1 Introduction

This report intends to explain the aims and objectives of the portfolio project undertaken. In order to determine whether any aims and objectives have been achieved, relevant theory and analysis of findings will be used. The aims of this portfolio project was to invest a notional principal amount of 200,000 was made available to invest in securities on the London Stock Exchange during the period from 4th October 2010 till the 1st April 2011, on which date the portfolio will be liquidated and any gains realised. Furthermore the project will be split between the two terms, in which to different investment strategies will be applied, in the first term an active trading strategy shall be adopted whereas in the second term a buy and hold strategy shall be put into place. The objective of this project was to develop an understanding of the stock market and to create a portfolio that is well diversified and minimises total risk. Moreover, this report shall explain any relevant theory in order to and demonstrate how this affected the strategy that was adopted for investment and how it was used in practice. It will also outline any limitations that were found through the project. Furthermore, the findings will be explained, showing how using different strategies affected the profit from investment, for example if active trading gave higher profit than buying and holding the shares. Finally, the report will come to a conclusion which will show in general how the market has performed and if the project would be approached differently if done again.

2 Theory:
2.1 Stock Market. The stock market acts as an efficient allocator of funds within the financial economy. The stock market is split into the primary and secondary markets. The primary market is there so newly issued shares can be sold to raise capital for the company. The secondary market is for existing shares and involves in the buying and selling these shares. 2.2 Relationship between risk and return The risk of a security is the uncertainty that the actual return will vary from the actual return. In an efficient capital market investors are risk averse and will want greater levels of return for being exposed to higher levels of risk. However with greater levels of risk the investor has a higher chance of earning greater returns. The risks that the investors are likely to face are systematic and unsystematic risk. Systematic risk is the

inherent market risk that every business and investor faces and cannot be reduced with diversification, the amount of systematic risk the investor is out of their control it controlled by factors in the environment surrounding the market and therefore is unavoidable. Unsystematic risk is the company or industry specific risk and can be reduced with the appropriate diversification; it is caused by a number of factors e.g. managerial inefficiency. Unsystematic risk is broken down into 2 categories; Business Risk and Financial Risk. Business risk is the risk associated with circumstances of the particular company which may affect the ability of the company to produce stable earnings. Financial risk of the company is affected by the level debt to equity financing it has, with higher levels of debt the investor has a higher risk of losing their investment if the company goes into administration. 2.3 Portfolio Theory: Portfolio theory was developed by Harry Markowitz, 1952, in order to quantify the risk of an investment portfolio, and to help investors develop an optimal portfolio. This a theory where the investor creates a portfolio in order to maximise their return from their investment at a given level of portfolio risk by diversification and using proportions of various securities. Modern Portfolio Theory is based on a number of assumptions in order for the model to hold. The assumptions of the theory include; there are no transaction costs or taxes, all investors will have access to information at the same time, all investors are price taker and therefore do not have an effect on the share price, all investors will try to maximise economic benefit and all investors will be able to accurately predict possible returns. However some of the assumptions that are needed for the model for hold are unrealistic. In reality investors are subject to taxes and transaction cost and therefore their optimal portfolio will be different from the one calculated with the model. Moreover, the model also assumes that investors are price takers; however in reality if investors were to buy and/or sell shares in large quantities then they would have an effect on the share price. Furthermore, the model assumes that shares can be split into fractions in order to have correct proportion that should be invested, however in reality this may not be possible and the investor may be required to purchase a minimum order of shares and therefore this would also affect the optimal portfolio that was derived from the model. Therefore portfolio theory is a useful tool for quantifying risk and creating a portfolio using diversification in order to reduce risk, however the optimal portfolio produced by the model may have to be adjusted because of the unrealistic assumptions.

