Press | Vox Markets
Neil Woodford has announced the “highly painful” decision to close his investment firm, following a disastrous day for the once-star fund manager. Fund supervisor Link ousted the disgraced fund manager from his flagship equity income fund early on Tuesday morning, announcing it would be wound down after Mr Woodford failed to raise sufficient funds for it to safely reopen in December. The disgraced fund manager then went on to hand in his notice at sister operation Woodford Patient Capital Trust (WPCT), before announcing on Tuesday evening that Woodford Investment Management would close its doors completely as soon as the firm has fulfilled its commitments.
Marston’s (MARS) has warned that Britons are settling for a pint instead of splashing cash on eating out. The firm said that annual profits will be broadly flat as an increase in spending on drinks was offset by a poor performance on food. Shares fell almost 7% as Marston’s – which owns more than 1,500 pubs – warned profits will be lower than previously hoped over the next two years. Chief executive Ralph Findlay claimed that families are cutting back on restaurant trips amid belt tightening by consumers as political turmoil over Brexit takes its toll. He said: “People are very happy to go out and have drinks in pubs. “People going out to eat are being more cautious.”
Associated British Foods (ABF) – Primark urged shoppers to avoid buying its wares on Amazon after it emerged that some of its Harry Potter and Disney themed products are being sold for ramped-up prices. The discount retailer does not sell online. However, third party sellers, who typically buy items in bulk and then sell them for a profit, have started flogging Primark products on the platform. A Primark spokesperson said: “We do not have a commercial partnership with Amazon and any Primark products which appear on the site are being re-sold by third parties, at higher prices. We encourage our customers to visit us in our stores to find the best value.”
Tesco (TSCO), Sainsbury (J) (SBRY), Morrison (Wm) Supermarkets (MRW) – Aldi and Lidl have raked in an additional £1bn in sales over the past year as more shoppers desert rival supermarkets. The German discounters have been luring middle-class customers from the likes of Waitrose and Marks & Spencer Group (MKS) as well as the “big four” in recent years by selling products such as manuka honey and less expensive lobster. The two chains now have a combined 14% of the grocery market as they continue to open stores across the UK. That is 0.8% higher than last year and the equivalent of £1bn in sales, according to research firm Kantar. They have recently overtaken Co-op and Waitrose to become the fifth and seventh-biggest supermarkets in Britain.
National Grid (NG.) has vowed to challenge regulators after funding was slashed for a scheme linking up the Hinkley Point C nuclear power station. The firm has been told by watchdog Ofgem that it must spend £80m less than initially planned on its Hinkley-Seabank project in a bid to save bill payers money. The regulator is offering a £637m grant to National Grid Electricity Transmission to link the nuclear plant to the rest of the country. This is 11% less than the grid’s initial request for funding. The transmission giant said it would continue to work with Ofgem to ensure a fair result but will seek to change its mind.
Thomas Cook Group (TCG) former bosses have attacked ministers for standing on the sidelines as it raced to secure lifeline funding – while other European countries scrambled to offer support. Appearing in front of MPs on Tuesday, chief executive Peter Fankhauser revealed ministers from Germany, Spain, Turkey, Bulgaria and Greece had personally contacted him to offer support in the days before the world-renowned travel company collapsed. In sharp contrast, Mr Fankhauser had just one meeting with Transport Secretary Grant Shapps on Sept 9, leaving negotiations to lower ranking officials as the business went down.
The boss of Next (NXT) has sold £10m worth of shares to plough more cash into a private business he has previously backed, outside of retail. Lord Simon Wolfson, who joined the retailer in 1991 as a store assistant, sold 153,000 shares for £66 each, bagging around £10m. He still has a £90m stake in the business. A spokesman for Next said this was the first time in seven years Lord Wolfson has offloaded shares and insisted the chief executive remained committed to the business. He said: “He’s absolutely not going anywhere.”
Woodford Patient Capital Trust (WPCT) – Neil Woodford’s investment empire disintegrated yesterday as the stockpicker announced plans to shut his company after he was sacked as manager of his main fund. He said that he had taken “the highly painful decision” to close Woodford Investment Management, the firm he had set up amid much fanfare in 2014, and would abandon his remaining investment portfolios. The move came only hours after Link Fund Solutions, which handles the corporate governance of the £3 billion Woodford Equity Income Fund, said that Mr Woodford had been dismissed as the open-ended fund’s manager with immediate effect and that Blackrock and PJT Partners would wind down the portfolio.
Renishaw (RSW) reported a slump in profits and blamed weakening demand on the tough global economic environment. Renishaw said yesterday that its pre-tax profits had fallen by 85% to £5.1 million on revenue down 19% at £124.6 million in the three months to the end of September, its first quarter. The company said that its core business of high-precision measuring instruments for various industries, which represents most of group revenue, had benefited the year before from larger orders from consumer electronics manufacturers in the Asia-Pacific region, which “have not been repeated this year . . . Furthermore, we have experienced reduced demand for our products as a result of the challenging global macroeconomic environment.”
