European Markets - Yenra

Open Higher as Wall Street Gains Overnight

European Markets

On May 18, 2005, European markets were off to a positive start in the wake of overnight gains on Wall Street.

Retail group J Sainsbury's underlying full year profits have dropped by 62% to 254 million pounds, in-line with market forecasts. Mobile phone group O2 has announced its first full-year dividend of 2.25 pence per share on annual pre-tax profits that more than tripled to 309 million pounds. Shares in LogicaCMG are trading higher on encouraging comments on current trading in its Annual General Meeting statement.

Scottish & Southern Energy has posted a 17.2% rise in underlying pre-tax profits for the year to March 31 to 714.8 million pounds. On the downside, Compass Group has unveiled a 7.8% decline in first half pre-tax profits to 260 million pounds from 282 million pounds in the prior year.

In macroeconomics, minutes have shown that the Bank of England Monetary Policy Committee voted 8-1 at its May meeting to keep interest rates unchanged at 4.75%. Meanwhile, average U.K. earnings rose by 4.6% in March versus 4.7% in February. Later today, the latest U.S. consumer price index data will be released.

London's FTSE-100 Index is up by 30.20 points or 0.62% to 4928.70, while Paris's CAC-40 Index has risen by 33.96 points or 0.85% to 4040.15. Milan's S&P MIB Index has climbed by 214 points or 0.69% to 31,274 and Frankfurt's DAX Index has gained 40.21 points or 0.95% to 4291.98. The pan-European blue chip Dow Jones Stoxx 50 Index is higher by 18.87 points or 0.66% to 2869.41.

J Sainsbury has posted a 62% drop in underlying full year profits to 254 million pounds from 675 million pounds in the previous year, on sales from continuing operations that were up by 5.5% to 16.364 billion pounds. These results are in-line with expectations with the company in the middle of a major restructuring programme designed to kick-start a sales-led recovery. It is proposing a 5.65 pence final dividend, down from 11.36 pence.

Mobile phone group O2 has announced its first full-year dividend of 2.25 pence per share on annual pre-tax profits that more than tripled to 309 million pounds from 95 million pounds last year. Total operating profits more than doubled to 338 million pounds on sales that were up to 6.68 billion pounds from 5.69 billion pounds in the prior year. Looking ahead, O2 confirmed its previous forecast for mid-single digit growth in U.K. net service revenue and stable profits margins. In Germany, O2 expects to deliver further strong service revenue growth, with EBITDA margins set to improve to around 20%.

Shares in LogicaCMG are trading higher on encouraging comments on current trading in its Annual General Meeting statement. The company said first quarter bookings are very strong, up 37% year-on-year and the firm is in negotiations for several large contracts, providing good visibility for the rest of the year. Also, LogicaCMG now expects organic growth between 4%-5% for the full year versus the 3%-5% it expected previously. Operating performance in the second half is expected to benefit from restructuring in France and Germany.

Scottish & Southern Energy has posted a 17.2% rise in underlying full- year pre-tax profits to 714.8 million pounds from 609.7 million pounds in the previous year. Turnover is up to 7.5 billion pounds from 5.2 billion pounds a year earlier, with a 12.7% increase in its full year dividend to 42.5 pence a share. At the end of the year, the group had 6.1 million energy supply customers, up 850,000 year-on-year, with 300,000 coming from the acquired Atlantic Electric & Gas.

Compass Group has unveiled a 7.8% decline in first half pre-tax profits to 260 million pounds, while turnover reached 6.2 billion pounds, up 6% on a like for like basis. Compass has initiated a business review to identify operational efficiencies; its objective over the medium-term (2006-2008) will be to deliver an improvement of 100 basis points in return on capital employed and to generate free cash flow of 1 billion pounds. Meanwhile, the company has agreed to sell a 75% stake in North American bakery cafe chain, Au Bon Pain for US$90 million but will retain the remaining 25% interest.

Telekom Austria's first quarter net income has risen by 63.6% to 115.7 million euros, aided by lower net interest payments and a lower tax rate. Operating income grew by 27.7% to 173.7 million euros on the back of cost cuts and lower one-off charges. Group revenues were up by 1.4% to 1.003 billion euros, driven by a 2.5% rise in the wireless business on rising subscriber figures.

Shares in Regal Petroleum have plummeted on a disappointing drilling report. An appraisal of four prospective reservoirs in the Kallirachi site revealed flow rates deemed non-commercial.

Report provided by Thomson Financial.