Share price portfolio

It looks like the GlaxoSmithKline price shares are going to be up next month since according to MUMBAI (Thomson Financial) - India's GlaxoSmithKline Pharmaceuticals Ltd. said it signed a licensing agreement with Japanese pharma Astellas Pharma Inc., which will give it exclusive rights to Astellas's injectible anti-fungal agent, Micafungin, in India (Source,http://markets.ft.com/tearsheets/performance.asp?s=GSK%3ALSE)

2. BSkyB

        Satellite broadcaster BSkyB, part of Rupert Murdoch’s media empire, runs the UK’s largest digital TV platform Sky.  Majority of its revenues are generated from its subscribers, while other revenue streams include advertising and interactive services.  Recently, it has also decided to diversify into the highly competitive broadband telephony market. (Thisismoney.co.uk, BSkyB profile, accessed 15/03/07)

1. Share performance

(Digitallook, 9th May 2008)

        The table above shows the share prices of BSkyB over the period of three months in 2008.  As you can see from the graph the Share prices dropped dramatically towards the end of February.  The reason for that is because the BBC decided to Challenge the rights to broadcast the Champions League football matches.  It could be argued that one of the reasons why sky decided to decrease the share price was to avoid competition.  Another reason why the share prices dropped is because of the plummeting value of its stake in ITV (www.independent.co.uk).  BBC and ITV joined forces to launch the service that will give millions of consumers’ access to free high-definition broadcasts (www.thisismoney.co.uk). It could be argued that this promotion will help sky attract more customers to their high definition package, which will help raise the share prices.  There’s a probability that the share prices will rise because The Financial Times reporting show BSkyB is looking to increase the  of its fast-expanding telecommunications  by ending its reliance on BT’s wholesale telephony products within the next 18 months.

(Thisismoney.co.uk, BskyB profile, 15/03/08)

(FT.com BskyB 03/05/08)

3. Ladbrokes

        Ladbrokes PLC is known as one of the worlds leading betting and gaming companies. Ladbrokes is where they are in re-inventing the betting and gaming experience whether it is online, in shops or Ladbrokes overseas outlet.  The bookmakers said that they have had a strong start to 2008, with no signs of a slowdown in consumer spending. The Pre-tax profits rose 46 per cent to £344.2m, while the economic downturn has had little impact, with revenues up 16 per cent in the first seven weeks of 2008.  Ladbrokes PLC chief executive said "We are recession robust," But Ladbrokes counted the cost of 23 race meetings being abandoned during the July and August floods and poor weather conditions in 2007.  However, company is poised to open 25 shops in Madrid when the region begins awarding operating licences to betting shops for the first time (ft 28/02/2008).

1. Share performance

        (Digital look, 10th May 2008)

        In late February, Ladbrokes informed of its sharp increase in annual pre-tax profit due to the sale of its hotel unit and world cup winning, its shares still fell though. Story from,(digital look, 2008f) With the company ending in February and with the appointment of Brian Wallace as the new group finance director in early March, the share price has been around the 410p.

Towards the end of April, the company is concentrating on expanding internationally and will soon be able to reach consumers through adverts.  Ladbroke’s shares rose a little bit on 24 April 2007 though they fell again maybe due to the fears from US company 888 plc lawsuits.  The company could increase it shares by reaching to more punters abroad through advertising. (Digital look, 2008g) accessed on 9 May 2008.Though the company did not have a great month in February, as the Sunday telegraph reported that, Ladbrokes's 470 m takeover of online gaming firm 888.com has run into trouble, prompting much of the gambling industry to write the deal off (the guardian, 2008a). Otherwise the share prices have been around the 410p.

4. Whetherspoons

        J D Wetherspoon plc (: ) (commonly referred to as Wetherspoons) is a  , founded by  in 1979. Now there are 700 pubs and 20,000 staff.   Whetherspoons outlets throughout the UK making it the larges and well-known pub in the UK. Wetherspoon J D reported annual 2007 earnings of 27.90 per share on September 07, 2007. (, 2008a)

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1. Share performance

(Digital look, 06th May 2008)

From the 11 March 2008 Whetherspoons experienced massive fall on their price of shares.  The reason for this could be because Whetherspoons lifted first half of the year profits by 10% to £28.9m, down from 32.9m a year earlier, with like for like sales down 2% over the period.  Even though JDW has experience that but it have also reported an improved sales trend in March  and April helped by real ale festival during which chain sold the equivalent of around 2.5 million pints, an increase of 7% on a like for alike basis against the previous year.