Investors in the Rank Group (RNK) were counting their winnings after the bingo and casino operator reported a 10% jump in like-for-like net gaming revenues in the three months to the end of September. Grosvenor Casinos delivered the “standout performance” with growth of 15% against weak comparatives, while digital revenues rose by 16% and its Spanish bingo business was up 4%. In the UK, Mecca bingo halls were flat as higher spend per visit was offset by lower customer numbers.
Shareholders in Prudential (PRU) overwhelmingly voted to spin off its fund management and UK insurance operation into a separately listed company at a general shareholder meeting. More than 99% of the votes were cast in favour of the demerger, in which M&G shares will be traded on the London Stock Exchange by the beginning of next week.
Demand for affordable homes and the Help to Buy scheme have insulated Bellway (BWY) from a Brexit-related slowdown in the wider market and enabled the housebuilder to report record annual profit and sales. Bellway announced revenue of £3.2 billion for the year to the end of July, an 8.6% rise on the previous year. It sold a record 10,892 homes for an average selling price of £291,968 and made an average profit of £60,833 on every sale. Total profit before tax rose by 3.4% to £662.6 million.
Indivior (INDV) gave its investors a dose of good news yesterday when it raised annual forecasts. Indivior said that its blockbuster Suboxone Film treatment had done better than expected. It had said previously that it was facing a market share hit after legal battles failed to stop generic rivals from being launched. A federal grand jury in Virginia has added to its problems, accusing the company in April of an “illicit nationwide scheme” to drive sales of prescriptions of Suboxone Film. Indivior denies the allegations. It has been profiting amid an opioid epidemic in the US.
Lord Wolfson of Aspley Guise has pocketed £10.1 million after cashing in shares of Next (NXT). Taking advantage of the recent surge in value, its long-serving boss sold 153,000 shares at £66.05 each after Tuesday’s closing bell. The share sale represented 10% of his holding. Lord Wolfson, 51, retains a stake in the business worth almost £100 million. A company spokesman said that he was using the money to invest in an existing non-retail venture.
UK-focused stocks were in favour — again — boosted by reports that British and European negotiators were closing in on a draft Brexit deal. Lloyds Banking Group (LLOY) rose 3p to 60¾p, while Royal Bank of Scotland Group (RBS) climbed by 10¾p to close at 226¼p. Housebuilders also moved higher. Barratt Developments (BDEV) rose 33½p to 683p, and Taylor Wimpey (TW.) closed up 4¼p to 166¾p. That was despite one of their peers, Bellway, cautioning that margins were likely to come under “more pronounced” pressure next year as costs rise and house price growth stalls.
Investors in Whitbread (WTB) can rest easy after UBS slapped a “buy” recommendation on the Premier Inn owner. Its shares have dropped by 15% over recent months, which the Swiss bank thinks is harsh. Despite concerns about growth in revenue per available room its analysts said that “Whitbread remains a quality business and the share price discounts a scenario which is more negative than that of the financial crisis”.
Fund managers surveyed by Bank of America Merrill Lynch reckoned that London’s stocks were the “least likely to outperform” over the next decade. “UK stocks have been out of favour with global fund managers for more than five years now, and European investors are not enthusiastic, either, with net 39% intending to remain underweight,” its latest European Fund Manager Survey said. Yet the bank likes UK equities, which it believes are “quality at a reasonable price”, providing both defensives and commodities, “a mix that has tended to outperform in the late cycle backdrop”.
Tempus – IWG (IWG): Avoid. Premium player in dynamic market, but share fundamentals are not appealing
Tempus – Playtech (PTEC): Buy. Lowly valuations for a diversifying company with opportunities
Lombard – HSBC Holdings (HSBA) 10,000 job cuts are a logical answer. Reports that interim boss is reviewing future of equities business make sense
Lex – Sophos Group (SOPH)/Thoma Bravo: cable tie. US buyer’s offer is attractive and UK fears of losing local tech expertise are overdone
US private equity group to buy Sophos Group (SOPH) for $3.9bn. Software-focused buyout firm Thoma Bravo agrees latest in series of deals
Ashmore Group (ASHM) shrugs off volatile emerging markets. $2.3bn investment loss offset by new business at emerging market specialist
Neptune Energy strikes $250m deal for Edison’s North Sea assets. Energean Oil and Gas (ENOG) to sell Italian group’s Norwegian and UK projects once it completes purchase
Superdry (SDRY) co-founder to remain as chief until 2021. Julian Dunkerton hopes to revive brand as board extends his period in top job
HSBC Holdings (HSBA) plans First Direct relaunch to compete with digital rivals. New features could include in-app marketplace and automated savings top-ups
Mike Ashley’s Sports Direct International (SPD) has called for wide-ranging investigation into the sportswear industry, complaining about the dominance of Adidas and Nike. The retailer said the ‘must-have’ brands hold a bargaining position which allows them to control supply and the price of their products. Adidas, for example, has blocked Ashley’s retail empire from selling some of its products, Sports Direct said. ‘Sports Direct believes that the industry as a whole would benefit from a wide market review by the appropriate authorities in both the UK and Europe,’ a spokesman said. Ashley’s grievance stretches as far back as 2013 when the German sportswear group withdrew replica Chelsea shirts from Sports Direct stores. The retailer said the dominance of Nike and Adidas allows them to ‘[refuse] to supply key products… with no apparent justification’.
