LSE, TMX Group results top forecasts

LSE, TMX Group results top forecasts

Stock Market Predictions

LONDON/TORONTO (Global Markets) - The London Stock Exchange and Canada's TMX Group reported forecast-beating results on Friday as they applied for regulatory approval of their $3 billion deal to join forces.

Shares of the exchanges, both pressured by competition from alternative trading upstarts, rose after the results.

First-quarter profit at TMX, the operator of the Toronto Stock Exchange, rose 13 percent to C$64.3 million ($66.8 million), while revenue climbed 17 percent to C$174.7 million, on record volume and robust equity financing.

"I, along with maybe one or two others were already on the high end of Street estimates and they exceeded our estimates by a country mile," said National Bank Financial analyst Shubha Kahn.

The LSE exchange reported 2010 profit up 22 percent at 341 million pounds ($555.5 million), well above a forecast of 314 million in a poll of 14 analysts.

Revenue increased 7 percent to 675 million pounds, above analyst expectations of 651.1 million. The total dividend for the period was 26.8 pence, above a forecast 25.9p.

"We have seen strong growth in our fixed-income businesses, exchange-traded funds and derivatives. We are also starting to see positive impact from technology sales," Chief Executive Xavier Rolet told Global Markets Insider TV in an interview.

The exchanges formally applied on Friday to have the deal approved by authorities in Ontario, Quebec, Alberta and British Columbia. The provincial regulators, along with the federal government, have a say in the deal first announced February 9.

The applications initiate a process that could last for months -- the TMX and the LSE are confident it will close sometime in the fourth quarter.

The would-be partners promise to create a transatlantic exchange and powerhouse in mining and resource equity that would do $4 trillion in annual trading.

Canadian critics fret that control of a national institution will fall into foreign hands.

"We have made this investment because we are convinced this merger represents an unparalleled opportunity for our company," Chief Executive Tom Kloet said.

MARKET SHARE EROSION

But the market share of both firms has been eroding. The LSE's share of domestic equities trading -- historically its top earning business -- has slumped in the past three years, hurt by the likes of Chi-X Europe and Bats Europe, whose parent filed for an IPO on Friday.

Last month the LSE's domestic market share fell below 50 percent for the first time in the UK exchange's 210-year history, Thomson Global Markets data showed.

The alternative trading platforms remain a formidable competitive threat to TMX as well.

The TSX and TSX Venture Exchange had a combined market share of about 65 percent by value and 68.8 percent by volume in the last quarter. Overall combined market share was down slightly quarter over quarter, according to data from the Investment Industry Regulatory Organization of Canada.

Both exchanges have tried to diversify business to counter the threat. Rolet has looked to derivatives trading, clearing and technology services for growth, and credited his strategy for the better-than-expected results. His boldest move is the proposed tie-up with TMX, a deal that will enable the UK exchange to tap into TMX's stable of booming mining firms.

TMX is in the process of launching its own alternative trading system, TMX Select. It has reduced fees and introduced rebates for certain services, and it launched services that allow for anonymous trading.

"If those initiatives bear fruit, it should offset some of the market share erosion, or at least stem some of the market share losses," said Khan.

LSE stock closed up 1 percent having risen more than 7 percent earlier in the session. TMX shares closed up 1.83 percent at C$41.75 late afternoon in Toronto, an implied premium relative to LSE's offer of $39.75, according to a CIBC research note.

(Editing by Sophie Walker, David Holmes)

($1 = 0.6140 pound)

($1 = $0.968 Canadian)

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HMV equity issue not on playlist

HMV equity issue not on playlist

Stock Market Predictions

LONDON (Global Markets) - British entertainment retailer HMV (HMV.L), grappling with waning demand in its core CD and DVD markets, said an equity issue was not on the agenda -- in the short term at least -- as it posted a further slump in sales.

"It is not on the table today, we do not have an equity story today," chief executive Simon Fox told reporters Friday when asked about analyst speculation of a rights issue early in 2012.

He said such a move would only be considered when HMV had demonstrated "a sharply improved business performance, and the initiatives we are putting in place work in a convincing way."

