Tue, Apr 23, 2013 - Page 15 News List

Britain looking to privatization to help reduce debt: report


As many as half of the 21 companies that the British government holds shares in could be wholly or partly privatized within five to eight years, the Financial Times reported on Sunday, citing Mark Russel who heads the Shareholder Executive.

The British government is increasingly focused on privatizations as a means to shed debt and avoid the need for spending cuts, the Financial Times reported.

The Shareholder Executive manages the British government’s stakes in more than 20 businesses. The Financial Times said Russell is in charge of the expected upcoming sell-offs of Royal Mail Group Ltd and the UK’s stake in Urenco, the world’s second biggest producer of nuclear fuel.

The Financial Times said the UK intended to raise about £3 billion (US$4.58 billion) before the end of this year from the sale of its one-third stake in Urenco, jointly owned with the Dutch government and German utilities RWE AG and EO.N SE.

Britain’s state-owned Royal Mail is expected to float its shares as early as the third quarter of this year, although the company’s chief executive Moya Greene said last month that the first quarter of next year was more likely.

Separately, UK corporate dividends fell sharply in the first quarter of this year when compared with the large one-off payouts seen a year ago, although underlying growth was still solid, a study showed yesterday.

First-quarter dividend payouts totalled £14.1 billion, a drop-off of nearly a quarter from £18.8 billion a year earlier, research by British firm Capita Registrars showed.

British companies had seen eight consecutive quarters of year-on-year dividend growth until the first quarter of this year.

Last year’s total was aided by a total of £4.4 billion in special dividends from Vodafone and Cairn Energy .

HSBC paid its first-quarter dividend early, in December last year, wiping another £1.2 billion off the first-quarter total, while many firms delayed payments into the second quarter to take advantage of a tax cut.

With this range of one-offs taken into account, dividends saw a much healthier underlying growth of 6.1 percent — albeit still slower than 9.2 percent growth in the first quarter of last year.

“There is a modest slowdown in underlying dividend growth underway, but that 6.1 percent should not be considered a poor performance,” said Justin Cooper, chief executive of Capita Registrars.

“Dividends have played catch-up over the last two years, and while we do still expect healthy growth, it will be at levels more consistent with the performance in company profits,” he said.

Oil companies posted the biggest underlying year-on-year growth, up 12 percent once Cairn’s one-off payout last year was taken into account.

In general, “cyclical” companies, those more highly exposed toward global growth trends, increased their payouts by 8.7 percent — three times faster than “defensive” stocks, which tend to offer more reliable dividends.

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