Julian Dunkerton, the founder of Superdry (SDRY), has returned to head the fashion firm on a permanent basis after jumping back into the helm in April in an interim capacity. Dunkerton – who orchestrated a boardroom clear-out, ousting former chief executive Euan Sutherland – now has until April 2021 as chief executive to carry out his ‘design-led’ overhaul of the troubled firm. ‘Julian has agreed to continue in the role to oversee the delivery of his vision to restore the brand to its design-led roots and lead the business to sustainable growth,’ Superdry said. ‘Today’s announcement reflects the board’s unanimous view that he is the right person to lead the business through this initial crucial phase of the turnaround.’
Energean Oil and Gas (ENOG) has agreed to sell Edison’s North Sea oil and gas assets to private equity-backed Neptune Energy for up to £223million. Mediterranean-focused Energean struck a deal to buy Italian group Edison’s assets for £676million in July. This gave it access to projects in countries including Croatia, Italy and Egypt, as well as the UK and Norwegian areas of the North Sea. Energean chief executive Mathios Rigas made it clear when the Edison deal was inked in July that the company would sell divisions that were not in line with its goal of becoming a major Mediterranean oil and gas player.
Sophos Group (SOPH) is set to be snapped up by a US private equity group in a £3billion ($3.82billion) deal. Shares in the company, which sells security software to small and medium businesses, jumped 577p on the news – just a few pence shy of Thoma Bravo’s offer of $7.40 (583p) per share. The offer has been accepted by the board and the deal will now go to shareholders for approval. If shareholders vote in favour of the deal, the company will end its short spell on the London stock market, where it was floated in 2015 by its former private equity owner Apax for £1billion. Peter Gyenes, chairman of Sophos, said the takeover ‘secures the delivery of future value for shareholders today’ thanks to Thoma Bravo’s ‘deep sector expertise’. ‘Under Thoma Bravo’s ownership we expect Sophos to accelerate its evolution and leadership in next-generation cybersecurity,’ he added.
China has approved Ganfeng Lithium’s investment in miner Bacanora Minerals Ltd NPV (DI) (BCN). The Chinese group owns 29.99% of Bacanora and a 22.5% stake in its Sonora lithium mining and processing project in Mexico. Bacanora has received £22million, and Ganfeng’s vice president Wang Xiaoshen has joined its board. Chinese firms have been buying lithium deposits as demand for the metal used in electric car batteries has boomed.
Ocado Group (OCDO) shares were knocked after JP Morgan analysts cast doubt on its value. The online grocer’s shares have surged by more than 60 per cent this year in a rally spurred by a £750million partnership agreed with Marks & Spencer in February. But according to JP Morgan brokers, its £9billion market value is ‘already stretched’.  As they put it, Ocado is a ‘great concept and great execution, but running the numbers makes us less excited’. They calculate that the retail joint venture with M&S and the deals it has signed with grocers for its state-of-the-art, automated warehouses are worth £3.9billon combined – or around 40% its value. Ocado would need to announce plans to build another 126 of the fancy distribution sites to justify the current market cap, they say, versus the 38 that are in the pipeline. JP Morgan downgraded its stock from ‘neutral’ to ‘underweight’ and trimmed its target price back from 1073p to 1050p – based on their estimate that there will be a further 85 warehouses, at a value of 6.1p per share each.
Ferrexpo (FXPO) tumbled 4.55p, to 143.15p after the firm’s board backed its chief executive, billionaire Kostyantin Zhevago, amid allegations of misconduct surrounding a former business of his. Media reports last week said Ukrainian authorities were seeking to put Zhevago on an international wanted list after he failed to report for questioning about a bank he owned until 2015. He denies any wrongdoing – and the board said it understands he has not been served with any legal notices. Separately, Ferrexpo has been mired in scandal this year over questions about funds donated to a charity connected with the mining group.
Ashmore Group (ASHM) rose after the amount of losses it made in the three months to the end of September was offset by bringing in slightly more in new business. This meant its assets were virtually flat – at £73billion – when compared with the quarter before.
