The Telegraph 06/12/18 - Vox Markets | Vox Markets

The Telegraph 06/12/18

Two former Tesco directors have been cleared of fraud in relation to the supermarket’s £263m accounting scandal after a judge ruled there was insufficient evidence, in what is being seen as a “significant defeat” for the Serious Fraud Office. Chris Bush, ex-UK managing director, and John Scouler, the then UK food commercial director, were accused of being aware that income was being wrongly included in the company’s financial records to meet targets and make Tesco (TSCO) look financially healthier than it was. When Tesco unveiled that it had overstated profits by £250m in October 2014 its shares plummeted by nearly 12%, wiping £2bn off its market value. The SFO began investigating the following month, brought charges against a trio of directors in September 2016 and a trial commenced the following year.

Packaging giant Smith (DS) (SMDS) has denied plans to sell its plastics division are a response to growing controversy around the material’s environmental impact as it unveiled another set of bumper profits. Excluding the plastics business, pre-tax profits rocketed 27% to £162m in the six months to October as new acquisitions and higher prices spurred 15% growth in revenues to £3.1bn. Miles Roberts, chief executive, refuted suggestions the sell-off was a reaction to the recent backlash against plastic, insisting the division, which makes crates, foam construction blocks and bag-in-a-box packaging, was a “very nice business”. He said: “The underlying demand is very strong, the business continues to grow and is profitable. It is quite a big market, we’re a good player but we see better opportunity for us to invest in our core business of corrugated boxes.”

Thomas Cook Group (TCG) ‘fundamentals remain robust’, says fund management titan. Thomas Cook’s biggest shareholder has come out fighting for the 177-year-old travel giant, blasting a stock market sell-off as an “overreaction”. As fears grow over the company’s future, Invesco insisted Thomas Cook’s “fundamentals remain robust”. Almost 60% was wiped off the company’s market value in eight days after Thomas Cook last week announced its second profit warning in two months, suspended its dividends and revealed it had opened talks with its lenders in the wake of a burgeoning debt pile. But Invesco global equities fund manager Stephen Anness said: “Much of what we heard from Thomas Cook last week was a repeat from what we already knew – that trading suffered from the exceptionally hot summer. That was exaggerated by the unexpected change to accounting, a change we very much approve of as it more clearly reflects the underlying business.”

Takeda and Shire Plc (SHP) shareholders approve £46bn pharmaceutical mega-merger. The £46bn merger between Shire and Takeda has won approval from shareholders, paving the way for the deal to be completed as early as January and creating one of the biggest pharmaceutical companies in the world. More than 88% of shareholders in Japanese company Takeda voted in favour of the acquisition, defying speculation that investors would reject the controversial deal. Anglo-Irish Shire, meanwhile, received the backing of more than 99% of its shareholders. The deal will be the largest ever foreign takeover by a Japanese firm and will rank among the 10 biggest acquisitions ever in the pharmaceutical sector. The tie-up will create a drugs powerhouse with close to £22bn of annual sales, roughly equivalent in size to AstraZeneca.

Stagecoach puts struggling US arm on the market. Stagecoach Group (SGC) insists it will not sell its troubled US coach arm “at any cost” despite swinging sharply into the red following a hefty writedown on operations across the Atlantic. The bus and rail giant announced on Wednesday that it had opened sale talks with a number of parties over the sale of all or part of its North America network. The announcement came as the company posted a £22.6m half-year pre-tax loss, principally driven by a painful £85.4m writedown of its US investment. Stagecoach also shouldered a £24.2m cost to equalise minimum pension benefits between men and women. Shares rose around 13% and the company’s valuation briefly broke through the £1bn barrier as profit margins on Stagecoach’s UK rail arm beat City expectations.

Joules sales rise as fashion brand braces for Brexit. Fashion brand Joules Group (JOUL), known for its brightly coloured designs, has taken early deliveries of its spring and summer ranges and set up a European warehouse as it braces for a no-deal Brexit. The company said that it was also preparing for increased paperwork that could result from stricter customs checks and had hedged its US currency requirements for the next year “to mitigate the expected disruption that  could arise in the event of a hard Brexit”. Joules joins the growing list of British companies, including drugs firm AstraZeneca and drinks merchant Majestic Wine, that are scrambling to stockpile products and looking for alternative routes in fear that the ports at Dover will be  thrown into chaos from increased checks.

Ryanair sued by airline watchdog over failure to pay strike compensation. Ryanair Holdings (RYA) faces a “watershed” legal bid by airline industry watchdogs to force the low-cost carrier to pay compensation to customers affected by a wave of strike action over summer. The Irish airline is refusing to reimburse passengers, claiming the industrial action across the continent amounted to “extraordinary circumstances” and that compensation laws do not apply. In April the European Court of Justice ruled that “wildcat strikes” by flight staff do not fall within the scope of “extraordinary circumstances”, which usually relates to bad weather or air traffic controller  disruption. Ryanair was hit by unprecedented levels of industrial action this summer as pilots and cabin crew launched concerted action. This came after the industry suffered from continued air traffic controller capacity shortages. Coupled with rising fuel prices, the airline admitted in October that profits have been hurt as result. And strike action has also negatively impacted passenger confidence, with fewer forward bookings made over the school half-term and  Christmas periods.

Patisserie Valerie hires finance chief to help steady the ship. Scandal-hit cake and coffee chain Patisserie Valerie has secured the services of a new finance chief after a hiatus of almost two months. Nick Perrin, the former finance director Aim-quoted veterinary company CVS, has been picked on an interim basis by parent company Patisserie Holdings (CAKE). He fills the void left by Chris Marsh, who was suspended on Oct 10 and resigned later in the month. Mr Marsh was interviewed by police as part of an ongoing fraud investigation. Led by serial entrepreneur Luke Johnson, Patisserie Valerie was plunged into crisis two months ago after revealing “significant, and potentially fraudulent, accounting irregularities”. A £40m black hole in its books was later  unearthed.

Takeover target Faroe Petroleum clinches Norwegian oil deal. Faroe Petroleum (FPM) has clinched a deal to boost its oil production in the Norwegian North Sea while battling a hostile takeover bid from its largest shareholder. Faroe told shareholders that the asset swap arrangement with Norwegian major Equinor, formerly known as Statoil, would raise its oil production by between 7,000-8,000 barrels of oil a day from next year. The Aberdeen-based producer said the output boost could allow it to return cash to shareholders and push through a sustainable dividend policy.

City adviser Numis knocked by hiring spree despite riding wave of M&A. Profits at City broker Numis Corporation (NUM) plunged 17% for the year to September as a hiring spree meant it failed to cash in on a rise in M&A activity. The company, whose clients include Aston Martin and Asos, said that extra hiring costs and “a year of investment” meant profits fell to £31.6m, despite advisory fees shooting up 21% due to a boom in takeovers. The business has traditionally won work on listings but in recent years has refocused its efforts on M&A, which generates lucrative fees and is an area previously dominated by big banks or specialist boutiques.


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Mentioned in this post

Patisserie Holdings
Faroe Petroleum
International Biotech Trust
Joules Group
Numis Corporation
Ryanair Holdings
Stagecoach Group
Shire Plc
Smith (DS)
Thomas Cook Group