The 90-year-old group, famous for its Nipper the dog trademark, said sales at stores open more than a year plunged 15.1 percent in the 18 weeks to September 3, which spans its fiscal first quarter.

That compared with a like-for-like sales fall of 14.5 percent in the year to April 30 and was broadly in line with analysts' expectations.

Total retail sales in the first quarter, including the impact of 29 store closures, slumped 21.8 percent. Including the firm's HMV Live business, total sales fell 19.4 percent.

"Entertainment markets have changed rapidly and we've got to move really fast, we've got to change our business," said Fox.

HMV has issued four profit warnings this year as a downturn in consumer spending exacerbated the long-term challenges of intense competition from supermarkets and internet retailers, as well as the increasing popularity of digital downloading.

In June, the group secured its immediate future with a 220 million pounds ($354 million) refinancing deal with banks. It has also sold the Waterstone's book chain and its Canadian arm to cut debt.

REVAMP

HMV has been shifting its emphasis from CDs and DVDs to the growth markets of entertainment-related technology products such as MP3 players, headphones, speaker docks and tablet computers, as well as live music and event ticketing.

It is spending 6 million pounds refitting 150 stores by early October to focus 25 percent of selling space on the new product areas.

It said like-for-like technology sales in its initial six "Fast Forward" stores have continued to more than double.

Extrapolating that uplift across 150 stores would deliver a 6-7 percent improvement in like-for-like sales from current run rates, said Fox.

The firm said HMV Live fared well during the summer festival season, with attendances up 23 percent on a like for like basis.

Fox said a strong product line-up at Christmas gave him some confidence, highlighting releases of all six Star Wars films on Blu-ray discs, and new albums from Coldplay and The X Factor artists.

HMV shares, which have lost 90 percent of their value over the last year, were unchanged at 6.4 pence at 1058 GMT, valuing the business at about 26 million pounds.

HMV made an underlying pretax profit of 28.9 million pounds in the year to April 30. However, analysts expect little or no profit in 2011-12 and, despite the refinancing, believe the firm, which employs about 4,500, faces an uncertain future.

Seymour Piece analyst Freddie George forecast a 2011-12 pretax profit of 2 million pounds. "We maintain our sell recommendation as we continue to believe that the business is a value trap and management will struggle to grow profitability."

Thursday, Home Retail's (HOME.L) Argos business reported an 8.6 percent plunge in second-quarter underlying sales, while Wednesday, Dixons Retail (DXNS.L), the UK's largest electricals retailer, posted a 10 percent fall in first-quarter UK like-for-like sales.

($1 = 0.622 pound)

(Editing by Rhys Jones, Sophie Walker and David Hulmes)

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U.S. retailers trim Europe plans on region's debt woes

U.S. retailers trim Europe plans on region's debt woes

Stock Market Predictions

LONDON (Global Markets) - A string of big-brand U.S. retailers may curb their UK and European expansion plans, deterred by the region's bleak consumer outlook and nervousness over the unfolding sovereign debt crisis in the euro zone.

"With the economic conditions a lot of retailers are asking themselves whether it's worthwhile to enter the UK (market) given that it's very competitive and saturated," Robert Gregory, research director of consultancy Planet Retail, said.

U.S. retailers to have added a note of caution to their UK and Europe plans include homeware retailers Crate & Barrel and Williams-Sonoma, clothing retailer Forever 21, and Victoria's Secret owner Limited Brands, sources said.

The tempering of plans is a setback for the UK retail sector which has seen several U.S. retailers target greater footprints in that country, seeking to replicate the successes of Apple and Abercrombie & Fitch and then access Europe.

Crate & Barrel has put its UK plans on hold until Europe's debt crisis abates, a first source familiar with the matter said.

Crate & Barrel Chief Executive Barbara Turf told a retail property conference on Wednesday the company was "slowing down" its international expansion plans, but that it hoped to open stores in the UK in the next 3-4 years.

Cushman & Wakefield's head of cross border retail, Mark Burlton, said U.S. retailers had been increasingly influential and active players in the UK market.