The founder of Hargreaves Lansdown (HL.) has accused the firm of failing in its duty to shareholders amid a row about political donations. Peter Hargreaves fell out with the investment platform last week over a planned shareholder vote on making donations to political parties. The 73-year-old billionaire made it clear he would use his 32% stake to oppose the motion, so Hargreaves Lansdown cancelled the ballot at the last minute before its annual meeting.
Neptune Energy a start-up backed by private equity and chaired by former Centrica boss Sam Laidlaw has snapped up a parcel of North Sea assets from oil and gas explorer Energean Oil and Gas (ENOG). Neptune Energy will pay $250m (£215m) for a clutch of stakes in producing wells and development projects that it described as an “important bolt-on acquisition” and an “excellent fit” with its other assets. The purchase will add an estimated 30m barrels of oil equivalent to Neptune’s portfolio in the North Sea. It includes a quarter stake in the Glengorm gas discovery in the UK’s Central North Sea, and a 15% interest in the Nova gas development in the Norwegian part of the basin.
Mike Ashley’s Sports Direct International (SPD) has hit out at the dominance of Adidas and Nike, calling for a Europe-wide investigation into the sportswear industry. The tracksuit tycoon’s FTSE 250 firm said the sector has “long been dominated by ‘must-have’ brands” and that they hold “an extremely strong bargaining position”. It added that this allows them to control both supply and product prices, including restricting ranges available to retailers, and withdrawing or refusing to supply products altogether.
Royal Bank of Scotland Group (RBS) was forced to develop its own digital bank after the failure of an audacious attempt to buy online lender Monzo, the Daily Telegraph can reveal. Senior executives from the taxpayer-controlled lender approached Monzo for talks before baulking at the price tag. Natwest owner RBS then decided it would be cheaper to set up a rival and designed mobile-focused Bó, which is gearing up to launch next month. It is the first time a large high-street bank is known to have made a move for a challenger firm, and highlights how seriously RBS and other major rivals take the threat posed by Monzo and fellow start-ups such as Revolut.
Superdry (SDRY) founder Julian Dunkerton will stay on until 2021 to help steer the retailer’s turnaround. Mr Dunkerton narrowly emerged victorious in April from a bitter battle with the retailer’s previous management. He launched a campaign to be reinstated at the helm having left the business in March 2018 after disagreeing about the design of the clothes and how its wares were sold online and in stores. Some industry observers have argued that Superdry’s travails are down to the brand losing its relevance in a fiercely competitive market. The shares have tumbled by three-quarters over the past two years.
Questor: S&U (SUS) offers a low valuation, good yield and sound risk management. One to hold. Questor share tip: the firm continues to be choosy about who it lends to: one of its two divisions has suffered just a single default on a loan
The founders of Sophos Group (SOPH) will share a £460 million payday after their company was acquired by an American private equity fund. In the latest overseas takeover of a London-listed company, Thoma Bravo agreed to buy Sophos, the cybersecurity specialist, for $3.8 billion. The San Francisco-based fund has offered $7.40 per share, worth 583p when the deal was unveiled yesterday. The deal was recommended by Jan Hruska and Peter Lammer, Sophos’s founders, and Apax Partners, its largest investor. The likelihood of a counterbid appears remote.
Julian Dunkerton plans to remain as chief executive of Superdry (SDRY) until 2021 after seizing back control of the company he co-founded, despite saying initially that he would take the job on an interim basis only. Mr Dunkerton, 54, rejoined the fashion retailer as its interim boss in April after shareholders narrowly voted in favour of his return — in turn prompting the resignations of senior directors including Euan Sutherland, the former chief executive. Superdry confirmed yesterday that he had agreed to stay on as chief executive until 2021.
Ferrexpo (FXPO) denied yesterday that its chief executive and biggest shareholder had been served with legal papers, amid reports that authorities in Ukraine have started a process to add him to an international wanted list. In the latest stage of a long-running saga, Ferrexpo said in a stock market statement that its board is “closely monitoring” the situation but has been informed that Kostyantin Zhevago “has not been served with any legal notice” and “strongly denies any allegations of wrongdoing”. A month ago, Ferrexpo denied reports that Mr Zhevago was suspected of embezzling about $100 million from Bank Finance and Credit. The Ukrainian lender, which he formerly controlled, was declared insolvent in 2015.
The new transport secretary will be questioned by MPs on why his department handed the operation of the west coast main line and the new High Speed 2 line to FirstGroup (FGP) when the company’s running of South Western Railway already had financial and operational problems. Grant Shapps is to face the Commons’ transport select committee tomorrow. Before that, the Labour Party has tabled questions in parliament, including: “What assessment, if any, of the financial performance of First Group’s existing rail franchises did the Department for Transport undertake prior to the announcement of the award of the West Coast Partnership?”
