The Morning Market
Baker Street, London - A slight recovery in the NASDAQ last night was a good omen for the UK, but a sizeable fall in Tokyo of nearly 3% more or less balanced that. The big feature of the last few days has been the recovery in the euro against the dollar; it now trades at 1.04, up about 3 cents in a week.
Many market watchers will be hanging on every word from Alan Greenspan when he gives his Congressional Testimony this afternoon. But as he has already said his interest rate stance is neutral there is no reason to expect any dramatic changes.
Good news from the insurance sector this morning outweighed some disappointing results, and the market edged up for choice. Also helping the market was data from the Office of National Statistics (ONS) indicating that retail sales volumes were 3.8% higher in June than a year ago. But perhaps that was because prices are lower? However, by midday the bears had taken over and the market slipped into negative territory.
Morning Risers
Legal & General (LSE: LGEN) rose 8.25p to 163p after it announced good first half figures. Operating profit rose 12.8% to £194m and earnings per share (EPS) even more, up 15.9% to 2.77p. L & G is one the most popular providers of tracker funds but its main business is still life assurance and pensions. UK life and pension EPI (new equivalent premium income, which comprises annual premiums and 10% of single premiums) rose by 23%. Even stronger is the international life and pension EPI growth of 66.4%, while new pension fund management business increased by 18%. The pension business grew by £6b and gives it a market leading position in pooled index funds. Combined PEP/ISA sales in the six months were a record £592m, but this was only up 4.2% on last year because of the change to ISAs. Analysts are generally keen on the stock with 4 buyers, 4 holders and only 2 sellers.
Having read the good news on Legal & General the market bid up rival stocks in that sector. So Norwich Union (LSE: NU.) gained 13p to 425.5p and Allied Zurich (LSE: ADZ) rose 15p to 776p.
ICI (LSE: ICI) was the best performer this morning in the FT100 with a gain of 45p to 735p. The reason for the jump was a positive statement with the interim results which itself was encouraging. Even though turnover fell 3.4% and profit before tax fell 15.7%, EPS rose 6.5% to 14.7p. However, the main feature was the reduction in net debt to £3.2b. This was due to the sale of £1.7b of assets to the Huntsman Group. Additionally, the company made encouraging noises about a return to growth in Asian markets.
Reinforcing the data from the ONS on retailing were bullish comments from the Boots (LSE: BOOT) AGM. The shares rose 20.5p to 781.5p after the chairman announced sales growth of 3.7% in the first quarter, although on a like for like basis it ranged from 0.4% for Boots Opticians to 2.9% for Halfords. These figures are not great but the company did say that the trend is improving and June was much better than July. Boots expects to announce its Internet strategy shortly.
Morning Fallers
The Qualiport took another hit today when Misys (LSE: MSY) announced its results. The shares fell 22.5p to 598.5p even though it announced earning per share growth of 25% to 16.2p. It was the worst performer in the FT100. Unfortunately investors were expecting 16.4p to 17.4p so the shares were marked down. The results are discussed in more detail in today's LunchBox.
The worst performer in the FT Allshare was WF Electrical (LSE: WFE) with a drop of 60p to 407.5p. The reason for the decline in this electrical distributor was a drop in profits as a result of difficult trading conditions. Sales rose 6.9% but PBT dropped 4.8% and EPS fell 32% to 28.31p. A net debt to equity figure of 90% probably didn't help either.
London Forfaiting (LSE: LFC) continued to decline, losing another 6p, to 36.5p after its disastrous results yesterday.
The Foolish Lunchbox - Miserable Misys
Misys, the highly rated information technology company disappointed the market today when it released figure for the year to May 31st. Even though turnover rose 30% to £582m, profit before tax (PBT) increased 39% to £124m and adjusted EPS were 26% higher at 16.7p, the market had hoped for more. Net debt fell to £ 49m from £135m as a result of the disposal of the Information Systems Division for £32m.
On a divisional basis the company saw strong underlying growth in Banking and Securities, partly driven by euro and Y2K issues. The Healthcare Division saw its first full year as a separate unit and marked it with vigorous expansion into the US. Insurance, the third division was flat.
Perhaps the most significant feature of the statement was the announcement of a new Internet strategy. The company intends to establish a pivotal position in Web-based financial services by building twin consumer and IFA- facing Web portals. This will build on the existing Screentrade business and Countrywide Independent Advisors. The aim is to establish "best of breed" Web based solutions for IFAs and a comprehensive consumer portal for financial services. Misys believes that the vertical market portal will be the most successful business model in financial services.
To be honest I am not sure I know what they are talking about, and what I have reproduced above is only a fraction of the "software speak" they use in the press release. The first 40 pages of the press release contained no financial analysis, but loads of "software speak" that quite frankly left me dazed. However, in section two I found some hard numbers. Banking & Securities had revenue of £329m last year, 32% higher, and operating profits 42% higher at £98m. Healthcare revenue was £170m, 104% up on last year while operating profits were 123% higher. Insurance reported revenues of £50m, a gain of 6.4% but operating profits were flat at £14m. The Internet business lost £2m on no revenue. The company said that there was clear evidence of a slow down in the growth rate at the end of the year in the Banking division.
One last point to note is that cash flow from trading activities was £89m, less than last year, but time prevents a study of why. I am sure TMF Googly will address the issue on Friday.
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