The Mail 10/09/19 - Vox Markets | Vox Markets

The Mail 10/09/19

Mike Ashley has swooped on another struggling retailer despite anger over his buying spree among Sports Direct International (SPD) investors. The 55-year-old tycoon has tabled a bid for jewellery chain Links of London after its owner Greek-based group Folli Follie put it up for sale. Ashley is understood to have made the offer through Sports Direct, where he is chief executive and the largest shareholder with a 63% stake. He is braced for a backlash from investors at Sports Direct’s annual meeting tomorrow amid claims he is losing focus as he seeks to expand his empire. Shareholder advisers ISS and Glass Lewis have urged investors to vote against Ashley’s re-election as a director, with the former warning that Sports Direct’s purchase of House of Fraser has ‘led to concerns about the company’s viability as a whole’.

Primark’s owner Associated British Foods (ABF) has insisted it will not increase prices for customers as it battles falling sales in the UK. The High Street chain’s parent company admitted ahead of its results for the year to September 14 that same-store sales in the UK are likely to fall by 1%. It warned that currency fluctuations would also put pressure on profit margins next year, as the weaker pound and stronger value of the dollar will increase the cost of goods. Primark is known for its cheap fast fashion and homeware including cushions from £3 and children’s pyjamas from £5. ABF expects Primark’s total sales in the UK to increase 2% this year, boosted by shop openings. Sales including international stores are predicted to grow 4%. Primark will have opened 14 stores by the end of its financial year in the UK, Germany, Spain, France, Belgium, the Netherlands and Slovenia. It is looking to open a further 19 next year, including its first in Poland.

Lloyds Banking Group (LLOY) has been forced to abandon plans to return cash to shareholders after being stung with yet another PPI bill of up to £1.8 billion. The lender’s woes mean it is unable to continue a share buyback intended to boost the share price for 2.4m long-suffering investors. It is a major embarrassment for chief executive Antonio Horta-Osorio, who vastly underestimated the scale of the PPI scandal eight years ago when he claimed enough cash had been set aside to deal with it. He has, in fact, been forced to set aside £21.9 billion to cover compensation payments to customers mis-sold payment protection insurance. In a further blow to the industry, Barclays (BARC) warned the scandal would cost it another £1.2 billon to £1.6 billion, taking its total bill as high as £11.2 billion. Royal Bank of Scotland Group (RBS) and CYBG (CYBG) last week set aside extra cash following a spike in claims from customers ahead of the August 29 deadline. Analysts said shareholders were paying for the crisis.

Scotgold Resources (DI) (SGZ) six months away from production at Cononish as gold price hovers near highs. Chief executive Richard Gray explains.’We will be producing our first gold at the end of February,’ he says. ‘We are currently developing and enlarging the existing adit so we can get our mechanised equipment in. We are getting the machinery over. And we are working on the buildings for the machinery.’ First ore will be mined at the end of this year, and a small stockpile will be built up before the first gold comes out in February. Now that production is so close, it seems in some ways as if the timing couldn’t be better. That’s because of the three way dynamic that operates between sterling, the dollar and the gold price. Almost all of the operating costs at Cononish will be incurred in sterling, which is currently very weak against both the dollar and gold. That means that while the likely selling price of the gold that gets produced from Cononish will be high, the only pressure on costs will be downward.

British American Tobacco (BATS) lost ground after its director of scientific research, Dr David O’Reilly, said ‘non-reputable’ vaping firms were responsible for several deaths linked to e-cigarettes in the US. American health officials have approached vaping with scepticism and told the US public last week that smokers should stop using e-cigarettes until probes into five deaths thought to be related to the activity, which is usually seen as a smoking substitute, have been completed. Tobacco giants are relying on vaping to fill the hole left in their earnings by the widespread rejection of smoking in the West.

Components and packaging maker Essentra (ESNT) advanced 9p, to 411.4p, after it bought Spanish group Nekicesa Packaging, which makes leaflets and labels for the pharmaceutical and beauty industry.

 

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Mentioned in this post

ABF
Associated British Foods
BARC
Barclays
BATS
British American Tobacco
CYBG
CYBG
ESNT
Essentra
LLOY
Lloyds Banking Group
RBS
Royal Bank of Scotland Group
SGZ
Scotgold Resources (DI)
SPD
Sports Direct International