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The Intelligent Investor

30 November 2010

U.K.
The Economic Monitor Series. Free Edition.

INSIDE THE REPORT MARKETS AT A GLANCE

 Stock recommendations and price targets from top  FTSE 100 closed in the negative territory, as investors remained
brokerage firms cautious over euro zone debt problems, with banks the worst
performers and miners rebounding alongside metals prices. At
 Analysis and views on Gfk Consumer Confidence and 1153 GMT, the FTSE 100 was down 22.68 points, or 0.41 percent,
OBR‟s U.K. GDP forecasts at 5,528.27.

 In the cash market, the yield on 10-year gilts was 12 basis points
 Economic Indicator Watch along with Graphs
down at 3.225 percent, narrowing the spread against Bunds to
around 56 basis points, a three-week low.
 List of companies earnings which hit and miss the analysts‟
expectations  Sterling slipped against the U.S. dollar to a two-month low of
$1.5485 before recovering to $1.5586. But some saw another
 Important Events Scheduled on December 01 move lower.

Oil fell towards $85, as the dollar hit a 10-week high on concerns
Economic Events & Indicators 
about Europe's debt crisis and on worries over demand in China as
it looks to brake energy demand growth and cool inflation. ICE
 EU Commissioner for Economic and Monetary Affairs, Olli Brent lost 30 cents to $87.04 after rising more than 2 percent on
Rehn to speak on "Building Europe's economic future" Monday.

 European Commissioner Michel Barnier speaks on “The  Gold rallied 1.4 percent to a 2-1/2 week peak and euro-priced
impact of speculation on economies” bullion set a fresh record high as concern over sovereign debt
levels in the euro zone fuelled buying of the metal as a safe store
of value. Spot gold was bid at $1,384.00 an ounce at 1415 GMT,
 Nationwide House Prices for the month of November against $1,368.09 late in New York on Monday.
 Markit/CIPS Manufacturing PMI data for November
STOCK INDICES
INDEX LAST CHNG % CHNG
Corporate Events
FTSE 100* 5528.27 -22.68 -0.41
 Anite, GEONG International, Telford Homes, Numis FTSE Tech Mark 100* 1893.51 -3.24 -0.17
Corporation interim results FTSE Eurofirst 300* 1069.52 0.28 0.03

 Brewin Dolphin Holdings, Sage Group, Thomas Cook DAX* 6688.49 -9.48 -0.14
Group final results CAC 40* 3610.44 -26.52 -0.73
Stoxx Europe 600 262.14 -0.02 -0.01

Breaking News * CLOSING VALUES

CURRENCIES
 Gfk Consumer Confidence falls in November
INDEX LAST PRIOR
 U.K. will miss renewable energy targets: Report
Euro (EUR/USD) 1.3032 1.3123
 Flybe plans IPO in December U.K. Pound (GBP/USD) 1.5579 1.5574
Japanese Yen (USD/JPY) 83.52 84.24
 Aberdeen profits zoom
All prices are at 11.44 AM EST
 Shaftesbury expects strong occupier demand
FUTURES
 Topps Tiles profits fall
LAST CHANGE
 Northumbrian profits beat forecasts
Crude Oil 85.07 -0.66
 Halma posts strong H1 results Natural Gas (Jan) 4.142 -0.068

Gold, (Feb) 1385.8 18.3

Copper (Mar) 382.55 5.8

All prices are at 11:33 AM EST


The Intelligent Investor - U.K.

STOCK RECOMMENDATIONS BY BROKERAGE HOUSES

BROKERAGE/COMPANY ACTIONS RATING PERV CLOSE

RBS
Brammer Raises price target to 250p from 160p Buy 210p
Altium
Halma Raises price target to 307p from 274p Hold 329p
ITE Group Raises price target to 220p from 200p Buy 186p
SocGen
Xstrata Raises to buy from hold Buy 1294.50p
Anglo American Raises price target to 3700p from 3100p Buy 2821p
Numis