        The company has positioned its self for the long term impact of no-smoking pubs through an increased food offering and a move into breakfast meals.

        Despite increase sales, Whetherspoons said margins continued to be squeezed by higher staff and food costs.  

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5. TESCO

The British Group Tesco is one of the largest food retailers in the world; Tesco is the leading supermarket in Britain with:

1. Small grocery stores under the Tesco Metro brand name;
2. Big supermarkets outside cities under the Tesco Extra brand name
3. 24-hour stores;
4. Gas station and Financial Services under the Tesco Express Brand name;
5. Tesco proposes food and non food products and services in its stores and as well on-line by its web site;
6. The group is well established in Ireland, Central Europe (Poland, Slovakia and the Czech Republic) and Asia (Thailand, South Korea, Japan and China).

1. Share performance

• We can distinguish two big phases: a stable-decreasing period and a spectacular increasing period. The first period from the 8th February 2008 to 15th April 2008 can be justify  by several elements which is in the first place the results obtained during the Christmas period considered insufficient, the recommendations of the competition commission judged unfavourable to Tesco as well as the charge of resort to fiscal paradise. The second period starting the 15th April 2008 and finishing the 2nd May 2008 can be explain by the fact that Tesco announced for 2007 a growth of sales of 11,1% which represent £51,8bn and a growth profit before tax of £2,803m which represent 5,7%.

4. The FTSE 100

(Digital look, 8th May 2007)

        The FTSE 100 is made up by the 100 biggest UK companies and overall shows the market place and how the UK market is coping. This means that generally when the FTSE 100 experience movements this affects the whole of the market and most companies follow the same path. However this cannot be said to be the case every single time the FTSE 100 shows movements.

        When looking at the above chart which shows a comparison of the FTSE 100 with the five companies in our portfolio, it shows similar movements when talking about negative and positive movements, although the scale of movement varies from company to company. This is an indication that something has happened in the market, for example a general increase in the interest rates. This will affect almost all companies, but for some it can show to be a terrible situation for the individual company if this has a lot of debit and mortgage.

        In our situation the differences in movements when comparing the FTSE 100 with our five companies do not differ hugely the only major difference can be seen for GlaxoSmithKline. After the general fall for all markets in share prices in March Ladbrokes did not follow the positive pace again and stayed down. Another company that have not followed the same path as the FTSE 100 is Whetherspoons which prices in the last month has slowly gone down.

        The reason for companies like Ladbrokes and Whetherspoons differences to the FTSE 100 is that they are facing individual problems which only affect their business. When looking at the existing 3 companies they more or less follow the FTSE 100, there are small differences but again this has been due to specific situations addressed at the individual company.

5. Revision of portfolio

When analysing the result of our portfolio it is clear who the winners and the losers are therefore we can today conclude that if we had chosen to spend our given amount differently and only have bought up shares in Balfour Beatty, BSkyB and GlaxoSmithKline we would have gained a bigger profit. If the portfolio for instance had been split into 1900 in GSK and 2500 in BSkyB, this would have given a profit on £ 2.672,00.  In retrospect we could have varied our portfolio with low risk and high risk organisation investment, spreading our portfolio of shares into a wider range of markets may have proved successful.  When we decided upon our organisations more research could have been done into future factors that would impact upon the share price for example the imposed smoking ban.  If given the opportunity to carry out this exercise again we would have looked in detail at possible mergers and takeovers before investing.  It is also worth considering companies that are producing energy efficient fuel for the future such as wind farms.

Share price as at 02 February 2008

6. The future – 2008 and 2009

It is very difficult to predict the future and what will happen in the market, if the shares will increase, stay stable or fall. Though when analysing the business environment around the world there are different factors that can play a role in the future market like interest rates, inflation, GDP, the housing market, population figures, value of the currency and the big issue with global warming.

