YP75: Volatility as BP and Prudential dominate the week's headlines

The volatility continued in the markets last week with events surrounding BP and Prudential dominating the news flow.

In addition to fears over slowing momentum in China's economic growth, BP's failure to halt the worsening oil spill in the Gulf of Mexico resulted in a poor start to the week for the markets. BP is now coming under increasing pressure from US officials to suspend dividend payments until the full cost of clear-up is known, however, it is believed the company are meeting with shareholders in the coming days to reassure them that the dividend will be paid.

After lengthy discussions with AIG, Prudential announced that it had scrapped its attempted takeover of the Asian insurance business AIA. Prudential had its revised $30.4bn bid turned down by AIG and now faces costs of around 450m. The deal had angered many of the company's largest shareholders from the outset given that Prudential were trying to buy a company far larger than themselves. Inevitably, the company's planned rights issue to finance the deal will not go ahead.

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Retirement scheme charges have hit Leeds-based Northern Foods plc hard over the past year as the company reported a 39 per cent fall in fiscal year profit. While profits dropped considerably, revenue remained broadly flat at 977m compared to a figure of 975.2m the previous year. The frozen food firm has felt the effect of impairment charges relating to the financing of the company pension fund and the closure of the Hull factory site. The company, which is well known for products such as Goodfella's Pizza, is now focused on investing in its brands in order to spur future sales. With market conditions likely to remain tough in the near term, management are looking to enhance marketing of its key products.

Elsewhere, engineering support services company Redhall plc has also seen a drop in profit on the back of rebranding costs. The company, which operates in the energy, defence and process sectors suffered a 12 per cent decline in fiscal first half profit to 2.45m at March 31 compared with 2.79m the year before. On a more positive note, management is hopeful the company will avoid any potential UK government spending cuts within these sectors and may even capitalise on new opportunities. With the new coalition Government looking to cut the UK's substantial budget deficit, the outsourcing of public services to the private sector in an effort to save money may be high on the agenda. The Wakefield-based company has raised its interim dividend 9.1 per cent to 1.8p per share.

n Past performance is not an indication on future performance. The information contained in this article has been taken from public sources and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents.

Edward Marsden, Assistant Investment Manager at Brewin Dolphin, Leeds

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