Greene King Raises price target to 500p from 475p Add 452.20p

Halma Cuts to hold from add Hold 329p


St Ives Raises price target to 120p from 100p Buy 99p
Carnival Raises price target to 3375p 3200p -- 2569p
Barclays
BG Group Raises to overweight from equal-weight Overweight 1168.50p
Credit Suisse
Capita Group Cuts price target to 800p from 900p Outperform 659p
Brewin Dolphin
Immunodiagnostic Systems Raises price target to 1175p from 900p -- 975p
Investec
Gooch & Housego Cuts to hold from buy Hold 455p
Panmure
ITV Raises price target to 73p from 64p Hold 67.10p
Renovo Raises price target to 85p from 74p Buy 46p
RPC Group Raises price target to 347p from 330p Buy 280p
Sthree Raises to buy from hold Buy 280p
UBS
QinetiQ Cuts price target to 115p from 120p Neutral 115.90p
WS Atkins Raises price target to 730p from 715p Neutral 718p
Deutsche Bank
Sage Group Raises price target to 285p from 264p -- 258.20p
Rio Tinto Raises price target to 4250p from 4150p -- 4043p
RBS
Logica Raises to buy from hold Buy 117.40p
Nomura
Meggitt Raises price target to 370p from 350p Buy 327.10

Disclaimer: The views and investment tips expressed by investment experts are their own, and not that of IBTimes or its management. We advise users to check with certified experts before
taking any investment decisions.
The Intelligent Investor - U.K.
The Intelligent Investor - U.K.

THE NEXT TRADING DAY

Economic Events
 EU Commissioner for Economic and Monetary Affairs, Olli Rehn to speak on "Building Europe's economic future" at 1300 GMT .

 ECB Governing Council member and president of the Dutch central bank Nout Wellink to attend Basel Committee meeting.

 European Commissioner Michel Barnier speaks on “The impact of speculation on economies” at 1630 GMT.

Company Events
Thomas Cook Group will report its final results with a revenue of £8,865.4 million, lower than £9,139.56 million a year ago. Analysts
forecast the company to report a net profit of £122.32 million, while EPS (pre amortization) is estimated at 23.594 pence per share.
Company will declare a dividend of 10.54 pence per share, as compared to 10.303 pence in the previous year. Capital expenditure for full
year is forecasted at £196.46 million, while book value is estimated at 190.91 pence per share in the current year.

As the tour operator is due to report results, it has talked down expectations of full-year pre-tax profits to about £390 million and a drop
in underlying profits. Thomas Cook recently announced its long awaited move into the Russian market while interest on TUI Travel has
centred on whether major shareholder TUI will launch a bid to take full control of the company. The company is planning to leave prices
in Germany unchanged this summer for short and medium-haul trips as a strong economic recovery has lifted consumer confidence in Germany after two bleak years.
Prices for long-haul will go up by 5 percent. Investors on the long and short sides of the market seem to have a split opinion on the future performance.

The Sage Group is expected to report its full year results with a revenue to fall slightly to £1,428.9 million, from £1,441.44 million a year ago. Analysts expect the
company to report a profit of 17.07 pence per share, with a dividend of 8.028 pence per share. Net Profit is forecasted at £235.59 million, up from £187.1 million a year
ago. However full year capital expenditure is expected to fall to £25.06 million as compared to £31.61 million a year ago. Sage has an impressive track record of
growing sale and profits year on year, and paying steady dividends, analysts are expecting 3 percent this year.

Brewin Dolphin Holdings will be announcing its preliminary results for the year ended 26 September 2010 on Wednesday 1 December 2010. Analysts expect the
company profit to increase to 12.6 pence per share, as compared from 19.3 pence per share a year ago. Revenue for full year is forecasted at £241.27 million, higher
than £210.38 million in the previous year. Company‟s full year book value is forecasted at £56.8 per share, with a dividend of 7.129 pence per share in the current year.
Brewin Dolphin said in its pre-closing statement for the year to September 26, 2010, that Funds under management at the end of the period increased 7.4 percent from
the preceding third quarter and improved 13.2 percent from last year. The board is looking forward to 2011 with confidence. For the half year ended March 28, the
company had reported a 37 percent rise in pre-tax profit, driven by income growth at both its business streams: Investment Management and Corporate Advisory &
Broking.

British residential property developer Telford Homes is expected to announce its first half yearly results. Analysts expect the company to report a full year profit of 3.7
pence per share, while revenue is forecasted at £140 million. Net profit is expected at £1.8 million, with a dividend of 2.5 pence per share. The company, which
specializes in regeneration projects in East London said it remained cautious of its outlook and expected little improvement in the mortgage market before early 2012.
It also expects to meet market expectations in the current financial year after an in-line first-half performance. The company says that trading conditions in East London
have been steady and the group continues to benefit from the 2012 Olympics as a result of the improving infrastructure and regeneration. The company is in talks with
four banks over a new corporate banking facility, which will replace existing bilateral facilities. The company also has loans from Royal Bank of Scotland, Barclays and
Allied Irish Bank.