(Sloman, 2005)

It is likely the market will stay stable as it has done the last years.  At the moment there are no signs of sudden major changes in the above mentioned factors that can affect the market in near future.  However all will have a bearing on the market in the future.

Interest Rates in UK have been increased to 5.5% since May 2007 and then went up to 5.75,  but the Bank of England is planning to raise rate to 6% from 5.75% have been questioned and some of the analysts are now saying the UK interest rate will remain the same and could even fall.   This will put extra financial constraints upon organisations and may affect productivity, growth and investment. (BBC news 9th May 2008a)

Inflation is also showing signs of increase, the government recently announced the CPI has gone beyond the target range of 2.5% in March, unchanged from February (www.stastics.gov.uk 9th May 2008b).  According to the Government statistic site factors such as a large upwards contribution from housing and household services due to changanges in the price of eating oil and gas.  If within the next few year inflation was to rise further this could have a negative affect upon the economy, this in turn would slow down growth and affect factors including interest rates, pensions and wage settlements.(bbc news 10th May 2007c).  

Furthermore the housing market is expected to slump due to interest rates increasing, many people with variable rate mortgages will be badly hit by the increase and the disposable income after having paid their mortgage will fall and their demand for other things will decrease.  This will affect the market in a negative way because people’s ability to spend will be curtailed by higher mortgage repayments.  

However many other factors such as technological development, population trends, distribution of world resources, EU regulations, growth of the countries within the EU and global warming can cause changes.  Although these are unlikely to have any major affect in the near future (2008/2009).  (Sloman, 2005)

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1. GlaxoSmithKline

1. SWOT Analysis

1. Strength: GSK is one of the leading companies. Having launched six drugs since the start of 2007-05-11 (Key Note, The pharmaceutical Industry 2005);

• Sound capital base;
• Established track record of product development
• Strong market position;
• Large highly skilled specialist work force;
• Diverse product portfolio from leading edge drugs down to toothpaste.

2. Weakness:

• Limitations to fully test the effect of drugs in humans;
• Geographically diverse locations.

3. Opportunity:  

• With the mergers of various companies involved with the production of drugs.  GSK has opened up to the possibility of producing an even wider range in a cost effective way;
• Emerging markets for gene therapies or vaccines.

4. Threats:

• Competitors producing cheaper generic drugs. New and advanced drugs rely on extensive research and testing;
• Counterfeit drugs being sold in competition with legitimate products;
• Political pressure to sell at prices that fail to pay for the development of new drugs or to recover past development costs;
• Patent expiry on drugs that generate strong income;
• Pfizer;
• Ever increasing cost of drug trials and ever higher standards imposed by national drug approvals bodies (Aspirin would not get approval if invented today).

2. PEST ANALYSIS

1. Political factor:

• Guidelines in how the benefits and effectiveness of its products are displayed in advertising with enquiries being launched into this practice.

2. Economic factor:

• Length of time and the cost to produce drugs are quite high. The regulation on prices and the on-going price wars between companies as had a negative effect on their profits.

3. Social factor:

• The demand for particular drugs changes with the demographics. This is also affected by the concerns society has with health.

4. Technological factor:

•  Advancements have enabled the production of more advanced drugs covering a wider range of illnesses in a shorter space of time.  However limitations make companies unable to produce enough drugs to meet demand  

(Key note Pharmaceutical Industry report 2005, Pest analysis)

2. BskyB

1. SWOT Analysis

1. Strengths:

• BSkyB holds a strong collection of broadcasting rights with its exclusive sports and movies packages proving very popular with customers.
• Not overly dependent on advertising.
• Better reception. (Cable & Satellite TV, Keynote 2004, [online])

2. Weaknesses:

• Having to persuade consumers in to paying a monthly subscription.
• Subscription revenues depend on churn, where consumers do not renew subscription.
• 10-15% of adults oppose to subscribing for TV. (Cable & Satellite TV, Keynote 2004, [online])

3. Opportunities:

• BSkyB has recently launched its own broadband service and has already gained 553,000 users within 12 months.
• Skies have the opportunity to expand on the interactive services they provide.
• If they continue to get premium TV programmes audience share will increase.  (Cable & Satellite TV, Keynote 2004, [online])

4. Threats:

• Much of Sky’s success depends on Premier league football rights.  
• Free view may become increasingly popular, increasing market penetration.  (Cable & Satellite TV, Keynote 2004, [online])

2. PEST Analysis

1. Political factors:

• Involved in major dispute with Virgin media.
• Subject of Ofcom investigation (Thisismoney.co.uk, BSkyB profile, accessed 15/03/07).