Ashmore Group (ASHM) led by one of the City’s wealthiest financiers attracted £1.9 billion of new money in the last quarter. Net inflows at Ashmore Group reached $2.4 billion in the three months to the end of September. However, assets under management edged up by only 0.1% to $91.9 billion after $2.3 billion of investment losses in the period offset the new business that the company had pulled in.
Thousands of people have signed an online petition urging Barclays (BARC) to reverse its decision to prevent its customers withdrawing cash from post offices. A campaign attacking the bank for putting profits ahead of its customers and urging its executives to think again “before it is too late” had been backed by more than 4,400 people last night. The petition, set up by the National Federation of Subpostmasters, warns that the move “will present major challenges to older and disabled people. Barclays’ actions will be damaging to customers and to a national institution — the local post office.”
Ocado Group (OCDO) shares drop as JPMorgan gets negative. They reckon that Ocado’s valuation is “stretched”, that the shares are worth 20% less than their value and there is little upside remaining in the price. “At this point we do not see risk/reward as compelling and scope for outperformance appears limited,” they said. “We downgrade the shares from ‘neutral’ to ‘underweight’.”
NMC Health (NMC) dropped after a bearish note from Jefferies, which described a surge in the share price as “unwarranted”. The hospital operator had looked set to be kicked out of the FTSE 100 after its value fell by a third in the first eight months of the year. Yet towards the end of August its shares recovered all those losses and more amid “unsubstantiated” reports that two groups, including one backed by Fosun, of China, were competing to buy a 40% stake. “We see no merit to this speculation as we believe the UK Listing Authority markets monitoring team would have likely investigated,” Jefferies said. The analysts believed that the rumours had “detracted from the fundamentals” and they repeated their “underweight” rating and £19.25 price target.
Tempus – Augmentum Fintech (AUGM): Buy. Solid portfolio should be capable of sustaining knocks and still generating good value over time
Tempus – Euromoney Institutional Investor (ERM): Hold. Quality business that at the moment feels fairly valued
HSBC Holdings (HSBA) plans First Direct relaunch to compete with digital rivals. New features could include in-app marketplace and automated savings top-ups
Morses Club (MCL) hopes path of careful change will win out on UK’s doorsteps. Business of selling credit to neighbours is under pressure from many sides
High street retailers are braced for their worst Christmas in more than a decade as they struggle with high taxes, economic fears and frenzied discounting only weeks into the season. The bosses of major chains have shared their concerns with The Mail on Sunday as Government efforts to ease the burden of tax on retailers appear to have foundered. Vital legislation designed to cut property tax for retailers in struggling high streets failed to make it though Parliament before it was closed down last week. Research by The Mail on Sunday has revealed that business rates have remained rigidly high despite rents falling as landlords cut lease demands for struggling shops. More than 12,000 high street stores are now paying more in business rates than in rent compared with around 500 in 2017, according to business rates consultants Altus.
City bosses have drawn up a plan to woo Chinese giants after Brexit and transform London into the ‘prime international location’ for Beijing firms to list their shares, The Mail on Sunday can reveal. Policymakers at the City of London Corporation – the body representing the interests of banks, insurers and other organisations in the Square Mile – believe there is an ‘urgent need’ to enhance relations with China and attract new financial services investment after the UK leaves the European Union. Documents seen by this newspaper say London is well placed to take advantage of the trade war with the United States, which has seen President Donald Trump threaten a crackdown on Chinese firms listing on its markets.
British Airways will use posts on Instagram and other social media platforms to help it pick new flight destinations. Millennials in particular are likely to choose where to go on holiday based on photos they’ve seen on social media and will consider how ‘Instagrammable’ a place or hotel is before booking. Willie Walsh, chief executive of BA’s parent firm International Consolidated Airlines Group SA (CDI) (IAG), said this had not affected decisions on flight routes before but would be taken into account in future.
BP (BP.) has warned that Hurricane Barry’s trail of destruction in the Gulf of Mexico hit production and increased its tax rate. The oil giant’s shares slipped 1.7%, or 8.45p, to 493.55p after it revealed 100,000 barrels were lost per day to the storm in July. The chaos forced the company to shut its rigs for two weeks, a trading update said yesterday. And because the storm affected a low-tax region, it meant BP had to produce more oil in regions with higher tax rates, increasing its overall bill.
Fund manager Terry Smith has been left red-faced after the brokerage firm he used to head was slapped with a £15.4million fine. Tullett Prebon, now a part of TP ICAP (TCAP), was found by the Financial Conduct Authority (FCA) to have ineffective controls around broker conduct in its rates division between 2008 and 2010. This, combined with a culture of lavish entertainment, allowed improper trading to take place. At one point, a Tullett Prebon broker claimed more than £15,000 from the company to pay for a luxury holiday to the US with his friend, a trader at a client bank. Tullett Prebon ended up paying for the ten-day trip to Las Vegas and California, during which time the broker racked up bills from dinners in expensive bars and restaurants, and hired two top-end sports cars as amusement.