Anite, the leading provider of software solutions to the international wireless and leisure travel industries is expected to report its first half yearly results with a revenue
of £38.5 million, up from £35.2 million a year ago. The company expects that their results for the first six months will exceed the board's expectations. Analysts expect
the company to report an EPS (pre amortization) of 0.815 pence per share, with a dividend of 0.3 pence per share. Capital expenditure in first half is expected at £2.45
million, while net profit is forecasted at £0.4 million in its first half.

Geong International will announce its first half yearly results with a net profit of £0.33 million. Revenue for first half is expected at £4.9 million, while EBIT is forecasted
at £0.41 million. The company says that its H1 trading was in line with expectations and expects the margin to remain strong. The company also adds that it is well
placed to meet market expectations as the SaaS business continued to grow and Geong continued to attract higher margin business in South Asia. Geong has signed a
2 year agreement with IBM and has become a significant business partner with Oracle in delivering its SaaS business.

Numis Corporation will declare its preliminary results with a profit of 3.5 pence per share, up from 2.2 pence per share a year ago. Revenue for full year is forecasted at
£50.3 million, higher from £41 million in the previous year. The company expects its book value at £1 per share with a dividend of £8.5 per share.

DAILY EARNINGS HITS & MISSES AS ON 30 NOV, 2010


DIFFERENCE REV EST REV ACT DIFFERENCE
COMPANY PERIOD CURRENCY EPS EST EPS ACT
EPS (mln) (mln) REV (mln)

Aberdeen Asset Management A GBP 12.23 -- -- 603.84 638.20 34.36

Gooch & Housego A GBP 20.47 -- -- 44.20 44.68 0.48

Holidaybreak A GBP 31.74 -- -- 471.73 461.70 -10.03

Immunodiagnostic Systems H1 GBP 20.33 18.76 -1.57 22.60 22.61 0.00

ITE Group A GBP 10.63 -- -- 112.04 113.50 1.46

Sanderson Group A GBP -- -- -- 25.70 27.00 1.30

Shaftesbury A GBP 10.60 9.70 -0.90 61.24 71.20 9.96

Silverdell A GBP 1.20 0.90 -0.30 58.00 56.67 -1.33

Topps Tiles A GBP 5.97 6.20 0.23 181.82 182.41 0.58

Ultrasis A GBP 0.04 0.01 -0.03 3.44 3.19 -0.25

Worldspreads Group H1 EUR -- -- -- 7.00 7.44 0.44


The Intelligent Investor - U.K.

ANALYSIS AND VIEWS

OBR raises UK GDP forecast for 2010


By Palash R. Ghosh, IBTimes

The Office for Budget Responsibility (OBR), an independent economic forecasting entity of the British government, raised its UK GDP forecast for
this year to 1.8 percent from the previous 1.2 percent estimate.

However, the OBR also reduced its 2011 GDP forecast to 2.1 percent from the prior 2.3 percent expectation; and its
economic forecast for the following year to 2.6 percent from 2.8 percent.

Beyond that, OBR is projecting GDP expansion of 2.9 percent in 2013, 2.8 percent in 2014 and 2.7 percent in 2015.
“The economy will continue to recover from recession, but at a slower pace than in the recoveries of the 1970s,
1980s and 1990s." OBR stated.

The body also declared that inflation will dip from the current annual rate of 3.2 percent to 1.9 percent by 2012,
given the waning impact of the imminent increase in value-added tax VAT.

In addition, the body said that the number of public sector job cuts over the next four years will amount to 330,000, down significantly from 490,000.

Overall, OBR expects UK unemployment will peak next year at 8.1 percent, then decline to just above 6 percent by 2015 and also slightly reduced the
expected Public Sector Net Borrowing Requirement from 149 billion pounds in 2010/2011 to 148.5 billion pounds.

Moreover, the OBR indicated that government plans to reduce the deficit, including spending cuts of more than 80-billion pound sterling, would
create “sluggish growth” over the medium-term. It also believes the government will be able to meet its supplementary target of reducing the debt-
to-GDP ratio by 2015-2016.

Howard Archer, chief UK/European economist at IHS Global Insight in London said the revised figures from OBR do not fundamentally change the
outlook for the economy and the public finances, so do not point to any significant change by the government from their current fiscal stance. “This
is essentially a case of tweaking rather than changing the story,” Archer stated.