2. Economic factors:

• Expanding further into telecommunications.
• 28% customer growth.
• Shares over 600p.

(Thisismoney.co.uk, BSkyB profile, accessed 15/03/07)

3. Social factors:

• Retaining rights for Premiership football.
• Providing TV and broadband packages.
• Gaining higher profile shows.

(Thisismoney.co.uk, BSkyB profile, accessed 15/03/07)

4. Technological factors:

• Introducing HD TV.
• Providing a broadband service.
• Sky plus proving successful.

(Thisismoney.co.uk, BskyB profile, accessed 15/03/08)

3. Ladbrokes

1. SWOT Analysis

1. Strengths:

• Ladbrokes have consistently led the industry through state of the art technology and management team (Annual Report).
• Two years ago, it opened a casino in the Paddington Hilton hotel in London
• The company is poised to open 25 shops in Madrid and extra 54 shops in Northern Ireland
•  Investment in e-gaming.

 

2. Weaknesses:

• It only makes a big profit, on big occasions regarding sports.
• Its decision to abandon the strategy in effect kills off talk of Ladbrokes as a suitor for Rank Group, the embattled casino and bingo operator, which has seen revenues plunge and which is attracting gaming groups
• Selling of large casino division Gala-Coral in 2000.
• Decided not to bid for  new casino licences

3. Opportunities:

• New Dual Screen set FOBT estate.
• £500 Jackpot machines set from September
• Large retail estate set up in Northern Ireland (Ladbrokes.com)
• High-rollers continue to boost its overall numbers, swelling telephone betting.
• Ladbrokes bought 17 shops in Italy last year
• Continued increase Internet betting.

4. Threats:

• Competition from new companies
• E-gaming's £55m operating profit will probably not grow much
• The British government's increase in casino duty in last year's budget.
•  The smoking ban and the removal of lucrative gaming machines.
• Recent decline betting on horseracing

2. PEST analysis

1. Political Factors:

• Ladbrokes conducted a review of its Casino strategy and however, will not be among the bidders to run them. "We have conducted a review of our casino strategy and have decided to withdraw from the process due to the length of time it would take to generate sufficient return on the capital spend required.
• Regulatory issues remain a quandary, although new act allowing betting company to open on Good Friday and Easter holiday is a boost.

2. Economic Factors:

• Interest income of ￡24.0 million was earned on the proceeds of the hotel disposal. The net finance costs of the continuing operations of ￡45.6 million were 169.8 per cent greater than last year (2005: ￡16.9 million), reflecting the increased leverage of the new capital structure.(Ladbrokes Annual Report).  The British bookmaker reported a 45 per cent increase in pre-tax profits to £344.2m for 2007, after seeing a huge increase in telephone bets from a small number of high-roller customers.  Operating profits in the telephone betting business increased tenfold to £183.6m from £17.3m in 2006, almost all of which came from high rollers. Turf TV signed a second big client Ladbrokes to its racing television service. Ladbrokes agreed to pay £6,500 ($12,901) for each of its 2,200 betting shops to use the service.

3. Social Factors:

• With the newly set gambling legislations, gambling can be less legislated than previously.
• Cheltenham festival
• The British government's increase in casino duty in last year's budget, the smoking ban and the removal of lucrative gaming machines, as required under the Gaming Act, have left casino operators nursing damaged businesses.

