Colgate palm released news that worldwide unit volume was rising better than expected at 6.0% and earnings per share were now 16%. This meant a higher dividend return on each share and gave investors an ideal opportunity to buy more shares thus causing prices to increase. This sharp increase mimicked the FTSE and set the Colgate share price at £33.31 a share.
Week 43
Bank of England governor Sir Edward George hinted that interest rates might need to be cut to protect the economy from the effects of falling stock markets.
Gordon Brown faced a budget crisis as he declares UK growth to be slowing. Gordon Brown predicts growth to be 1.5% rather than 2 %, speculators respond well to a more realistic prediction.
Colgate Palm US reports that cash flow continues to increase. Due to excellent top line product growth combined with a strong gross profit margin enabling an increase in advertising spend whilst still delivering a double digit return on share investments which enticed further investment in company stock
Week 45
The US markets took a nose-dive following a profits warning from the tech giant Cisco Systems.
Colgate achieves record sales with high net income and earning per share in the third quarter, thus reinforcing a strong profit margin and investor holdings.
bottom lines."
Week 46
On November 6th 2002 MMO2 announced significant progress in two of its main markets, the UK and Germany. This was following the release of O2’s six month interim results showing a rise in the share price largely due to the lunch of its new multimedia messaging service. With sales of the ‘Sharp GX-1’ phone topping 4 million in Japan O2 announced plans to distribute the phone in Europe. The company reached an 18.3 million customer turnover with November revenues reaching approx £4.5 billion.
O2 secured the new 3G license to enable picture messaging and the share price matched the fluctuations of the FTSE. Disciplinary action taken against O2 competitor Vodafone for their TV commercials displaying scenes of a sexual nature in the beginning of November also influenced the share price.
British gases share prices go up after plans to increase taxes for the North Sea oil and gas industry came under attack. The Scottish Council for Development and Industry (SCDI) said the new tax regime was unstable and out of touch with economic reality. The organisation also claimed that Chancellor Gordon Brown's proposals were causing serious damage to investor confidence. The tax increase, since its announcement in the budget had caused British gases share value to fall dramatically. Oil and gas companies are also be affected by other increases, for example in corporation tax. The proposals were attacked by the industry, with the UK Offshore Operators Association (UKOOA) warning that 50,000 jobs were under threat.
Week 47
November 13th: the FT stated Vodafone have announced bids to try and gain control of the French telecoms group Cetegel. Vodafone attempted to buy a 44% stake in the company from long term telecoms group Vivendi. With the recent announcement of first half results showing a 4.25 billion rise (41%) rise in the pre tax profits. Obtaining the stake in the French company would secure a large part of the French market and pose a great threat to any other telecoms companies contemplating expansion through the French market and middle Europe. Vodafone’s shares rose almost 13% in London to close at 111p, a record high since May 2002 but MMO2’s prices seemed un-daunted.
Week 50
Retailing giant Marks & Spencer poached Vittorio Radice, the chief executive of Selfridges, to join its main board with a £1.2m "golden hello", Selfridges share price also fell sharply in response to the news.
Week 51
December 12th 2002: CIBC analysts recommend Colgate as one of the top ten companies to invest in. Colgate continues to invest capital in cost-saving projects, while upgrading their systems, enabling them to reinvest their returns in the growth of the Company. This was their key driver in the continuous improvement in gross margin from 1984 to 2001.
Mmo2 Seasonal trends saw a dip toward December 10th with people buying fewer phones.
Transco, British Gases network supplier came under attack after hundreds of people were left without gas for more than a week and say they are not being given enough compensation. Legal action was threatened by the residents of the area if more compensation was not offered up. Share prices of British gas in comparison fell, until the following week when the situation was resolved.
Week 52
Retail shares fell because of worries about weak sales in the crucial Christmas period and weaker confidence for the year ahead.
Share prices dropped further when 29 British Gas service engineers in Cambridge staged a one-day strike on Friday over regional pay. They say it is unfair that engineers in some areas earn an extra £500 each year. The workers want the allowances in Cambridgeshire, Hertfordshire, Suffolk and north Essex to match those in Bedford and Milton Keynes. British Gas said they had already reached an agreement with the majority of their workers on the pay issue.
Week 01
War in Iraq beckoned with Sadam Hussein defiant towards US and UK and the build up of troops in Kuwait. FTSE 100 rises as Christmas shopping has boosted UK retailer’s sales.
Week 02
World markets fluctuate further as UN weapons inspectors provoke Iraq with spot checks. War seems more imminent.
It is reported in the FT that P & O’s take over with Carnival may have to go before the European competition commission again to get approval. Share price looks shaky as it falls further.
3.0 The Companies and Markets
3.1 Selfridges and Retailers in General
Retailers in general during the three months felt a squeeze upon their usual pre- Christmas sales as an economic slow down loomed. Sales for most retailers were down by 8 %. This was reflected in the share prices of most high street retailers.
Selfridges’ sales and shares have varied greatly over the 3 month period. Shares in Selfridges dropped as much as 25 percent over this period, and many factors caused this. During the Christmas period Selfridges reported a slow down in sales growth, and like many stores quoted its self to be in a “Resilient” period. This up market department store had to rely on their leading brand names for sales survival, using brands names such as Burberry and Paul Smith to entice the Christmas shoppers.
