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Market overview: 17 January

Burberry sees slowdown in third quarter; RBS sells aircraft leasing business to help boost lending; WPP buys Chinese social media agency. Plus a summary of business press headlines.
January 17, 2012

■ Iconic British luxury brand Burberry has reported a 21 per cent underlying growth in total revenue in the three months to December 31st (fiscal third quarter), a significant slowdown from the 30 per cent underlying growth seen in the first half.

Royal Bank of Scotland has struck a deal with a Japanese bank to sell its aircraft leasing division for $7.3bn (£4.7bn).

■ Acquisitive advertising conglomerate WPP is to acquire CIC, a social media research and consulting agency in China.

Rio Tinto, the Anglo-Australian mining firm, saw the amount of iron ore shipped during 2011 below the amount it actually produced, the firm's latest operations update reveals.

■ Housebuilder Taylor Wimpey said trading conditions have remained robust since its interim update in November 2011 and it expects to post an 80 per cent increase in operating profit for the second half of 2011.

■ Newly-listed steel giant Evraz has seen crude steel production rise by 3 per cent in the year ended December 31st, helped by an increase in volumes in the Czech Republic.

■ Credit checking firm Experian experienced underlying revenue growth in all geographic sectors in the final quarter of 2011, with Latin America growing especially rapidly.

■ The strong performance at spread-betting firm IG Group has continued, with both profits and revenues rising by 28 per cent in the first half (IC COMMENT).

■ Electrical retailer Dixons said it saw strong sales in the first two weeks of 2012 but this followed a 5 per cent slump in European sales over the previous three months.

International Personal Finance, the door-step lender which issued a profits warning in December after getting caught on the hop by exchange rate movements, is to get a new chief executive.

■ The recycled packaging firm, DS Smith, has launched an agreed bid for SCA Packaging, the second biggest packaging business in Europe.

■ Pubs group Greene King saw retail and food like-for-like sales rise 8.2 per cent and 11.1 per cent, respectively, in the last seven weeks, helped by an exceptionally strong Christmas week's trading.

■ Logistics firm Stobart Group said it expects to meet expectations for the 12 months to the end of February.

Range Resources fell back on Tuesday morning in active trading after announcing a share placing at a deep discount to Monday night's closing price.

■ US-focused oil firm Nighthawk said it had raised around £2.9m by selling more new shares to investors.

■ Iconic British luxury brand Burberry was out of favour on Tuesday morning after seeing revenue growth slow down in the third quarter.

■ FTSE fledgling Phytopharm yesterday announced that a drug which originates from a traditional Chinese herbal remedy may provide hope for those suffering from motor neuron disease.

■ The Financial Times is reporting that the defence giant, BAE Systems, may be trying to develop foreign contracts in order to keep British shipyards in work.

Premier Foods, the firm behind brands such as Hovis, Sharwood's and Mr. Kipling, said it would cut 5 per cent of its 12,000 strong workforce by 2013.

Intermediate Capital (ICP), the specialist investment firm with €12bn under management, says it saw depressed levels of private equity activity in Europe in the final quarter of 2011.

■ Shares in NetDimensions, which makes staff training technology, jumped this morning after it said full year profits would come in ahead of expectations.

■ Europe- and North Africa-focused oil and gas group San Leon Energy has today announced significant progress on its 100 per cent owned Durresi License (4,208 km2) in Albania, in the form of the final processed volumes from its 840 km2 3D seismic survey.

Westminster Group, the security solutions firm, leapt 41.5 per cent in morning trading after announcing revenue growth of 260 per cent in 2011 versus 2010.

■ Building and packaging products supplier Ensor surged 30 per cent this morning after announcing the acquisition of a 90 per cent stake in security products group Technocover for a nominal amount.

■ Robert Adair, Chairman of Plexus Holdings, is retiring from the board at the end of June, and has sold his entire shareholding in the company.

Cove Energy, the east Africa-focused oil and gas company that recently put itself up for sale, said the Lagosta 2 appraisal well off the coast of Mozambique has shown the thickest gas pay to date of its current drilling campaign.

Rio Tinto, the Anglo-Australian mining firm, saw fourth quarter production continue to bounce back after output was hit by severe weather conditions in the first half of the year.

■ Housebuilder Taylor Wimpey said trading conditions have remained robust since its interim update in November 2011 and it expects to post an 80 per cent increase in operating profit for the second half of 2011.