2.4 Efficient Market Hypothesis The Efficient Market Hypothesis implies that, if new information is revealed about a firm, it will be incorporated into the share price rapidly and rationally, with respect to the directions of the share price movement and the size of that movement (Arnold, 2008, p. 563) For a stock market to be efficient, it has to be Operationally, Allocationally and Pricing Efficient. The market is operationally efficient when transactions take place at the lowest possible cost, speedily and reliably. A market is allocationally efficient when resources are allocated to the firms which will use them to be the most productive. The major implication for investment is that investors cannot expect to beat the risk-adjusted average, except by chance. Investors should instead seek to maximise the effectiveness of diversification in their portfolio. (Firth et al, 1986, p. 12) Furthermore, a market is pricing efficient when the investor can only earn a risk adjusted return from their investments as prices move immediately and unrelated to announcement. Within an efficient market, investors will not be able to make any abnormal profits because all historical and present information about the company will be reflected in the share price, and only new information will bring a change in the share price, and as news is unforecastbale as a result future prices are as well. Within the efficient market there is three levels of efficiency; weak-form, semi-strong form and strong-form efficient. In a Weak-form efficient market the current share price will reflect all information that caused past price movements. In a Semi-strong form efficient market current share prices will reflect all information available to the public, such as earnings reports and dividend announcement, and therefore assuming that there will be no point in analysis publicly available information after release as it will be incorporated in the share price. In a Strong-form efficient market all relevant information about the company has been reflected within the share price and no one, not even people with inside information, is able to make an abnormal profit. In reality, stock markets are seen to be closer to semi-strong form efficiency because most investors are only able to view publicly available information, but are not able to use that information to make a gain as it will be reflected in the share price instantaneously. This is backed up by Firth (1967a, 1979, 1980) who found that after the announcement of a takeover bid share prices were instantaneously and fully adjusted to their correct levels. 2.5 Random Walk Theory:

The random walk model is assumed to imply that successive price changes (or more usually, successive one-period returns) are independent. In addition, it was usually assumed that successive changes (or returns) are identically distributed. Together the two hypotheses constitute the random walk model." (Fama (1970), p. 386.) The random walk theory suggests that future changes in stock prices cannot be predicted by looking at trends in past price movements. Moreover evidence from empirical testing shows that a technical trader using past prices for investment decisions will not be able to realise greater profits than those investors that choose to buy and hold. 2.6 Beta: The Beta of a security is the measure of how volatile the security is compared to the market portfolio, therefore is a measure of the systematic risk of the company. In this case the FTSE 100 has been used as a proxy for the market portfolio and therefore has a Beta of 1. If a security is more volatile than the market in general then it is likely to be more risky, therefore it will have a Beta of greater than 1. If a security is less volatile than the market it is seen it is seen as being less risky as well and will have a Beta of less than 1. The Beta is a useful to the investor because helps them determine whether they are likely have a higher or lower return, for example if a security has a Beta of more than 1 then it is more risky and the investor can expect that it will provide higher levels of return and vice versa. However, because the Beta of a security is calculated using historical price information will give little indication to the investor of how the security will perform in the future and is no guarantee of future returns. Furthermore because the Beta is calculated on historical prices it is not possible to calculate an accurate Beta on newly issued securities. 2.7 Filter Rule. The filter rule involves the investor looking at historical trends in share prices to identify a pattern which will make it possible for the investor to determine when it is the best time to buy or sell a security and will create a point, when the share price is percentage above or percentage below the current share price. The advantage of using this will be that the investors loss will be limited during a bear market, and the investor will be able to spot opportunities to buy during a bull market. However when taking into account transaction costs and commission, a buy and hold strategy may provide better earnings.