"My instinct would tell me that U.S. retailers have been the biggest takers of space in terms of square feet," Burlton said, citing Forever 21, which opened large stores on London's Oxford Street and in Westfield's Stratford City mall in 2011.

However, their increasing cautiousness has paralleled the worsening European debt crisis, which has brought upheaval to the governments of Greece and Italy and has sapped consumer confidence across EU countries.

U.S. Treasury Secretary Tim Geithner was in Europe this week to lobby the region's leaders ahead of a key EU Summit on Friday. On Thursday, he said the U.S. and global economy had strong interests in efforts to strengthen the euro.

TENTATIVE STEPS

Analysts expect Britain's retail pain to worsen as shoppers cut back on non-essentials and slash spending, worn down by stagnant wage growth, government austerity measures and uncertain job prospects.

Against this backcloth, several property agents told Global Markets that some U.S. retailers were sitting out the crucial Christmas period in the UK and Europe, traditionally the busiest shopping period of the year, to see if the New Year brought better prospects for expansion to those markets.

Williams-Sonoma, which manages the Pottery Barn furnishing chain, is planning to open UK stores in 2013, two other sources told Global Markets, contradicting previous reports it would open its first London store in early 2012. It wanted more visibility on how the euro zone debt crisis would play out before deciding to expand, one of the two sources said.

Limited Brands, which is opening its first Victoria's Secret store on New Bond Street next year, may also take longer to roll out its cosmetics chain Bath & Body Works into the UK and Europe on similar concerns, a fourth source close to the company said.

Forever 21 was also taking a cautious approach to its European expansion although it is still opening stores, a source with knowledge of the matter said.

Williams-Sonoma and Forever 21 declined to comment. A Limited Brands spokesperson said "we have made no announcements about Bath & Body Works in the UK, and Victoria's Secret will open there as planned."

Burlton said it was unlikely such retailers' cautiousness towards expansion would last long.

"There's only a very slight cooling off just with the euro zone crisis, but brands recognize now that the only way they can get growth is by becoming international ... they've no choice but to have to investigate new markets," he said.

James Ebel, a director at retail property consultancy Harper Dennis Hobbs, said while retailers had taken notice of the euro zone crisis, any that were paring back plans were the exception than the norm.

"I'm still receiving quite a lot of interest from American retailers coming to the UK," he said. "There hasn't been a time, within the last 10 years, when U.S. retailers have been so interested in coming to Europe as there is now."

(Reporting by Brenda Goh; Editing by Andrew Macdonald)

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Murdoch and sons survive News Corp annual meeting

Murdoch and sons survive News Corp annual meeting

Stock Market Predictions

LOS ANGELES (Global Markets) - Using contentious barbs and comedic relief, Rupert Murdoch deflected attempts by angry investors to remove him as chairman of his News Corp empire at the company's annual meeting on Friday.

The 80-year-old media baron survived what was effectively a no-confidence vote and also managed to get his sons James and Lachlan reelected as directors.

The octogenarian began the meeting with perfunctory comments about being personally determined to right News Corp's wrongs, saying it must be an ethical company and that it had been subject to fair criticism and unfair attack. But that was as conciliatory as he got.

Unlike his sons Lachlan and James, who sat quietly during the 75-minute meeting, Murdoch stood defiant in the face of tough questioning about News Corp's corporate governance, a proposal to strip him of the long-held chairman role that goes along with his CEO title, and fresh allegations of computer hacking that piggyback off the phone hacking charges responsible for putting Murdoch in his precarious position.

In addition to the roughly 150 people inside the Zanuck Theater on the Fox Studios lot in Hollywood, about 100 others stood outside, voicing opposition to the company and carrying signs that read, "Murdoch isn't above the law" and "Big Media, Big Money, Get Out."

Murdoch was feistier than he had been during questioning by a special committee of Parliament in July.

British member of parliament Tom Watson, Australian pension fund representative Stephen Mayne and Julie Tanner of the Christian Brothers Investment Service were among those who sparred with Murdoch. Mayne, a longtime News Corp antagonist, and Murdoch, who employed his familiar tactic of pounding the table to stress a point, circled each other like familiar opponents.