The Oxford street branch suffered the most with flat sales in the run up to Christmas as many shoppers were put off by the threat of terrorist attacks, disruption to the London Underground and rail network during a fire-fighters’ strike. This was mirrored in the share price of the time as they dropped over the Christmas period with Selfridges cutting prices to maintain sales.
But both store London and Manchester managed to make up 2% in the six week Christmas period and the winter sale start, with 22% over the full 22 weeks up till January 4th 03’.
On January 6th it was announced that the shares were 3.5 percent higher at 239 pence, making Selfridges a stock market value of 368 million pounds.
Other reasons for share price movements during this time were tax rises, unstable interest rates and the housing market cooling down.
3.2 Mobile operators
Telecommunications groups continue the on going battle for leadership after the introduction of the 3G infrastructure, a service allowing picture messaging and easier phone to pc capabilities. The telecommunications market over the past two-three years has rapidly evolved and there is no inclination that it is going to stop, however it the market as a whole is affected by world affairs. Uncertainty about a possible conflict between Iraq and the US poses a great threat to industry as a whole and in times of speculation consumer spend seems to be more concentrated on other areas. However the share prices of major phone network retailers have not been too affected by any scare tactics with O2’s share price rising a consistent 6% since September 2002 against a 5% drop on the FTSE 100 and phone giant Vodafone’s share price rising an incredible 23%. In an industry driven market the future for the telecoms companies looks promising yet its possible that any company that doesn’t hold a stable ground at present could be left behind as the major players continue to develop twenty-first century technology with full intention of playing hard ball.
3.3 P & O Princess and Cruise Operators in general
The cruise line industry over the past 3 months has reported growth in its major markets in the US and Europe even though tourism has been affected greatly since the September the eleventh.
A bitter year-long battle has also taken place between the world's biggest cruise line during this period and it looks set to end with P&O Princess being taken over by its rival Carnival as the two companies reached a £3.5bn ($5.4bn) deal after two weeks of negotiations. Carnival clinched it by agreeing to create a company listed on both sides of the Atlantic thus creating the largest cruise line in the world.
Carnival proposed a "dual listing" as P&O Princess had previously used this to refuse Carnival's takeover offer. P&O said it had amicably ended its joint venture agreement with Royal Caribbean and had paid a $62.5m break-up fee. Carnival's new offer values P&O Princess at 504 pence per share, 9% higher than the closing price of P&O at the end of our period.
P & O’s shares have fluctuated quite a bit throughout this period but they have not been directly affected by the FTSE 100s changes as the shares do not rise and fall in proportion with the rest of the market.
3.4 British Gas and Energy Suppliers
The energy suppliers have had a rough time in the last three months with increased taxes and more competition from foreign companies. British gas being the biggest of the suppliers has weathered the storm quite well. The market being supply orientated has not grown but British gas has diversified into other areas. The shares have fallen in correspondence with the FTSE 100 index but have not really seen any major fluctuation other than those of the market in general.
Overall British gas has benefited from the weaker energy suppliers such as TXU who have fallen by the way side and lost customers to British Gas.
3.5 Consumer Pharmaceuticals
The oral care sector of the pharmaceuticals market has over the last fifty years been an area of progressive growth. People are now more than ever concerned about their health and the condition of their bodies. The market seems to be a relevantly slow moving. With the development of various types of oral care products that is each more cleaning than the last or each more fresher than the other brand it is hard to depict actually where the market is going. Yet steady but slow increase is affected by the FTSE as can be seen on the FTSE/Colgate graph (appendix). Colgate is very market driven. It is the consumer that often influences the demand for products and on this basis the company will supply. The possibilities for companies in this market stem from creativity. For example, the average consumer will throughout most of their life brush their teeth twice on a daily basis therefore consuming average amounts of mouth care products. It is the challenge of the supplier to develop new products that will gain the consumer’s attention and possibly entice a sale and interest in company share investment.
4.0 Conclusion
World stock markets have racked up a third consecutive year of losses, making the current share price slump one of the longest on record.
The decline reflects sluggish economic growth, weak corporate profits, a spate of accounting scandals in the US, and fears over war in Iraq.
Overall our portfolio made a loss and performed about as well as the FTSE 100.
The shares that did especially well were the MMO2 mobiles shares as these made a profit in the margin of £1000, which would count for a 10% profit on the initial £9500 invested.
The other shares all made loses but after the finish date P&O would have made a profit as the final approval of the merger took place and the shares rose to £5.07 a share.
In retrospect if we were to do this project again, we may have chosen less profitable, troubled companies as there is more information available in the media. We would have also chosen only UK companies rather than one in the US market as well as this made it more confusing to follow its path over the last few months.
The main points of improvement would be to be more aware of the markets and how they operate as well as signing up for Financial Times every day. We decided that it would have been better to meet more often and concentrate upon the individual companies more as a group than as individuals.
http://investor.colgatepalmolive.com/ReleaseDetail.cfm?ReleaseID=97999&ReleaseType=Earnings
Financial times, Vodafone turns up the heat on Vivendi over Cetegel, wed November 13th
FT, Vodafone turns up the heat on Vivendi over Cetegel, wed November 13th