3 Strategy Explained:
3.1 Diversification of portfolio The purpose of diversification of my portfolio was to reduce the total risk that I faced, this is done to try and minimise the variability in the average earnings. Diversification to minimise total risk involves buying shares across many different industries this is backed by Markowitz in his journal of portfolio selection where he states that The adequacy of diversification is not thought by investors to depend solely on the number of different securities held. A portfolio with sixty different railway securities, for example, would not be as well diversified as the same size portfolio with some railroad, some public utility, mining, various sorts of manufacturing, etc. The reason is that it is generally more likely for firms within the same industry to do poorly at the same time than for firms in dissimilar industries. (Markowitz, 1952, pp.77-91) In order for diversification to be successful in reducing risk the portfolio will have to spread across different sectors, this is because across the different sectors a negative in one industry will generally be outweighed by a positive performance in another industry therefore reduce the chance of loss. Furthermore diversification reduces the unsystematic risk that the investor faces, and making the systematic risk the main risk that they face. However diversification across industries will only be affective if the securities are not perfectly correlated. 3.2 Reason why I selected shares Before buying any shares I decided to, at first, use simple techniques to determine which securities to purchase, this was because I did not have sufficient knowledge of the stock market. At first I used the random walk approach to select shares, this involved drawing a line across the financial times shares and picking any shares that were any points across the line. Furthermore, I also picked the first few shares according to companies I know, because I thought it would have been easier to keep track of companies that I am interested in. However these techniques did not take into account any level of risk involved. My strategy was to try and pick shares that had a low or medium level of risk attached to them, this was because I wanted the portfolio to have less volatility in the returns, to do this I tried to find the Beta of various share to see how they performed in comparison to the market. Beta, as explained above is the measure of systematic risk of the company compared to the market. Furthermore, once I have selected the shares I want to buy and hold, I will pick a selection of 5

shares and the market proxy, and will monitor their returns for a 6 month period. This will allow me to work out their returns over that period and use them to work out the Beta of each security, to show if they are aggressive or defensive in comparison to the market. The higher the beta will show that the shares have a higher systematic risk. Moreover I will also calculate the standard deviation of the 5 shares and the market proxy to measure of how far apart the data is from the average of the data. If all the observations are close to their average then the standard deviation will be small, whereas if the observations are spread then their standard deviation will be higher. The standard deviation will also show how risky each security is, and can be used to calculate expected returns.

4 Relate theory to practice While the project was ongoing I decided to see the effect that any public
announcements would have on the share price of a company, this was to see if the efficient market hypothesis held and the UK stock market was semi-strong efficient. I monitored the share price the day before and after the announcement in order to determine whether the theory held or not. This was based on the assumption that favourable news should see a rise in the share price and negative news will see a decrease in the share price. Moreover I calculated Beta for a select number of shares to determine how they would react in comparison to the market.

5 Limitations
Throughout the duration of the portfolio project I found limitations with the strategy I used. When I was using the random walk approach for selection of my shares I found that my shares were being diversified because the line did not cross the same industry more than once. However these initial techniques were simple ways of picking securities to purchase, however these methods of picking shares did not take into account what level of risk the security has attached to and therefore it will not be clear if the greatest level of returns were being achieved for the given level of risk. Moreover I was not able to determine an accurate Beta of a security because there was not enough finance available to create the market portfolio. The market portfolio is defined as A theoretical bundle of investments that includes every type of asset available in the world financial market, with each asset weighted in proportion

to its total presence in the market. (Investopedia, 2011) With the market portfolio all unsystematic risk will be diversified away, leaving only systematic risk. This was desirable because, in reality a proxy to the market is being used, which would contain an element of unsystematic risk within the calculation of Beta, whereas when using the market portfolio all unsystematic risk will be diversified away leaving only the systematic risk showing the true performance of the security in relation to the market. Furthermore I found that there was a lack of information within the stock market and was not able to determine how much of the risk associated with each company, was business risk or financial risk this was not possible as there was insufficient data about the stability of earnings compared with other companies in the industry.