"It is time to get on the governance high road. You've been treating us like mushrooms," said Mayne, who has attended more than a decade's worth of these meetings.

Later, in response to Mayne's comment that he was not sure how he planned to vote his shares, Murdoch shot back, "I hate to call you a liar, but I don't believe you. I know how you're going to vote."

FIREWORKS

The real fireworks were supplied by Watson, who flew to Los Angeles to attend the meeting as the representative of 1,669 shares of nonvoting stock held by labor group AFL-CIO. At his first opportunity to speak, Watson noted the "deep irony" of News Corp using images of Prince William and Kate Middleton during its presentation since both were alleged phone hacking victims.

He said News Corp could face new investigations in the UK by the country's Serious Organised Crime Agency, stemming from the actions of at least three private investigators employed by News International, News Corp's UK newspaper publishing unit. Murdoch has failed to warn shareholders of the possibility of new civil lawsuits, Watson said.

"I promise you absolutely that we will stop at nothing to get to the bottom of this," Murdoch said in response to Watson.

Despite the animosity between the two, Murdoch jokingly defended News Corp's democratic voting process by pointing out that its Fox Business channel had featured Watson earlier in the day.

"We're fair and balanced," he said, referencing to the company's familiar slogan.

After the meeting, Watson told reporters that he was pleased to have had the opportunity to bring the issues to the attention of investors, even if board members "didn't choose to acknowledge the points I made."

"I made my serious points ... the board can choose to ignore me if they like," he said.

Watson said he was sure the issues brought up during the meeting would be put to James Murdoch when he returns to Parliament for more questioning next month.

CROWD SUPPORT

Murdoch had some supporters in the crowd, among them Haim Saban, the billionaire creator of the "Teenage Mutant Ninja Turtles" franchise. Saban said he was shocked at investors' focus on corporate governance and said they should instead be looking at News Corp's strong operating performance. He also asked Murdoch if he had plans to revisit the abandoned $12 billion BSkyB deal.

In the wake of the phone hacking scandal, a group called Avaaz campaigned against News Corp's bid to take full control of UK satellite operator BSkyB.

Murdoch said the company does not have plans to put the deal back on the table, but added "never say never, though."

Another independent investor thanked Murdoch for creating "thousands of jobs across the world."

Since Murdoch controls 40 percent of News Corp's voting B shares and is supported by the next largest holder, Saudi Prince Alwaleed bin Talal, there was little chance that Murdoch, his sons James and Lachlan or any other long-time serving director would have been voted off the board.

Shareholders reelected the media conglomerate's board of directors on Friday and failed to approve a proposal to oust Murdoch from his chairman post.

News Corp did not disclose the specific results, including how many investors withheld their shares from voting or how many voted against the directors, saying in a press statement that the company would file the numbers with the U.S. Securities and Exchange Commission early next week.

News Corp board chairman Viet Dinh took pains to defend the company's dual class stock structure by pointing out that Comcast, Warren Buffett's Berkshire Hathaway and others feature the same structure. He also noted that shareholders voted to approve the structure as recently as 2007. Dave Devoe, News Corp's chief financial officer, pointed out that the company has not bought a single Class B share with the $1.6 billion it has spent on stock buybacks.

News Corp shares closed up 2 percent to $17.20 on the Nasdaq on Friday.

"The News Corp recovery in line with the market at the close would indicate that the Street approves of this status quo," said Collins Stewart analyst Thomas Eagan.

Separately on Friday, News International, the News Corp division that housed the News of the World newspaper at the center of the phone hacking scandal, said it would pay the family of murdered British schoolgirl Milly Dowler 2 million pounds (US$3.17 million). Murdoch will personally donate another million pounds to charities chosen by the Dowler family.

Dowler was abducted in 2002 and found murdered six months later. News this year that the tabloid had hacked into her phone after she disappeared caused widespread revulsion in Britain and elevated the hacking to a national scandal.

Among the many concerns for Murdoch aides is the possibility of further reputation damage and embarrassment.