“As these forecasts will provide the backdrop when George Osborne presents his budget next March, nothing really has changed for the Chancellor.
Having said that March still looks some way away in economic terms, especially given all that is going on in the Eurozone.”

Archer also said he thinks the downwardly revised GDP forecasts for 2011 and 2011 “still look on the optimistic side to us.” He projects growth of 1.7
percent in 2011 and 2.2 percent in 2012. Archer added he is doubtful the British economy can actually grow according to the figures the OBR
published for the 2013-2015 period.

Similarly, Vicky Redwood, senior UK economist at Capital Economics in London, said the downgrades to near-term economic growth are "hardly a
vote of confidence in the Government‟s claim that the economy is capable of withstanding the looming fiscal squeeze."

The update by the OBR, Redwood concludes, does nothing to alter the fact that "the fiscal squeeze will be the defining influence on the economy
over the next few years."

ANALYSIS AND VIEWS

U.K. Consumer Confidence weakens in November


By IBTimes

Consumer confidence in the U.K. remained "deep in the negative" territory in November, as people were factoring in the impact of the government‟s
austerity measures, according to a survey.

The GfK NOP Consumer Confidence Index decreased by two points this month to -21, against the analyst expectation of a reading of -20. Four of
the five measures, including forecast of personal financial situation and general economic situation, decreased this month, while the remaining
measure stayed the same, the report said. The annual moving average decreased one point to -18.

The index measuring changes in personal finances during the last twelve months has stayed the same this month, at -13 while the forecast for
personal finances over the next twelve months decreased by five points to -7, twelve points lower than November „09. The measure for the general
economic situation of the country during the last twelve months decreased by three points to –46, thirteen points higher than this time last year.

"There would need to be a further drop next month before we could definitely say things are getting worse, and that
people really are concerned about the impact of the cuts in the Comprehensive Spending Review.”
Nick Moon, MD of GfK NOP
Social Research "What is more worrying in this month's figures is that the worst-performing elements of the index are those that
look to the future, with a five point fall in confidence for people‟s personal financial situation over the next 12
months.”
The Intelligent Investor - U.K.

TOP STORIES

Gfk Consumer Confidence falls in November


A survey by GfK showed that British consumer confidence weakened more than expected in November. The Gfk/NOP consumer confidence
barometer fell to -21 in November from -19 in October, below analysts' forecasts for a reading of -20. It was the weakest reading since July. The
index measuring people's expectations for their own finances in the coming year fell to -7 from -2 in October, making it the lowest since February
2009.

U.K. will miss renewable energy targets: Report


Public accounts committee report published on Tuesday, shows that Britain will miss its 2010 goal of making 10 percent of electricity from renewable
sources because of government dithering. Report stated that it was also unlikely to meet its legally-binding European Union target for 2020.
According to report into funding of renewable energy, the Department of Energy and Climate Change (DECC) has admitted it will not meet the
government's own target of increasing the share of low-carbon renewable energy in Britain's electricity supply to 10 percent by the end of 2010. The
report says some 40 percent of renewable schemes in England do not get planning approval, while others fail to get adequate funding.

Flybe plans IPO in December


Budget airline Flybe has planned to raise 60 million pounds ($93.50 million) through a London initial public offering (IPO) in December. The company
would use half of the proceeds of the offering, to fund its aircraft fleet expansion, and the other half to strengthen its cash position. Chief executive
Jim French said listing will assist in achieving the next stage in the company‟s exciting strategy for growth. Bank of America Merrill Lynch is the sole
global coordinator and book runner on the offer.

Aberdeen profits zoom


Aberdeen Asset Management has reported 147 rise in its pretax profits in the 12 months to end-September, boosted by record new business
inflows. The company posted profit before tax of 210 million pounds ($327 million) for the year, up from 85.1 million pounds a year earlier. It
attracted net inflows of 2.6 billion pounds, partially reversing the net outflow of 10.7 billion pounds the previous year, on demand from emerging
markets. CEO Martin Gilbert said looking ahead, financial markets still pose many challenges and uncertainties, but the company is confident on
continued growth. Assets under management rose to 178.7 billion pounds, up from 146.2 billion pounds a year earlier and 168.8 billion pounds at
the end of August. Aberdeen would pay total dividends of 7 pence per share for the full year, up from 6 pence per share last year.

