Rises on Takeover Bid

Publicis higher after winning GM ad-buying account; plus more of Thursday's European stocks in the news

From Standard & Poor's European MarketScope


Online travel retailer was up £0.13 to £1.66, after travel website Travelocity Europe, owned by the U.S. company Sabre Holdings, said it will buy the company at a price of £1.65 in cash per share, a premium of approximately 57% over the closing price of £1.05 on May 10, 2005. Travelocity said the price values's capital at approximately £577 million. is recommending its shareholders vote in favor of the scheme. Separately, the company reported an increase in first-half gross profit to £82.9 million, compared to £55.9 million, representing a gross margin of 16.2% compared to 17.2%. It added that the loss per share has improved to 3.62 pence, compared to a loss of 3.99 pence in the period last year and that the total transaction value is up 57% to £512.1 million.

Insurance group Royal & Sun Alliance was up £0.04 to £0.78, after it announced first-quarter operating result of £160 million and a first-quarter ongoing business combined ratio of 91.2% compared to 94.2% in the period in 2004. The group said net profit is £122 million, up £44 million from the first quarter of 2004. In addition, the core group showed a strong performance, U.S. exposure has been reduced and an operational improvement programme has delivered savings of over £200 million.

British Airways was up £0.08 to £2.54, ahead of tomorrow's results. Dresdner Kleinwort Wasserstein expects the company to report a 50% rise in earnings, despite sharply higher fuel costs. It said a key swing factor will be whether or not a £40 million profit-share is due to employees. It may be payable if the earnings before interest, taxes and amortization margin exceeds 6.5%. Separately, the company's shares rise as crude oil extends losses following the overnight collapse on the New York Mercantile Exchange after data showed strong stocks in the US.

Manchester United was up £0.36 to £3.01, after U.S. businessman Malcolm Glazer bought a majority stake in the football club. Manchester United said that Red Football, acting on behalf of Glazer, now owns 56.9% of the team and it awaits the formal terms of the Red offer. Earlier, Red Football bought a majority stake in the company of 28.7% and is to make an offer for the entire company valued at £790.3 million. Red Football said it bought 75.7 million shares at £3.00 from the Cubic Expression Co. -- the investment company of Irish horse racing tycoons John Magnier and J.P. McManus - representing approximately 28.7% of the issued share capital of the team. Glazer's group said the acquisition of Cubic's shares has been settled and therefore the offer will, when formally made, be unconditional from the outset.

Energy group International Power was down £0.07 to £1.81, after Deutsche Bank said the company's first-quarter results were a bit better than its forecasts but in line with consensus. Earnings per share of 2.8 pence were higher than a Deutsche Bank estimate of 3.2 pence and the 2.6 pence reported last year, while pre-tax profit of £83 million was higher than the bank's estimate of £73 million and the £51 million reported last year. The broker said that the recently acquired power assets from Edison Mission Energy did well, especially First Hydro in the UK. It noted that the pre-existing business did less well, thanks to price weakness in Australia and the lack of a recovery in the U.S. Earlier, the company said net cash inflow from operating activities was £54 million, compared to £46 million in the first quarter of 2004. It added that higher profitability this quarter can be attributed to positive contributions from all new plants. Earnings per share guidance for fiscal-year 2005 remains 11.0 pence to 12.5 pence.


The bank BNP-Paribas was up €2.00 to €54.00 after the company reported first quarter net profit up 56.4% to €1.72 billion, according to International Financial Reporting Standards, beating forecasts of about €1.2 billion. Gross operating profit rose 36.5% to €2.46 billion, also beating forecasts. First-quarter revenues rose 19% to €5.6 billion, higher than expected. The broker Kepler said first-quarter results beat consensus estimates of €1.25 billion.

Luxury-goods group Hermes was up €4.70 to €157.00, after JP Morgan said it is confident on the company's outlook, despite a soft first quarter. Goldman Sachs is also confident, since the first quarter was affected by supply delays, which could boost the second quarter.

Advertising group Publicis was up €0.44 to €23.00, after the media website reported that the company's Starcom MediaVest agency has won General Motors' $3.2 billion annual media buying account from rival Interpublic.


Volkswagen was up €0.64 to €33.80, as the German press reports rumors that new chief executive Wolfgang Bernhard is targeting a cut in material cost levels by more than €1 billion next year. Furthermore, according to press reports the company is targeting a 20% cost reduction on the overall group. The broker Kepler would support this idea, given the fact that the level of material cost represents the largest competitive disadvantage the company has. The broker remains bullish on the idea of upcoming deeper cuts into the inefficient structure of the company, and said the anticipated 2005 free-cash flow turnaround (of an estimated €1.3 billion) supports its valuation case. It maintained its buy rating and target of €42.

Airline Lufthansa was up €0.20 to €10.36, after the investment bank Goldman Sachs increased its estimates for 2005 earnings per share to €0.20 from €0.01 and for 2006 to €0.27 from €0.07. The broker said first-quarter figures are above estimates due to a better-than-expected recovery at its catering department and a better performance on other costs. Meanwhile, the bank MM Warburg upgraded the company to buy from hold, with a target of €12. As opposed to previous announcements, an achievement of the company's operating result target in the current year seems possible, according to the broker, which added that the revised earnings estimates lead to a fair value of €12.30.

Leoni AG, maker of wiring systems, was down €2.51 to €58.85, after the company reported first quarter net profit rising 44% to 7.9 million. Sales rose 23% to €350 million. The company said it confirms forecasts for sales to rise to more than €1.4 billion. It said it sees a charge of €5 million to €7 million from the collapse of British carmaker MG Rover and cannot say whether it will be recouped. Credit Suisse First Boston expected sales to be up 20.9% year on year and net income to be up 138% to €8.3 million. The broker raised its net earnings forecasts for 2005 and 2006 by 23.8% and 21.7% respectively. It said it believed the company would have a very good 2005, with 14.6% sales growth, margin expansion and asset turn acceleration.

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