Baker Street, London -- The total eclipse of the sun put the markets in the shade this morning. Tons of traders took a stroll outside to ruin their retinas. With their eyes off the screens and on the orange orb instead, trading was thin for much of the morning. However, just before midday brightness returned and the FTSE 100 bounced back from yesterday's lows to return above the crucial 6,000 level by lunchtime. This made many investors over the moon with joy as excitement returned. This euphoric mood could prove temporary, though, as the publication by the Bank of England of its quarterly inflationary report focuses minds on interest rate rises again.
All eyes were on Colt Telecom(LSE: CTM) today. The loss-making telecom company will release its interim results this afternoon when the American markets open. Analysts anticipate that sales will more than double to £92m but pre-tax losses will also continue to rise at the same rate to £27m. Further news about the network's continuing growth throughout Europe is expected as well. As a result the shares shot up 68p to 1265p.
This reappraisal allowed the valuations of other telecom stocks to be reconsidered. Thus Telewest (LSE: TWT), badly beaten over the past few days, ticked up 7.5p to 224p. BT (LSE: BT.A) improved 22p to 933p and Vodafone AirTouch (LSE: VOD) rose 26p to 1168p.
Satellite broadcaster BSkyB (LSE: BSY) got off the mark early this morning. The company reported its full year results well ahead of the eclipse. The digital revolution has rather put its earlier strategy in the shade recently. However, investors were encouraged that, despite a 73% fall in profits to £73m, digital subscriber numbers rose by more than expected to 1.21m. This is a fifth more than was originally envisaged. Hence the group's shares rose 17p to 578p. In sympathy set-top box provider Pace Micro Technology (LSE: PIC) picked up 2.5p to 197p.
Oil shares succumbed to a bout of profit taking this morning. Yesterday BP Amoco(LSE: BPA) was about the only share in the FTSE 100 to end the day as a conqueror. Today the company's shareholders received their retribution as the stock fell 10p to 1215p. Shell (LSE: SHEL) also had to swallow its medicine this morning. Its shares dropped 5.5p to 526p.
Shares in Holiday tour operators were struck this morning by a few sentences in industry giant Airtours' (LSE: AIR) interim statement. Although bookings for summer 2000 were up 11% on this year, trading at the monet is apparently tough, particularly in the highly competitive North American markets. Airtours dropped 9.5p to 410p. First Choice(LSE: FCD) collapsed 8.5p to 164p. Earlier in the year the group was trading around 200p amidst bid speculation from Airtours.
Baker Street, London -- United News & Media(LSE: UNWS), best known for its Branson look-a-like boss Lord Hollick and its tabloid newspapers The Express and Star, is in the news again. Only last Friday the company announced their 1999 interim results, but that didn't stop them putting out another statement yesterday. They've appointed a new e-commerce business director, a tiny disposal (sold for £4m, although resulting in "considerable savings", if you can work that one out) and most surprisingly an announcement that the integration of recently acquired CMP is "proceeding ahead of expectations".
I'm always a little sceptical when companies make what I consider to be unnecessary stock exchange announcements, especially in the high-technology world. United News released interim results just last Friday, and surely then they already knew that the CMP assimilation was on schedule. By repeating or reiterating the obvious, especially mentioning the magic Internet word, do they hope to get a short term fillip for their share price? Being cynical, I can only assume that's the case.
Logica(LSE: LOG), the fast-growing software and computer services group, is another company that doesn't miss out on any opportunity to remind the market of its progress. Over the past month, yes just 30 days, they've made four separate new contract announcements, which will add £25.4m to their sales over varying periods of time. That's pretty much peanuts when you consider their annual turnover for fiscal 1998 was £473m. So, why do it? It keeps the company in the news, is a cheap form of marketing and brand awareness, and no doubt Logica is hoping the stock market will take note of the news trickle and mark the shares forever higher. At a forecast price to earnings ratio (P/E) of about 60, perhaps that technique has been successful.
Back to United News & Media. In late April this year, they took a large step into the new world paradigm by acquiring CMP, a leading US technology media company, for a net total cash consideration of US$920 million. The move was aimed at cementing United's position in the high tech business-to-business publishing sector, and "provided an outstanding Internet opportunity, with external financing planned by end of 1999". Plans are already underway to list CMPnet, an online publisher of computer titles and related information.
Looking back at their interim results of last Friday, it's obvious why United are considering raising some cash courtesy of their Internet interests. The CMP acquisition left them heavily in debt, to the tune of £1.365 billion. In the first half of 1999, cash generated from operations was £120m, but after deducting interest paid, tax bills and capital expenditure, free cash left was just £54m, and all that and a little more was paid out by way of dividends.
The accountants at United must have considered this when deciding to recommend they pay US$920m cash for CMP. Did the company already have the grand plan in place -- to pay for the acquisition by taking advantage of the buoyant Internet IPO market? Depending on the outcome, this could either be considered a very smart move, or on the downside, the high-risk strategy has a chance of flopping, leaving United with seemingly little manoeuvring ability given their high debt.
United News & Media also jointly, with British Telecommunications(LSE: BT.A), owns UK based Internet Service Provider LineOne, and having seen the valuation of Freeserve(LSE: FRE) soar to over £2 billion, is potentially licking its lips with anticipation. Not surprisingly, it has seen takeup of the service fly since it turned copycat and offered free Internet access, although with something like 350,000 registered users versus Freeserve's 1,400,000, a copycat £2 billion (and falling fast) valuation is out of the question.
Don't get me wrong -- as an Internet company ourselves, we see the future in this exciting medium, as do United News & Media. Of course there's more to the company than these rather new on-line initiatives, as was discussed in Nigel Roberts' relatively recent stock ideas article. But, they are firmly pinning their future growth to the Internet flagpole, and putting their money where their mouth is. As for the success of the strategy, as ever, only time will tell. But, United have reported flat earnings from 1994 to 1999, and company's share price has hardly set the world on fire over that period either. Given that past record, and lack of cash generation, it will take some leap of faith in the management to jump about this fast moving but potentially rickety Express.
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