencilled in for next Wednesday, it may call into question the timing of any commentary from the government on its wider “big bang” announcement on the domestic banking industry, which was speculated to occur in the first half of next week."