Business press headlines:

Confidence within the UK's construction industry has "collapsed" with just 5 per cent of small businesses operating in the sector expecting their workloads to increase this year, according to a new report. The Federation of Master Builders' "state of trade survey" found workloads have fallen in each of the past 16 quarters and confidence in the repair, maintenance and improvement (RM&I) market is plunging. Brian Berry, the federation's director of external affairs, said: "The disastrous results for the RM&I market are very alarming." Commenting on the Scottish construction sector, John Hall - Scottish council member with insolvency trade body R3 - said: "Given the continued squeeze on facilities by lenders, it is highly likely that many more businesses in the construction sector will fail in the coming year," The Scotsman says.

An independent Scotland could start life with a debt pile of as much as £270bn, equivalent to more than double its annual economic output, according to a report by advocacy group Taxpayer Scotland. Taxpayer Scotland, which is linked to the London-based Taxpayers' Alliance organisation, estimates Scotland's debt could be as high as £189bn, even before taking into account its share of the national debt. Adding in Scotland's £80bn share of the UK's £940bn national debt suggests it might face a £269bn burden, costing more than £10bn in annual interest payments. The report by Taxpayer Scotland warns that even with annual oil and gas revenues of £6bn, the country spends £9bn more every year than it generates in revenues, The Telegraph reports.

Directors at Peacock Group secured a stay of execution yesterday after the collapse of emergency debt talks. The company, which trades as Peacocks and Bonmarché, filed a notice of intention to appoint administrators at both discount store chains, which gives it up to ten working days of protection from creditors in which to seek a buyer. The privately owned retailer, which is cash-generative but is in the red because of interest payments, is said to be speaking to trade and financial investors. The company employs 11,000 staff and would be one of the biggest retail failures of the downturn if it does go into administration, according to The Times.

Oil prices climbed 70 cents to $111.14 a barrel on Monday, after Iran issued fresh threats to cut off up to 17m barrels per day of oil supply from world markets by shutting down the Strait of Hormuz. Iran warned its neighbours in the Gulf states that they should not attempt to make up for the shortfall if an embargo is imposed on its crude oil exports, and reiterated its threat that it could block oil transport on the Strait in response to sanctions. State-run Iranian news agency Mehr reported that "no country" could cope with the shock of the Strait being closed. But Saudi Arabia, the world's biggest oil producer, hit back, playing down the risk of disruption, The Telegraph writes.

Sumitomo fought off competition from China Development Bank Corp to buy Dublin-based RBS Aviation Corp for about $7.3bn in what will be seen as a major success for the state-backed lender RBS as it attempts to become a more UK-focused business. RBS Aviation is the world's fifth-largest aircraft leasing business by the value of its fleet and manages or has on order 466 aircraft. Buying the RBS business will see Sumitomo, which operates its own much smaller aircraft leasing business, become the world's fourth-biggest aviation leasing company. "The deal is expected to complete before the end of the third quarter, and will be seen as a major part of RBS's attempt to restructure its business," said Bruce Van Saun, RBS finance director, on Monday evening, The Telegraph reports.

The Government has moved to defuse a row over a possible concession to private employers running final-salary pension schemes, insisting that any change would not affect current pensioners. A proposed reform which would excuse employers from having to raise pensions in line with inflation would only apply to benefits accrued in future, if at all, the Department for Work and Pensions said. Steve Webb, the Pensions Minister, raised eyebrows at the weekend when he suggested that compulsory inflation-proofing could be scrapped as a way of reducing employers' costs. But yesterday the DWP, while confirming that inflation-proofing was being looked at as a way of encouraging employers to retain final salary-linked schemes, said that there would be no retrospective element, The Times says.

The temperature of industrial unrest in the country will rise a notch this week as 2,500 Unilever workers go on strike over pensions and 1,600 Balfour Beatty electricians move towards action in a bad-tempered pay dispute. Thousands of staff at HM Revenue & Customs, meanwhile, started the week with lightning walkouts in a row over bringing in private companies to operate its call centres. Workers producing Hellmann's mayonnaise, Colman's English mustard and Flora spreads are to walk out of Unilever facilities at first light tomorrow on the first of 11 days of rolling strikes. They will be joined on the day by boffins at Unilever's molecular science facility deep in the Bedfordshire countryside and by IT workers on Deeside, as five of the group's twelve British facilities face significant disruption, The Times writes.