Former News Corp executive Les Hinton, who resigned this summer, is due to reappear before Parliament for additional questioning on Monday.

(Reporting by Lisa Richwine in Los Angeles and Yinka Adegoke in New York. Writing by Peter Lauria. Editing by Robert MacMillan)

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Tesco exec sold shares ahead of profit warning

Tesco exec sold shares ahead of profit warning

Stock Market Predictions

LONDON (Global Markets) - A senior Tesco (TSCO.L) executive sold stock just over a week before a profit warning sent its shares plunging, a regulatory filing shows, causing fresh embarrassment for the world's third-biggest retailer.

Noel "Bob" Robbins, UK chief operating officer, sold 50,000 shares at 404.51 pence apiece on January 4, netting around 202,000 pounds ($309,000), according to a filing published on January 5.

That was eight days before Tesco reported its biggest drop in underlying British sales for decades, and just three days before the end of the period covered by its trading statement.

UK listing rules say directors should not buy or sell shares in their company while in possession of unpublished, price-sensitive information.

The regulations, policed by the Financial Services Authority (FSA), also require directors and senior managers to obtain board-level approval before selling shares and forbid trading in shares during so-called "close periods" between the end of a financial period and the reporting of its results.

One shareholder watchdog described the sale as troubling.

"It doesn't look very good, especially in this case, when you are head of UK operations," said Simon Wong, a partner at corporate governance watchdog Governance4Owners.

Tesco said it and Robbins had operated within the rules.

"Bob Robbins sold less than 5 percent of his substantial shareholding in Tesco for necessary family expenditure," a spokesman said.

"We are confident that Bob was not in possession of any price-sensitive information at the time the sale was approved."

Wong, however, said simply operating within the letter of the law was not enough. "If these companies say it's still within the rules, then I think the rules may need to change, because this is a concern and it damages confidence."

Indeed the FSA says its listing rules are designed not only to avoid abuse but also to ensure that the right thing is seen to be done. Companies are given the freedom to impose even stricter guidelines should they deem it necessary.

Under Tesco's rules, directors were barred from trading company shares from January 7 to Jan 12.

Other retailers opted for much longer close periods ahead of their key Christmas trading updates. Marks & Spencer's (MKS.L) and J Sainsbury's (SBRY.L), for example, both ran for about four weeks, although they were reporting quarterly sales figures. Tesco published third-quarter sales on December 8, and was giving just a seven-week trading snapshot on Thursday.

Morrisons (MRW.L), on the other hand, which like Tesco had a truncated Christmas trading period of six weeks, had a similar close period that ran from December 30 to January 9.

The importance of keeping to the spirit, as well as the letter, of rules on personal dealings was highlighted last week when Swiss National Bank chairman Philipp Hildebrand resigned, saying he could not prove he had been unaware of a currency trade made by his wife.

SHARE PRICE PLUNGE

On Thursday, Tesco said investment to improve its British business would hit profits in its 2012-13 financial year, sending its shares down as much as 19 percent, their biggest one-day drop since 1988.

The stock fell a little further on Friday to touch a 34-month low of 315 pence.

"The significant movement in the share price on Thursday was, we believe, primarily due to the announcement on profit guidance and UK investment plans for 2012/13. Bob was not party to discussions around the profit guidance or the investment plans at the time he made his sale," the Tesco spokesman said.

The FSA, which routinely looks into large share price movements, declined to comment.

A Tesco veteran, Robbins, 54, was appointed UK chief operating officer on March 1, 2011, having previously worked as chief executive officer for central and eastern Europe and strategy and development director in Asia. He sits on the group's executive committee, one level below its main board.

A regulatory filing on Friday showed Tesco's new chairman Richard Broadbent bought 30,149 shares at 329.98 pence on Thursday, or about 99,000 pounds.

On December 22, internet director Ken Towle also sold 40,193 shares at 385.6 pence apiece, worth around 155,000 pounds.

($1 = 0.6528 British pounds)

(additional reporting by Paul Hoskins, James Davey, Peter Thal Larsen and Sinead Cruise; Editing by Chris Wickham and Will Waterman)

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