The owner of airline Jet2 has lifted its profit expectations for the year after a rise in demand for flights and packaged holidays since the collapse of Thomas Cook last month. Dart Group (DTG) share price jumped following the trading update. However, the company said it remained ‘very cautious’ as the travel industry continues to face ongoing problems, including rising costs and waning consumer confidence in the face of a weaker pound and Brexit uncertainty. A weaker pound means higher costs for companies based in the UK, and also undermines the purchasing power of UK holidaymakers heading abroad.
MIDAS SHARE TIPS: Scotgold Resources (DI) (SGZ) – the Highland stock that really could be a gold mine. Midas verdict: Gold is trading at about $1,500 (£1,225) a troy ounce and economists expect it to move higher in the coming months as investors seek a safe haven. Scotgold should benefit from this trend. The company has struggled in the past, but it is close to production, with financing in place and an experienced team at the helm. For locals and lovers of the Highlands alike, there is also the appeal of supporting a successful Scottish gold mine. At 54p the shares are a buy.
MIDAS SHARE TIPS UPDATE: Ramsdens Holdings (RFX) shares rise as pawn shops that sell jewels sparkle thanks to strong gold prices. Midas verdict: The retail sector has been filled with profit warnings, shop closures and other tales of woe. Ramsdens seems to be holding its own. Its high street customers are loyal and it has a small but fast-growing online business selling jewellery and foreign currency. Ramsdens’ product range and ambition may continue to shield the business from some of the problems affecting the high street. But, with economic conditions weakening, shareholders have a right to feel cautious. Having enjoyed a 17% increase in the share price since last year, they may choose to sell half their stock and bank some gains. They can then keep the rest and hope that Kenyon continues to deliver.
FirstGroup (FGP) new chief, David Martin, the former Arriva chief who replaced ousted Wolfhart Hauser, is to meet investors at the end of a whistle-stop tour of the US on Oct 31, The Daily Telegraph understands. In his first meeting with them since taking office in August, Mr Martin will be hoping to convince investors that he has the right team and strategy in place to reinvigorate the company’s fortunes after months of disquiet. Coast Capital Management, the Wall Street activist and First’s biggest shareholder, will likely provide a stern test of Mr Martin’s resolve.
Analysts have claimed that Direct Line Insurance Group (DLG) could be heavily exposed to the City watchdog’s plan to crack down on alleged overcharging of loyal customers, with the company facing a probable one-off hit to its earnings and possible damage to its brand once regulators announce final measures next year. Britain’s home and motor insurers have all found themselves under fire, after the Financial Conduct Authority (FCA) announced a ban on companies unfairly hiking prices for existing customers – a practice known as “price walking” or the “loyalty penalty” – after finding that millions of people overpaid when renewing their insurance last year.
Lloyds Banking Group (LLOY) is understood to have stepped up its succession planning as analysts and headhunters bet that its chief executive Antonio Horta-Osorio will go within a year. Lloyds is understood to be in the­ ­“initial research” stage of finding a successor as speculation grows that Mr Horta-Osorio, who has long been tipped as a potential candidate for the top job at HSBC, is eyeing his exit. “I believe we will see Antonio move to step down from the board of Lloyds within the next 12 months,” said John Cronin, a banks analyst at Goodbody. Investec’s Ian Gordon said it would be “a surprise” if the 55-year-old stayed for more than another two years given he became CEO in 2011.
Investors in the UK’s stock market are expected to enjoy a £240bn “deal dividend” if Boris Johnson can seal a last-gasp Brexit agreement before the Oct 31 deadline. Stocks in London would rise 10% and the pound would claw back 8% against the dollar if a Brexit deal is reached, according to market stress tests conducted by data giant MSCI. Sterling and UK-exposed stocks skyrocketed into the weekend amid resurgent hopes of a breakthrough in talks between the UK and EU. The domestic-focused FTSE 250 index advanced more than 3% while RBS and housebuilders saw gains of more than 10%. Sterling gained as much as 2.8% on Friday, pushing above $1.27 for the first time in three months.
The City watchdog has fined broker Tullett Prebon £15.4m for failing to be open and co-operative with an investigation into cosy relationships between brokers and traders that included lavish golf trips and wild foreign jaunts. Tullett Prebon, now part of FTSE 250 firm TP ICAP (TCAP), had “ineffective controls around broker conduct” between 2008 and 2010, resulting in “improper” trades, the Financial Conduct Authority (FCA) found. A report found that brokers’ bonuses were tied to to how much business they generated, while the company paid for golfing trips to Scotland and trips to Monte Carlo, Ibiza and Las Vegas, all on top of the usual client drinks and dinners in the City.