4. Technological Factors:

• The introduction of the internet has attracted more online customers.
• Ladbrokes operates one of Europe’s biggest Telephone Betting businesses with over 120,000active customers (Ladbrokes.com).
• Internet betting grew by 7 per cent, despite continued tough competition in the online poker market

4. Whetherspoons

1.  SWOT Analysis

1. Strengths:

• The main strength is that Whetherspoons is a modern pub providing a unique service unlike other pubs.
• 700 outlets providing the same first class serves.
  (jdwetherspoon, 2008a ) www.jdwetherspoon.co.uk/investors

2. Weaknesses:

• No power over politician decisions, e.g. losing customers over smoking ban could affect the profits.
• Political changes such as having a new prime minister could affect the economy.  

3. Opportunities:

• Whetherspoons are expanding very fast having 700 pubs in the UK
• Providing some unique service e.g. all day food makes it harder for competitors to keep up.

(, 2008a)

4. Threats:

• Many competitors in the market

2.  PEST Analysis

1. Political factors:

• Legislative Structures

Smoking ban in public places comes into power form the 1st of July. Whetherspoons opened outlets as non smoking pub and are now at 61 non-smoking pubs. (Jdwhetherspoons, 2008b)

• Political stability
• As Tony Blair has ended his career as Prime Minister Laws may change (BBC news, 2008e).

• Government plan for new drop down on underage drinkers

2. Economic factors:

• Interest rates
  The Bank of England has increased interest rates to 5.75%, this can lead to more consumers not being able to afford to go out (BBC news, 2008d).

3. Social factors:

• Mobility
  People are more interested in health living, this might mean less drinking.
• Lifestyle
  peoples life style has become more hectic and free time is now a vital necessity, customers may feel going to Whetherspoons is time consuming  and profits may be affected.

4. Technological factors:

• Communication- communication with consumers has become more efficient because of technology. This is an advantage on understanding what the customer’s needs are and wants are.

5. TESCO

1.  SWOT ANALYSIS

1. Strengths

• Increase number of stores (16 new stores in Ireland, 50 in Russia, 11 in Malaysia…);
• Increase market share and size (more than 32% market share in the United Kingdom);
• Increase profit (11, 8%) which is £2.8bn annual profit;
• Competitive in food and non-food (10% growth sales for non- food in the first half of the year);
• New Stores like Tesco Metro are more accessible to customers.

2. Weaknesses

• Not as reactive and flexible as specialised competitors in some services (Ex: Carphone Warehouse in phone);
• Lack of knowledge in some market such as insurance and phones;
• Recent enter in several new markets at the same time.

3. Opportunities

• Make alliances with others specialised companies to offer better services (lack of knowledge and specialisation in some services);
• Go on with its present strategy with the aim of being implemented in new locations and varied the kind of stores types;
• Continue its international growth (300 new stores over the last five years in twelve countries).

4. Threat

• Wal-Mart takeover of Asda (Wal-mart is the main global competitor);
• Governmental commissions are observing the company for abuse of dominant position;
• Some group and organisation think the growth of Tesco bring out the disappearance of small shops and try to boycott them;
• Entrance in the market of international competitors.

2.  PEST

1. Political factors

• The government by the Competition Commission and pressure groups tries to weaken Tesco because they consider that Tesco and large retailers abused theirs dominant position;
• New Groups boycott Tesco as well as its main competitors with the aim of making survive small retailers;
• By the liberalisation, international competitors could enter in the market.

2. Economic factors

• The decline of the housing prices, the regulation of credits and the pressure of banks allowed envisaging a decline of the household consumption;
• Increase of non food retailing for anticipate the decline of the consumption of food;
• Wal Mart and Asda impose low prices strategies to its competitors.

3. Social factors

• The modification of the society by the increase of working women, the increase of single people and changes in work model have involved the development of food- to-go and equally the set up of more flexible opening hour and new days open;
• The become aware of Britain’s on the dangers of non healthy food has increase the organic food retailing.

4. Technological factors

• Adaptation and Use of new technology;
• Online retailing with home shopping and home delivery;
• The development of new services such as financial services bring out the set up of highly efficient computer based system;
• Increase of implementation of automatic point of sale with laser and scanning.

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SOURCE: HTTP://MARKETS.FT.COM/TEARSHEETS