6 Findings
At the end of the portfolio project once the shares had been liquidated, I found that
HMV Share Price Before News 43.75p 8th Dec 2010 After News 36.50p 9th Dec 2010 Renovo Before News 68.5p After News 17.00p Ocado Before News 181.00p After News 285.00p

efficient market hypothesis hold, in respect to it being semi-strong efficient and incorporating public announcements in share prices instantaneously. I found this

10th Feb 2011 11th Feb 2011

monitoring the share price of three companies after public announcements. In regards to HMV Group and Renovo PLC, the

10th Jan 2011 8th Feb 2011

negative public announcement (Appendix 17 & 18) had an instantaneous negative effect

on the share price of the company as the market reacted to the news, the share prices dropped 16.6% and 75.2% respectively. However in the case of Ocado PLC (Appendix 16) there was not instantaneous reaction to the news, yet the share price rose slowly to its peak then levelled out, this is demonstrated by (Appendix 10). Moreover, I general I found that the shares that I was monitoring showed an upward move (Appendix 10-14), except for GlaxoSmithKline (Appendix 12) which in general went down this was due to several negative public announcements over the period monitored, in addition over the time period monitored, the market index (Appendix 15) showed an upward move in its share value. Additionally while calculating the Beta

for the securities (Appendix 5 to 9), I found that each of the securities were between 0 and 1. Therefore they were all less aggressive than the market proxy therefore were

less risky. However, within my Beta calculations I found that GlaxoSmithKline had a Beta between 0 and 1 (Appendix 7), so in theory it should have moved up with the market but a slower rate, however when compared with the graph for share prices of the company (Appendix 12) and the market (Appendix 14), this shows that using Beta to select share may not always be applicable. Furthermore, when adopting the different strategies during the two terms, either to be an active trader or to buy and hold, I found that the profit that the profit figures (Appendix 3) with the two strategies were close to each with active trading jus coming out better. I believe this is due to being able to sell share when you see that they peaked, because I found that buying and holding the shares made me miss out on the selling shares when they on the rise, in addition to this with the buying and holding strategy I was subject to bad news (Appendix 18) causing the share price to drop rapidly and make a loss on that security.

7 Conclusion
The objective of this project was to create a well diversified portfolio, using different strategies within the two terms, to buy and hold and to actively trade. Over the project relevant theory was used to influence decisions to buy and sell securities. I have found through this project that active trading may have been the best strategy because it allowed me to benefit from positive performance and limit my loss when performance was negative. If I were to do this project again, I would have applied the filter rule to a section of my portfolio as it may have given me a guide when to sell share, i.e. following a 5% fall in price.

8 References.
Fama, E F. "Efficient Capital Markets: A Review of Theory and Efficient Work," Journal of Finance, 26, No. 1 (May, 1970), pp. 383-417. Markowitz, H. Portfolio Selection, the Journal of Finance, Vol. 7, No. 1 (Mar, 1952), pp. 77-91 Fama, E. Efficient capital Markets: II, Journal of Finance 46, (1991), pp.1575-1617. Goldfarb, D. Iyengar, G. Mathematics of Operations Research, Vol. 28, No. 1 (Feb, 2003), pp. 1-38. Arnold, G. (2008), Corporate Financial Management, 4th ed, Harlow, Pearson Education Limited. Brealey, R. Myers, S. Allen, F. (2008), Principles of Corporate Finance, 9th Ed, McGraw-Hill. Investopedia, Market Portfolio, [Online], Available at: <http://www.investopedia.com/terms/m/market-portfolio.asp> [Accessed 1 April 2011]. Firth, M. Kean, S. (1986), Issues In Finance, Philip Allan Publishers Limited.

9 Appendix

Appendix 3: Profit from Sales

Total Profit Profit From Active Trading Profit From Buy And Hold 9,314.90 4,557.30 4,446.38

Appendix 4: Standard Deviations

Market Ocado BSkyB GlaxoSmithKline Inmarsat Admiral 0.8768305% 3.5616462% 0.7027800% 1.1678031% 1.3745059% 1.3425711%