“We’ll give you clarity at the full-year results,” Nick Beighton, the normally jovial boss of ASOS (ASC), sniffily told an analyst on the morning of its second profit alert in July. The first profit warning was just before Christmas. On Wednesday, when he updates the City, Beighton will have to go beyond clarity. There is “a lack of visibility” says Georgina Johanan, a retail analyst at JP Morgan. Asos has kept shtum so far about how its coffers might shape up in 2020. Once a stock market tech darling, the online retailer’s share price has slumped from highs of £76 last year to £24 on Friday. Almost 5% of its shares are on loan to shortsellers.
BP (BP.) will take a hit of up to $3bn (£2.4bn) from asset sales and warned that a storm in the Gulf of Mexico dented its production in the middle of this year. Shares in the oil giant fell 1.8% to 492.85p even as it insisted there would be no impact to its dividends or free cash flow. It comes as BP, which last week announced the departure of chief executive Bob Dudley, looks to sell off non-essential assets worth around $10bn by the end of this year – one year ahead of schedule. The company sold its entire Alaska business to Houston-based Hilcorp Energy for $5.6bn this year.
Questor: as incoming boss mulls a cleaner future, BP (BP.) strength gives him room to breathe. Questor share tip: oil major’s reserves are still highly cash generative as it plots a move away from fossil fuels. Hold
Company dividends could be under threat, with British businesses near the bottom of international league tables for dividend sustainability after a long spell of payouts growing more rapidly than profits. Dividend cover is expected to be at its lowest level in a decade this year, according to Henderson International Income Trust, an investment trust. Companies making large payouts to the detriment of capital growth may find that it becomes unsustainable, forcing them to cut dividends and to fall into a “dividend trap”. Global dividend payments topped £1 trillion for the first time last year after profits reached a record £2.3 trillion. This year dividends are expected to rise again, by 8.7% to £1.1 trillion, outstripping profit growth of 5.6%.
Legal & General Group (LGEN) new huge plant producing modular housing is one of the most ambitious diversifications attempted by the FTSE 100 insurer. “It’s taken us longer to do it than we thought, but we are very happy. The trajectory looks very positive and promising. There’s good customer acceptance now. The hard yards are over,” said Nigel Wilson CEO. He has just had to tell the Legal & General board about progress to date. Creating what the group says will be the biggest modular housing factory in the world has not come cheap: the subsidiary lost another £20.6 million last year, taking accumulated losses to almost £76 million. But Mr Wilson believes that the size of the potential prize makes the upfront cost worth it. Producing snag-free, low-cost housing on a commercial scale is the holy grail for policymakers desperate to boost new housing starts in Britain to 300,000 a year. The figure was 200,000 last year.
The number of visitors to shops continued to fall last month. Footfall on high streets and in shopping centres and retail parks is now down by 10% compared with seven years ago, according to Springboard, the retail analyst. The defection of shoppers to online retailers has added to the travails of businesses also suffering because of high taxes, weak consumer confidence and Brexit uncertainty. Shopper visits declined by 1.7% in September as heavy rain in the last week of the month led to the lowest visitor numbers to shops in any week since last year’s Beast from the East cold snap. High streets and shopping centres were hit hardest, with numbers declining by 1.8% and 3.2%, respectively. Retail parks fared better, with footfall up 0.1%.
AA (AA.) has launched a hunt for a new chairman two years after it ousted Bob Mackenzie, a former executive chairman, for punching a senior director. The motoring organisation has hired Korn Ferry, the consulting firm, to find a successor to John Leach by next summer, Sky News reported. Mr Leach, 71, joined the AA as a non-executive director in 2014 and took on the chairman role after Mr Mackenzie, 62, was dismissed for alleged gross misconduct in 2017. A legal dispute between Mr Mackenzie and the company over his removal is continuing.
Listed companies have suffered a decline in the quality and quantity of analyst coverage since new European rules were introduced, according to research that contradicts official views. The regulations, which came in at the start of last year, force brokers to charge asset managers separately for trading and research fees. This has encouraged asset managers to cut their budgets for externally produced equity research. Smaller listed companies are in danger of dropping off the radar of large institutional investors, it has been claimed, making it harder for them to raise capital and reducing liquidity in their shares. A review of the impact of the new rules — known as Mifid II — by the Financial Conduct Authority last month found “no evidence of a material reduction in research coverage”. However, in an annual investor relations survey, 52% of British companies reported a year-on-year decline in the number of analysts covering them, while 38% reported a fall in the quality of “sell-side” analyst research.
Land Securities Group (LAND) is close to sealing the £650m sale of a portfolio of cinemas, restaurants and indoor ski slopes as it builds a war chest for deals in London’s real estate market. The company is understood to have agreed to sell its 95% share of X-Leisure unit trust to private equity investor CIT. London offices make up almost half of Land Securities’ £11.7bn property port–folio, and chief executive Rob Noel, who is due to step down next year, is looking to push further into the market despite the shadow cast by uncertainty over the future of WeWork. Mike Prew of the investment bank Jefferies said the co-working provider’s rapid expansion had artificially inflated rents, and this was likely to unwind as the company slows its growth in the capital and focuses on reducing its losses.
