April 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

With just one day’s trading to go, the gap seems to be too big. At the end of last week, the Dow Jones Industrial average closed at a six year high, and, or so proclaimed commentators, the index was within just 380 points of its all time high, and it seemed as if the record could go this week.

Last night the index hit a new six year high, but at 11382 is just 35 points up on the week, and the record, reached in January 2000 of 11750 seems a little too elusive.

When Wall Street took its famous fall in 1929 it took over 25 years to return to that level. Some warned history could repeat itself. It’s worth remembering, however, that the years that followed that dramatic crash were blighted by the awful US depression of the 30s, and then the Second World War. In contrast, the years following the 2000 high have been followed by a period of rapid US growth, blistering global growth, and an eaten pudding. Back in 2000, dotcoms represented a dream, an idea for the future. Then, investors said the proof of the pudding is in the eating, and there’s no sign of Dotcoms making any money. But, since then, it’s been proven that the Dotcom market really does exist, and the longed for potential really was real and no idealist’s dream.

And while international tension has been ever present (but that’s not new) and the events of September 11th were truly horrifying, the world has seen nothing like the war that followed in the aftermath of world wide economic crisis of the fourth decade of the last century.

Its seems unlikely that there will be a 25 year wait this time for the Dow to hit a new all time high.

April 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

It’s hardly a pace that is only fit for the autobahn, but the German economic machine is moving forward again, and is gathering pace. One could say perhaps that it’s moved out of first gear into second.

According to six economic institutions that know the German economy, growth of 1.8% this year is expected, this projection is up from their previous 1.2% estimate.

But, this is no juggernaut slowly gathering momentum, because the same coterie of economists warn that 2007 is likely to see growth slow slightly.

According to the Item club, the UK is likely to grow by 2.3% this year, 2.6% next and then 3% in 2007.

April 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Some of GlaxoSmithKline’s customers might wheeze, but there was no hint of constrictions to the corporate airways yesterday, as the world’s second largest drugs company announced a 35% rise in first quarter profits, after its asthma drug, Advair, has proved a big hit.

In all the company posted net income of £1.5bn. With a strong pipeline, and with its Tamiflue rival drug for Avarian flu, Relenza, the company seems to be sitting pretty.

Meanwhile, the UK’s number 2, AstraZeneca, saw a 37% rise in quarterly profits to US$1.43bn. It was a stunning performance by the company, but some analysts are fretting that its future line up is too weak.

Astra’s sales were lifted by the big three: Nexium, Seroquel, and Crestor. Crestor especially saw a dramatic rise in sales after tests last month appeared to show that the drug really does reduce the levels of plaque in arteries; no other drug has been shown to do that.

Sources

AstraZeneca raises guidance after strong quarterCNBC

Healthy drugmakers smash profit forecasts
Scotsman

GlaxoSmithKline sees 25pct profit rise BusinessWeek

April 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Russian President Vladimir Putin has accused the West of double standards, while gazing across the global economy form his own two pronged approach to standards in business.

Mr Putin wants the West to see things from Russia’s point of view. He says: “We hear statements about a threat of dependence on Russia, about the need to restrict Russian companies’ access to European markets. But you must understand us too, and try to look at things from our position.” And while the world frets over the ever rising cost of energy, Vlad impaled European and US governments when he said: “We are being blocked to the North, the South and the West on any pretext. We have to find outlets, to fit into the global development process. What are we supposed to do in these circumstances, when every day we hear the same thing? We start to look for other markets.”

The Russian gas company Gazprom, which according to Mr Putin is now the second largest company in the energy sector in the world, with only Exxon Mobile bigger, may want to buy Centrica, the owner of British Gas. To say this would be a controversial bid is an understatement. The snag is the British government is caught in a tangle over the affair.
The UK always fights the open market battle, and lambasts France and the US for protectionism, how can it stop a Russian company from buying a British business? - Wouldn’t that really smack of double standards?

But then Gazprom is state owned and last Autumn cut off supplies to the Ukraine. Do we really want to give the Russian government so much power over the UK?
It’s been suggested that the competition commission could step in and save the government’s blushes and stop the purchase. The truth is however that, at the moment, it’s by no means certain, indeed it’s probably unlikely, that Gazprom will make a serious bid anyway.
But while Russia accused the West of double standards, Clara Furse, the chief executive of the LSE, has written to Mr Putin after the Russian government refused to allow entry to one of the key investors in the country.
Tom Browder, head the Moscow-based Hermitage Capital Management, the investment company, is the largest portfolio investor in Russia, but Mr Browder is a big critic of the Russian government, frequently asking probing questions about corporate governance.
In her letter Ms Furse said: ” If the single largest investor in the Russian market can be arbitrarily denied entry into the country, that would send a very negative signal to other parties seeking to invest in Russian companies.”