Market Beta

Appendix 5: Ocado Beta

SUMMARY OUTPUT Regression Statistics Multiple R 0.152296456 R Square 0.023194211 Adjusted R Square 0.013801847 Standard Error 0.035369821 Observations 106 ANOVA df Regression Residual Total 1 104 105 SS MS F Significance F 0.003089374 0.003089374 2.469475432 0.119114163 0.130106521 0.001251024 0.133195895 Lower 95% Upper 95% Lower 95.0% Upper 95.0% -0.002144497 0.011531035 -0.002144497 0.011531035 -0.162695674 1.405071626 -0.162695674 1.405071626

Intercept X Variable 1 Beta

Coefficients Standard Error t Stat P-value 0.004693269 0.003448128 1.36110647 0.176422015 0.621187976 0.395294422 1.571456468 0.119114163 0.621187976

Appendix 6: BskyB Beta

SUMMARY OUTPUT Regression Statistics Multiple R 0.335718288 R Square 0.112706769 Adjusted R Square 0.104175103 Standard Error 0.006651674 Observations 106 ANOVA df Regression Residual Total 1 104 105 SS MS F Significance F 0.000584491 0.000584491 13.21040619 0.000434598 0.004601455 4.42448E-05 0.005185947 Lower 95% Upper 95% Lower 95.0% Upper 95.0% 6.69091E-06 0.002578521 6.69091E-06 0.002578521 0.122776996 0.41761243 0.122776996 0.41761243

Intercept X Variable 1 Beta

Coefficients Standard Error t Stat P-value 0.001292606 0.000648457 1.993355662 0.04884136 0.270194713 0.07433935 3.634612248 0.000434598 0.270194713

Appendix 7: GlaxoSmithKline Beta

SUMMARY OUTPUT Regression Statistics Multiple R 0.505151476 R Square 0.255178014 Adjusted R Square 0.248016264 Standard Error 0.010126838 Observations 106 ANOVA df Regression Residual Total 1 104 105 SS 0.003654028 0.010665496 0.014319524 MS 0.003654028 0.000102553 F Significance F 35.63067952 3.34537E-08

Intercept X Variable 1 Beta

Coefficients Standard Error -0.001042083 0.000987244 0.675575262 0.113177914 0.675575262

t Stat -1.055547749 5.969143952

P-value 0.293620812 3.34537E-08

Lower 95% -0.002999824 0.451139217

Upper 95% Lower 95.0% 0.000915658 -0.002999824 0.900011307 0.451139217

Appendix 8: Inmarsat Beta

SUMMARY OUTPUT Regression Statistics Multiple R 0.222112205 R Square 0.049333832 Adjusted R Square 0.040192811 Standard Error 0.013466 Observations 106 ANOVA df Regression Residual Total 1 104 105 SS 0.00097865 0.018858647 0.019837297 MS 0.00097865 0.000181333 F Significance F 5.396971807 0.022118085

Intercept X Variable 1 Beta

Coefficients Standard Error 0.000247896 0.001312771 0.349624207 0.150496507 0.349624207

t Stat 0.188834159 2.323138353

P-value 0.850590808 0.022118085

Lower 95% Upper 95% Lower 95.0% Upper 95.0% -0.002355379 0.002851171 -0.002355379 0.002851171 0.051183995 0.648064419 0.051183995 0.648064419

Appendix 9: Admiral Beta

SUMMARY OUTPUT Regression Statistics Multiple R 0.45414852 R Square 0.206250878 Adjusted R Square 0.198618675 Standard Error 0.012018684 Observations 106 ANOVA df Regression Residual Total 1 104 105 SS 0.00390355 0.015022672 0.018926221 MS 0.00390355 0.000144449 F Significance F 27.02376698 1.0096E-06

Intercept X Variable 1 Beta

Coefficients Standard Error -0.000382433 0.001171676 0.698260836 0.134321255 0.698260836

t Stat -0.326398668 5.198438898

P-value 0.744778668 1.0096E-06

Lower 95% Upper 95% Lower 95.0% Upper 95.0% -0.00270591 0.001941043 -0.00270591 0.001941043 0.431896754 0.964624917 0.431896754 0.964624917