Babcock International Group (BAB) is under pressure to replace its finance director after a tumultuous few years. At least one leading shareholder is agitating for the removal of finance chief Franco Martinelli, who has held the role for five years and spent 12 years before that as financial controller. Chairman Mike Turner, the former boss of BAE Systems, was replaced by former Shell executive Ruth Cairnie in July. Since then, the share price has partially recovered. Babcock recently won a contract to build five Type 31 frigates for the navy. Some investors, though, are understood to be pushing for more new blood, and better communication with the City over its performance.
Letter and parcel deliveries could grind to a halt at Christmas if workers at Royal Mail (RMG) agree to a strike this week. About 110,000 members of the Communication Workers Union (CWU) have been balloted over action. The results on Tuesday are expected to lead to a mass walk-out. The planned strike — over pay, conditions and employment terms — comes at a crucial time for the former state-owned monopoly. It is battling against slumping letter volumes, the rise of competitors, such as Yodel and Hermes, boardroom upheaval and Labour’s renationalisation threat. The industrial action also risks undermining the attempts of boss Rico Back to improve productivity and expand parcel deliveries.
Flutter Entertainment (FLTR) could be forced to sell brands including Paddy Power to appease competition watchdogs, analysts say. The company, which this month announced a £10bn merger with Canada’s Stars Group, could face demands for remedies from the Competition and Markets Authority to win approval for the deal, according to Canaccord Genuity. The stockbroker said the most “logical decision” would be to sell Paddy Power’s digital and retail business, given the importance of Stars Group’s Sky Betting & Gaming operation in America. While Flutter, which also owns Betfair, would want to hold on to Paddy Power, the combination with Sky Bet will mean it owns three of the UK’s top seven online betting brands, which could lead to concerns over choice. Canaccord said that any sell-off would be an emotionally “difficult decision”, given the enlarged group’s intention to have its headquarters in Dublin, where Paddy Power is based.
HSBC Holdings (HSBA) is to review its global equities sales and trading business as it tries to slash costs under caretaker boss Noel Quinn, raising the prospect of more job cuts. Europe’s biggest bank is looking to cut 10,000 jobs in Europe out of a global headcount of 240,000 — some of which will come from the sale of its French retail bank. Global equities revenues were $1.2bn (£930m) last year, equivalent to about 2% of group revenue. “Equity desks are becoming more automated — it wouldn’t be a shock if they take more bodies out,” said an investment banker. HSBC is under pressure to shrink its bloated cost base as profits are squeezed by low interest rates and unrest in Hong Kong, where HSBC makes about 80% of its money. The bank posted $52bn of income and $35bn of expenses last year.
The boss of Smiths Group (SMIN) was handed £4.1m in pay and perks after a 13% surge in profits. The base salary of £820,000 for Andy Reynolds Smith was boosted by cash and share bonus schemes totalling £3m last year, which Smiths said were mainly rewards for hitting long-term goals.
ASOS (ASC) is due to admit that pre-tax profits tumbled by 69% to £31.3m after a series of mis-steps. Although sales are thought to have risen 12% to £2.6bn, a string of profit warnings have pushed the online retailer’s shares close to a five-year low
AA (AA.) justifies private equity’s reputation for flogging threadbare companies to the stock market. CVC, Permira and Charterhouse listed the roadside assistance company in 2014. The AA was hobbled from the start. The buyout barons, which bought it from Centrica, extracted hefty dividends and loaded it with £3.3bn of debt before taking it to market. After a brief honeymoon, the shares started to drop in mid-2015 — and it has been downhill ever since. The AA has been battered by a series of problems. Pugnacious executive chairman Bob Mackenzie was ousted in 2017 after a brawl with a colleague. A profit warning last year bruised investors further. Membership has dwindled from 4m in 2014 to 3.19m last month. Earlier this month, the Financial Conduct Authority dealt another blow, warning that it may penalise insurers that capitalise on customers’ loyalty or inertia by charging them higher prices. Debt remains stubbornly high at £2.7bn, with a net debt-to-core profits ratio of 7.8 times. The AA paid £127m in interest costs last year, and a further £24m to reduce the deficit in its £2.4bn pension scheme. AA’s finances are not sustainable in the long term. When the time comes to refinance that mountain of debt, it will face crippling fees and — in all likelihood — more punitive interest rates. A rights issue at this share price is not viable, and selling assets such as its growing insurance business is a road to oblivion. It may be generating cash, but at this rate it would take decades to clear that pile. That leaves either a sale or a messy restructuring, probably involving a debt-for-equity swap. Until someone comes up with an answer, the AA is too big a risk. Avoid.