April 28, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

When the EU announced that in future there would be no exclusive TV coverage of the Premiership, the cat was set amongst the pigeons.

The EU edict is that Premiership TV coverage must be broken into six packages of 23 games. These packages will not differ in terms of importance of games, but will be randomly selected. No one broadcaster can have the rights to all six, so we know that from 2007, the BSkyB monopoly of Premiership TV coverage will be over. And yesterday was the day the bids had to be in.

But the BSkyB dominance is not just under threat from EU regulation. The new breed of new media broadcasters, the likes of BT and NTL with its quadruple play offering, could soon mount a credible threat to the hegemony of the Murdoch TV empire.

For BSkyB, Premiership coverage was a kind of Trojan Horse. It paid out just over $1bn for its current rights in 2003. No doubt viewers had their BSkyB dishes installed in their hundreds of thousands as a result, and formed a new captive audience for the company’s other channels.

But today, it’s BT and NTL who need the Trojan Horse. NTL, which recently acquired Virgin Mobile, and merged with Telewest, plans to offer a quadruple play option of TV, Broadband Internet access, and both fixed line and mobile telephony. It’s the combination of Cable TV, TV over the net, and now over mobile phones that make the possibility of the company bidding for soccer rights a possibility. If it wins any one of the six packages, it will probably be marketed under the name of Virgin Sport.

Some analysts argue that the NTL four play package is irrelevant; that mobile phone usage is a personal decision, and the other three packages relate more to the family. But, the contrary argument is that it will give the company extra justification for purchasing high quality premium content.

BT too has its plans. With Broadband getting faster, the reality of live TV coverage approaches, and BT will soon be launching its TV package which will be combined with Freeview to offer additional services over the Internet, including premium films and presumably sport, and repeats of programmes shown on Freeview.

With the likes of Carphone Warehouse launching their cut price free phone calls and broadband for £20 per month service, BT needs content to differentiate itself from the rest of the pack.

For all that, BSkyB remains the favourite to pick up the lions share of the premiership booty, and the company which some experts think will win the rest is pay TV company, Setanta, which recently agreed a £54.5mn deal for TV converage of the Scottish Premier League.

For our money this is a good test for BT and NTL. The credibility of their bids, regardless of whether they actually win, will give us a better idea of how serious their challenge in the wider TV market is.

April 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Thanks to James Bond, the Aston Martin became the dream car for many. But times change, and perhaps modern day cinema audiences who are influenced in their aspirations by product placements will find themselves desiring the latest, state of the art, sleek, bulldozer.

Fiat has managed to pull off the coup of having its W190 bulldozer feature as the secret agent’s vehicle of choice in an opening sequence car chase for the next Bond movie.

But there is good news for the Newport Pagnell based, Ford owned, maker of super expensive sports cars. Bond will also drive an Aston Martin, after settling for a BWM in the previous film.

The new film, Casino Royale, featuring new blonde bond Daniel Craig is due to go on general release in November.

April 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Would business benefit if all communication was conducted in text? Last night in the TV programme the Apprentice, Sir Alan Sugar, in an appeal for brevity, asked one of his potential apprentices, to restrict his answers to SMS like succinctness. Certainly it would perhaps be a good discipline for some people to adopt.

But for day to day chat, surely, a good old natter on the phone takes some beating.

According to a report from Ofcom, these days the number of text messages sent across the length and breadth of the land exceeds the number of phone calls. Apparently Joe average sends 28 texts a week, but only makes 20 phone calls

The exception is London, no doubt because most mobile phone bills are paid for by the employer.

The Ofcom report also found that out in the countryside, broadband take up is still behind urban areas, although counting dial-up internet access too, a higher percentage of people in the countryside have net access.

The Ofcom report also looked at take-up of digital TV across the country. It found that Wales and the North West of England have the highest take-up of digital television, both at 72%. London and Northern Ireland have the lowest levels of digital television take-up at 58% and 53% respectively.
There are clear geographic differences in television viewing habits - people with digital TV in Scotland and the North East watch the most television in the UK (both at 28 hours per week) whereas those in London and Northern Ireland watch the least (at 23 hours per week).
Programmes with a local flavour attract larger audiences in some parts of the UK - for example, Midsomer Murders in the West of England, Doc Martin in the South West of England, Heartbeat and Emmerdale in Yorkshire, Hogmanay Live in Scotland, Wales on Saturday in Wales, EastEnders in London and Coronation Street in the North West.
Radio listening also varies geographically with the number of weekly hours spent listening to the radio highest in the South of England (at 26 hours per week) and lowest in the North East, Scotland and Wales (at 22, 23 and 23 hours respectively).

