Morning Financial Press Review
Paul Kettle
AM Press Round-Up -3 min read
05:59, 7th June 2019

Below are the key morning headlines from today’s papers, featuring the The Times, The Telegraph, The Daily Mail & more - see the full Press section here.

Aviva to axe 1,800 jobs as UK business splits in two. Around 1,800 jobs will be axed at insurance giant Aviva (AV.) FOLLOW as part of a plan to save £300m a year over the next three years, with unions warning they will fight compulsory losses. Aviva – which employs around 30,000 staff in total – said some of the cuts would come from natural staff turnover. One market observer said it would be difficult to say exactly where the jobs would be lost. “But it’s nothing to do with the decisions relating to UK insurance. These cuts will be made globally and the split is about creating responsible, individual business leaders” they added. Following last week’s speculation, Aviva has confirmed plans to split its UK life and general insurance businesses to “enable stronger accountability and greater management focus”.

Rolls-Royce offloads £4bn pension liability in record deal. Rolls-Royce Holdings (RR.) FOLLOW has transferred much of its pension scheme responsibility to insurer Legal & General Group (LGEN) FOLLOW in move that removes future risk from its balance sheet. The engineering group is shifting £4.6bn of assets and £4.1bn of liabilities to L&G in a transfer affecting 33,000 pensioners in Rolls’s 76,000-member retirement scheme. Rolls will pay £30m to L&G through an exceptional cash contribution. Transferring the scheme frees up Rolls from future liabilities related to the scheme if the value of its assets fall, removing a potential financial burden from the engineering business. Joel Griffin, Rolls’s pensions head, said the agreement would mean “increased security for Rolls-Royce pensioners and reduced risk for our business”.

Joules gives the high street some welly with its homely brand of ‘total retail’. Joules Group (JOUL)FOLLOW  has once again delivered a rare spot of brightness amid the retail doom and gloom. While other high street stalwarts are scrambling to shut stores and some close their doors forever, Joules has defied the retail slowdown by posting a 17% rise in sales for the year to May to £218m. The business, which sells floral wellies and rugby shirts, said that despite the “challenging sector trading environment”, it expected its underlying pre-tax profits to be at the top of City estimates. Analysts are currently forecasting profits of between £14.8m to £15.3m, suggesting the brand could report a 17% increase on last year’s profits.

Mitie boss pledges to overhaul ‘unaccountable’ culture. The boss of outsourcer Mitie Group (MTO) FOLLOW promised to make its staff more accountable for their work to help it get back on track as it unveiled a return to profit. Phil Bentley, who has led the cleaning, maintenance and security company since 2016, said: “We are on the second phase of our turnaround – we certainly haven’t turned around but we are turning.” Mr Bentley has been simplifying Mitie’s sprawling structure and HR processes and investing in IT systems since taking the reins. But the former Cable & Wireless chief executive said it also needed a cultural overhaul to make staff more accountable for their work.

Rail investors receive green signal from Go-Ahead. An unexpectedly upbeat message from Go-Ahead Group (GOG) FOLLOW has boosted investors’ appetite for the struggling rail sector. Go-Ahead has been labouring to recover from the scheduling crisis last year that caused weeks of disruption on its Thameslink and Southern services after timetables were changed. However, yesterday it said the London super-franchise was on the mend. Though it is unlikely to be profitable following face-saving penalties levied by the Department for Transport, Go-Ahead said it has the problems under control.

Peter Cruddas sees pay cut in half after CMC Markets’ profits fall. The City tycoon behind CMC Markets (CMCX) FOLLOW has taken a 50% pay cut as the spread-betting company announced that profits had fallen by nine tenths after a regulatory crackdown and quiet range-bound markets. Peter Cruddas, 65, told The Times: “I’m not getting any bonus at all this year. My earnings will halve, I think.” While CMC has yet to publish pay numbers for the year to March, Mr Cruddas’s pay package looks likely to shrink from £846,000 with a bonus to his base pay of about £420,000. He put a brave face on the slump in pre-tax profit from £60.1 million to £6.3 million, saying that business had stabilised after European regulators imposed rules designed to protect novice punters. He said the performance was down to a lack of volatility in markets. He added: “This has been a difficult period of trading for CMC and our sector but, having now weathered the European Securities and Markets Authority transition, we exit this year with renewed confidence in the future.”

Pub group Mitchells & Butlers (MAB)  FOLLOWwas in demand after being branded “cheap as chips” by a broker, sending investors scurrying to bag a bargain. Berenberg upgraded the operator of the Harvester and All Bar One brands to “buy” with a 360p price target. It said the shares were undervalued given that the group owns 80% of its property portfolio and has “significantly de-risked” its balance sheet. “Following a long spell of underperformance, Mitchells & Butlers’ like-for-like sales growth and earnings finally have some renewed momentum, driven by operational improvement initiatives as well as an improving market environment,” the Berenberg analysts said.

Entertainment One Limited (ETO) FOLLOW shares surged nearly 16% higher after the maker of Peppa Pig refuted a report that the company’s president and chief content officer was in talks to quit. It followed an exclusive in the Hollywood trade title Variety that the veteran film and TV producer Mark Gordon was headed for the exit following a stand-off with senior managers. The company issued a statement declaring that Gordon ‘continues to be a part of the team both now and into the future’. Citi said there appeared to be a ‘mismatch’ between what the article was actually reporting – namely, that Gordon’s role may change – and the share price reaction. ‘The market appears to have jumped to the conclusion that Mark Gordon is set to exit Entertainment One altogether (based on the negative tone and commentary on internal relations and, perhaps, inaccurate conclusion in the article that suggests there could be a complete departure),’ Citi said. ‘The comment made by the company implies an exit is not on the cards.’  City broker Numis, which is strong on the media and entertainment companies, rates the shares a ‘buy’ up to 573p and saw Wednesday’s dip as an opportunity to pick up stock in the group on the cheap.

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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