Appendix 10: Ocado Graph

300 250 200 150 100 50 0 19/9/10 9/10/10 29/10/10 18/11/10 8/12/10 28/12/10 17/1/11

Ocado

6/2/11

26/2/11 18/3/11

Appendix 11: BskyB Graph

840 820 800 780 760 740 720 700 680 19/9/10 9/10/10 29/10/10 18/11/10 8/12/10 28/12/10 17/1/11 6/2/11 26/2/11 18/3/11

BSkyB

Appendix 12: GlaxoSmithKline Graph

1350 1300 1250 1200 1150 1100 19/9/10

GlaxoSmithKline

9/10/10 29/10/10 18/11/10 8/12/10 28/12/10 17/1/11

6/2/11

26/2/11

18/3/11

Appendix 13: Inmarsat Graph

740 720 700 680 660 640 620 600 19/09/10 09/10/10 29/10/10 18/11/10 08/12/10 28/12/10 17/01/11 06/02/11 26/02/11 18/03/11

Inmarsat

Appendix 14: Admiral Graph

1,800.00 1,750.00 1,700.00 1,650.00 1,600.00 1,550.00 1,500.00 1,450.00 19/9/10 9/10/10 29/10/10 18/11/10 8/12/10 28/12/10 17/1/11 6/2/11 26/2/11 18/3/11

Admiral

Appendix 15: FTSE 100 Graph

6,200.00 6,100.00 6,000.00 5,900.00 5,800.00 5,700.00 5,600.00 5,500.00 19/9/10 9/10/10 29/10/10 18/11/10 8/12/10 28/12/10 17/1/11 6/2/11 26/2/11 18/3/11

FTSE 100

Appendix 16: Financial Times: January 10 2011: Ocado reports 27% rise in Christmas sales Ocado, the online grocer, on Monday reported a 27 per cent rise in sales in the four weeks to Christmas as shoppers took to the internet to avoid the severe weather and busy supermarkets. Fourth-quarter sales increased 27.4 per cent to 178.9m, compared with 140.5m last year. Average orders per week for the period were 28 per cent higher against last year, while average order size was broadly flat at 112.12 compared with 112.67 last year. Gross sales rose 29 per cent to 551.1m for the 52 weeks to November 28, compared with 427.3m last year, in line with analysts consensus estimates. Ocado said it was able to deliver 98 per cent of orders during the Christmas period in spite of the snowy conditions, although it did have to reduce the number of delivery slots available to customers in light of the weather. Andrew Bracey, chief financial officer, said Ocado has done exactly what it said it would do at the time of the flotation and added that the group was in line with market expectations for full-year earnings. Ocado is due to report preliminary results on February 1. However, shares in the group slid 3 per cent to 180p in afternoon London trading. The stock, which floated last July at 180p, had rallied in recent sessions on expectations of a strong Christmas performance, having spent much of the past five months below the offer price. In our view, the December trading indicates that Ocado had a solid start to the new financial year despite the challenging weather conditions, said Karen Hooi and Temilade Olatunde, analysts at Goldman Sachs, one of the banks that advised Ocado on its IPO. They estimate sales growth for the current financial year of 29 per cent on earnings before interest, tax, depreciation and amortisation of 39.4m. Ocado said the timeline and budget for a second processing site, or customer fulfilment centre, were on track and it had appointed a main building contractor. The centre, based on the Staffordshire/Warwickshire border, will give Ocado four times the order-processing capacity it had going into the listing. It will create around 2,000 new jobs. http://www.ft.com/cms/s/0/92e19864-1c8b-11e0-a106-00144feab49a.html#axzz1Igbc0i6l