April 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Have fears that a smoking ban in English pubs will lead to mass closures, gone up in flames?

After the habit was banned in Ireland’s drinking houses for the public, 600 pubs were eventually closed, and some feared that English pub’s profitability would disappear in a puff of clean air, when a similar ban is enforced In England.

But news in from Scotland appears to suggests those fears are groundless.

Two companies, two different perspectives, and two sets of data were released yesterday, and the conclusion: peering thought the foggy world of statistics it would appear the smoking ban has had little effect.

First there is Imperial Tobacco, the British tobacco giant announced its latest results yesterday. Over the last six months pre tax profits were up 13% to £547mn, with cigarette sales up 9%, thanks to sales in Eastern Europe and Asia making up for the steady declining in the UK and Germany.

In the UK sales have been falling 4% a year, and yet, since the ban was enforced earlier this year, there has been no reduction in sales at all in Scotland.

Then, in the pub trade, JD Wetherspoon, said that since the Scottish smoking ban, sales in its 38 pubs north of the border have actually increased.

The company did launch a high profile marketing campaign emphasising the benefits of drinking in pubs where smoking is banned, however, and its Finance Director Jim Clarke said ” We’ve not really seen any difference in trade. I think our caution is that it’s only been four weeks. So, our conclusion is - good start, but still too early to judge.”

April 27, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

The economic down turn in the UK is over.

With talk of a potential crash in house prices, gradually rising unemployment, a High Street that can’t get beyond first gear and a manufacturing sector that would be grateful if it could even hit first gear, you could be forgiven for thinking the UK was about to go off the rails. But according to the latest report from the respected Item Club, from Ernst and Young, the UK is expected to bounce back strongly over the next few years managing 2.6% growth next year, and an impressive 3% in 2007.

As for 2006, it reckons the UK will mange an adequate 2.3%.

Meanwhile the Office of National Statistics has released its latest data for the economy, showing that the UK managed a 0.6% quarter on quarter growth in the first quarter of 2006. The UK has gradually been picking up from a low point of 0.3% growth 12 months ago.

While the US is enjoying faster growth, and the tiger economies much faster expansion still, it would appear that once again, the UK is leaving our EU cousins behind.

The Item club also predicts steady inflation in the years ahead, jumping to an above target, but hardly worrying, 2.1% this year, followed by 2.2% the next, before falling back to below the Bank of England’s target of 2%.

The Item club said “The Buoyancy of the housing market and the potential weakness of sterling in response to rising interest rates will make the Monetary Policy Committee reluctant to cut interest rates to stimulate demand. However, the housing and equity markets will support consumer spending, and a weaker pound will help exports. Exports are now moving ahead strongly with the European economy and could - for a change- surprise on the upside.”

But, that scourge of the UK economy, anaemic investment, is expected to remain below the average seen in our main economic rivals.

The question is this: how can the UK grow so fast, when employment levels suggest that is little scope for extra production, and low investment suggests productivity will stay low?

The item club says it’s down to immigration and that the unexpected consequence of the UK being one of only three EU countries to immediately sign up to freedom of movement of labour in 2004. Its chief economic advisor, Professor Spencer said “The steady flow from the most recent accession countries to the UK has proved remarkably positive for the economy, keeping interest rates a half a per cent lower than they would otherwise have been. From Poland to Slovenia these individuals have plugged gaps in a variety of industries, from agriculture to hospitality and catering, with nearly 300,000 immigrants taking new jobs in the UK in the last thre years. Unlike previous occasions that have been confined to major urban centres, this influx has benefited many regions across the UK from East Anglia to Edinburgh.”
He adds, “As a direct result the UK workforce has become younger, more flexible and economical, easing the pensions burden and keeping interest rates lower than many commentators could have predicted. Even with a modest rise in unemployment numbers we are looking at a very favourable cost-benefit ratio.”

April 26, 2006 | posted by Michael Baxter in Uncategorized | comments (0) |

Some might fear it’s a sign of the end of the dot com boom. Amazon, that beacon of profitability in the days when dotcoms just made huge losses, has seen profits slump by 35%.

Net income in the last quarter was $51mn, from $78mn a year ago.

Is this is a sign that the market is becoming saturated, and that the Amazon growth story is nearing its end?

Actually, although there have been signs that the online book seller has been approaching a flat period for growth, that was not the case last quarter.

The fall in profits was due to higher expenses, as the company upgrades some of its technology.

In fact sales were up a very healthy 20%.

The current market valuation of Amazon puts it at 41 times earnings estimates for 2007. That’s a very high p/e ratio, and the company will need to start seeing profits jumps significantly for the next few years to justify that share price.