Shaftesbury expects strong occupier demand


Shaftesbury has reported double-digit growth in its net asset value for the full year, and expects strong occupier demand for its properties to
continue. The company reported adjusted diluted net asset value per share of 4.14 pounds ($6.45), up 23.6 percent year on year. Its net assets for the
year to September 30 was at 863.7 million pounds, from 717.3 million in the year earlier same period. After its Chief Executive Jonathan Lane said he
wants to retire during 2011, the company has started a search for his replacement. Company‟s full-year adjusted profit before tax was 22.3 million
pounds for the year with full-year adjusted diluted earnings per share 9.7 pence a share.

Topps Tiles profits fall


Tile and wood retailer Topps Tiles declared a fall of 7 percent in its yearly profits. The company resumed dividend payments and is encouraged by
current trading. The firm made an underlying pretax profit of 16.3 million pounds ($25.4 million) during the period. Revenue was up 2 percent to
182.4 million pounds, with sales at stores open over a year up 1.7 percent. In the first seven weeks of the new year like-for-like sales were up 3.2
percent. Topps will pay a final dividend of 1 pence a share.

Northumbrian profits beat forecasts


Northumbrian Water Group today reported better than expected results and said that economic conditions remain challenging but it was well
placed to maintain a strong financial performance. Pretax profit was up 3.1 percent to 89.7 million pounds ($139.8 million) during the six months to
September 30 and proposed an interim dividend of 4.72 pence per share. Northumbrian Water is the last of the four main U.K. listed water
companies to report its quarterly results. United Utilities and Severn Trent both had reported a fall in profits last week.

Halma posts strong H1 results


Safety equipment group Halma‟s first-half pretax profits rose 29 percent, lifted by growth across all its major geographic markets, and would
continue to look for attractive acquisitions. The company raised its interim dividend by 7 percent to 3.54 pence. Chief Executive Andrew Williams said
market conditions are much steadier than they have been over the previous two years and, therefore, this year the company expects a much more
evenly balanced split between first half and second half trading. During the first half, the company posted a pretax profit of 49.3 million pounds
($76.8 million) from continuing operations, compared with 38.1 million pounds a year ago. Revenue was up 12 percent to 249.1 million pounds.
The Intelligent Investor - U.K.

ECONOMIC INDICATOR WATCH ON DEC 01, 2010

Nationwide House prices (MoM, November)


Forecast: -0.40%, Prior: -0.70%

Nationwide House prices (YoY, November)


Forecast: 0.50%, Prior: 1.40%

The Nationwide index figures for the month of November is likely


to follow declining house prices trend, stating that the prices have
fallen for four out of the last five months.

Economists forecast falls to continue into 2011 as higher jobless


numbers, public spending cuts and tight mortgage lending
take their toll.

Previous month, the British house prices fell indicating the


downturn in the country's property market to be more
entrenched. The average price of a property fell 0.7 percent,
dropping twice than expected. The annual pace of house price
growth slowed to 1.4 percent from 3.0 percent. Nationwide said
that if recent trends were to continue to the end of the year, it
would leave prices flat to slightly lower over 2010 as a whole -- a
far cry from the rise of around 6 percent recorded in 2009.

However Nationwide expects that expansion of the Bank of


England's quantitative easing programme could help put a floor
under prices.

Markit/CIPS manufacturing PMI (November)


Forecast: N/A , Prior: 54.9

Markit/CIPS's headline manufacturing Purchasing Managers' Index is due to be released on Dec 1, 2010 for the month of
November at 1458 LST. For the month of October British manufacturing activity rose unexpectedly to 54.9 from September's 10-
month low of 53.5, its highest level since July and in contrast to economists' expectations for a fall to 53.1. The rise in the index above
its mid-point of 50 means activity grew faster than in the previous month.

James Knightley, economist at ING said the impact of government spending cuts is yet to be noticed hence they remain cautious and
see growth slowing through 2011.

Samuel Tombs, Capital Economics said that October's U.K. CIPS/Markit report on manufacturing suggests that the industrial recovery
still has some momentum. He said that most of the activity indices improved. In particular, the pick-up in the output balance from
54.5 to 56.4 left it pointing to quarterly gains in manufacturing output of 0.8% (compared to 0.5% or so over the previous few
months). The latter tentatively suggests that manufacturers have become a bit more confident about the outlook for demand.
“Nonetheless, it is clear that the industrial recovery has cooled somewhat since the first half of the year and we would not be surprised
to see it lose further pace over the coming months in response to the weakness in overseas markets and the effects of the fiscal
squeeze at home," he added.

Ross Walker, RBS said that the present trends indicate that the industrial production should remain solid going into 2011.

Disclaimer - All information used in the publication of this report has been
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