Appendix 17: HMV shares slump as big freeze adds to its woes (Reuters) - Music, DVD, games and books retailer HMV (HMV.L) said severe weather was hitting Christmas trade, compounding problems caused by competition from grocers and the internet which have driven some peers out of business. The British group posted a wider-than-expected first-half loss, a big increase in its debt and cut its dividend, sending its shares down as much as 29 percent to a record low of 31 pence on Thursday. With forecasters predicting more snow and sub-zero temperatures in the run-up to Christmas, chief executive Simon Fox said he was concerned about the short term trading outlook. "Our stores are ready (for Christmas). We have done everything we possibly can but if customers cannot get on to the high street it will be very serious for all retailers, including ourselves," he told reporters. He said the outcome for HMV's year to end-April would be largely determined by the next four weeks of the Christmas trading period which together with the final four months of the year account for 60 percent of total sales. Prior to Thursday's update HMV shares had lost 62 percent of their value over the past year, massively underperforming a 3 percent fall in the general retailers index .FTASX5370. "These results do little to ease fears that HMV is slowly being consigned to the history books," said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers. The 89-year-old group, which trades from over 730 HMV, Fopp and Waterstone's stores, has benefited in recent years from the demise of rivals like Woolworths, Zavvi and Borders. But it faces the same competition from supermarkets, online retailers and digital downloading that landed those businesses in trouble. In March, it set out a strategy to boost profits focused on evolving its product mix, growing business in live music and ticketing, and improving Waterstone's margins. "The attempts by the group to diversify into live music have had little effect, today leaving shares of the group worth roughly 30 percent of their market valuation in 2009," said Richard Curr, head of dealing at Prime Markets.

"The statement today paints a stark picture of a company in an increasingly rapid decline, with increased losses, falling like-for-like sales and soaring debt levels." Citi analysts said they expected HMV to move into a "sharp cost reduction phase" in 2011, that could include closing shops. PROFIT FORECASTS FALL, DEBTS RISE HMV, which makes all its profits in its second half, made an underlying pretax loss of 41.3 million pounds for the six months to October 23, compared with analyst forecasts for a loss of 38-39 million pounds, according to a company poll. Sales fell 6 percent to 749.5 million pounds, with sales at stores open over a year down 11.5 percent. Underlying net debt surged 72 percent to 151.6 million pounds and the company halved its interim dividend to 0.9 pence a share. "The concern is that, if double digit like-for-like sales declines perpetuate, then even our forecasts could be too high and this could cause significant cashflow weakness," said Altium analyst Philip Dorgan, who is forecasting a full-year profit of 46 million pounds, down from 74.2 million last year. Aside from the severe weather Britain's retailers are worried higher taxes and public spending cuts aimed at reducing government debt will hit consumer demand in the months ahead. An industry survey on Tuesday showed British retail sales growth slowed in November, while on Wednesday electricals retailer Kesa (KESA.L) said the market environment was "increasingly uncertain" and computer games group Game (GMG.L) said its profit margins would fall by more than it previously expected. At 1204 GMT, HMV shares were down 26 percent at 32-1/2 pence, valuing the company at about 135 million pounds and helping to drag down the UK general retail index .FTASX5370.

http://uk.reuters.com/article/2010/12/09/us-hmvidUKTRE6B828U20101209?pasgeNumber=1

Appendix 18: February 11th 2011: Renovo's anti-scarring product fails; shares plunge Key anti-scarring product Juvista fails in Phase III trial Renovo's shares down 75 pct LONDON, Feb 11 (Reuters) - Renovo (RNVO.L) said its key anti-scarring product Juvista had failed in a final stage clinical trial, sending shares in the British biotechnology group plunging. "We are extremely surprised and disappointed by the failure of Juvista to meet the Phase III trial primary and secondary endpoints," chief executive Mark Ferguson said in a statement on Friday. "The board of Renovo will now consider all options open to it to maximise shareholder value." Pharmaceutical group Shire (SHP.L) has a licence to sell Juvista in the United States, Mexico and Canada. Shares in Renovo fell 75 percent following the failure, wiping nearly 100 million pounds ($161 million) from the company's valuation. Shire's shares were 1.5 percent higher. (Reporting by Paul Sandle, Editing by Mark Potter) http://uk.reuters.com/article/2011/02/11/renovo-idUKLDE71A1D520110211