The Telegraph 13/08/19 - Vox Markets | Vox Markets

The Telegraph 13/08/19

M&C Saatchi (SAA) has been punished by investors after admitting failings in its accounting had triggered a one-off charge of £6.4m. M&C Saatchi, which operates an international network of agencies, said that an internal audit of accounting at some of its British subsidiaries had uncovered £4.9m of “specific issues”. The company said it had set aside a further £1.5m to cover any further problems that may be uncovered by outside investigators in a further ongoing review. The accounting failings relate to revenue recognition policies that were flagged up in May by KPMG, M&C Saatchi’s auditor, as “over-aggressive”.

Rolls-Royce Holdings (RR.) is facing further worries after parts from one of its troubled Trent 1000 engines appeared to drop from a jet taking off in Rome. Shares in Rolls fell more than 3% in early trading on Monday following reports of the incident, which took place as the Norwegian Boeing 787 took off on Saturday. According to local reports and images on social media, 25 cars and a dozen houses in the Rome suburb of Fiumicino were damaged by fragments from the aircraft. High-temperature pieces of the engine, ranging from about two to four inches in length, were reported to have fallen from the 787 as it was climbing through 1,200ft shortly after take-off. Rolls has so far earmarked £1.6bn to sort out problems with the Trent 1000 since issues with it first emerged in 2016.

Thomas Cook Group (TCG) had another fifth wiped from its value after revealing it is in discussions with its bondholders to inject £150m into the company on top of previously revealed plans for its banks and largest shareholder, Fosun, to pump in £750m as part of a rescue plan. The additional £150m would give the ailing tour operator “further liquidity headroom” to help it get through the winter months, traditionally a tough season for the sector, the company said. The discussions with bondholders were first reported last week. The announcement brings to £900m the amount that Thomas Cook hopes to raise from Chinese firm Fosun, its banks and bondholders. It hopes to implement the arrangement in early October. The talks raised fears that existing shareholders in the 178-year-old travel group would be wiped out. The company said on Monday that existing shareholders were “expected to be significantly diluted” by the deal but may be allowed to participate in the recapitalisation on terms to be agreed by Thomas Cook, its creditors and Fosun.

Tullow Oil (TLW) revealed a “potentially transformational” oil discovery off the coast of Guyana, causing the value of its partner in the country – Eco (Atlantic) Oil & Gas NPV (DI) (ECO) – to rocket. The discovery, which could exceed 100m barrels, was made in the Jethro-1 well, more than a half a mile below the sea. It lies in the Orinduik block, in which Tullow owns a 60% stake. Eco owns 15% of the block and its shares soared. “This substantial and high value oil discovery in Guyana is an outcome of the significant technical and commercial focus which has underpinned the reset of our exploration portfolio,” said Paul McDade, Tullow’s chief executive. “It is an excellent start to our drilling campaign in the highly prolific Guyana oil province.” The companies hope that further drilling at nearby sites will uncover similarly bountiful reserves. Analysts at Jeffries said that Tullow had “proved its exploration credentials once again”.

Acacia Mining (ACA) rose after the Tanzania-focused miner was given permission to resume exports for its North Mara gold mine. Tanzanian authorities had ordered production to stop while they undertook an investigation into its operation.

The financial watchdog is looking into last week’s “bear attack” on litigation funder Burford Capital (BUR) by US short seller Muddy Waters. The short selling saga erupted when Muddy Waters issued a cryptic tweet last Tuesday, saying it was entering a “blackout period” and would announce “a new short position on an accounting fiasco that’s potentially insolvent and possibly facing a liquidity crunch”. Burford’s shares immediately tumbled, even before it was revealed as the target of the attack in a report published on Wednesday. Muddy Waters accused Burford’s management of “aggressive and unwarranted” valuations of undecided legal cases it had funded, manipulating its return metrics, and “laughter-inducing” governance. A spokesman for the Financial Conduct Authority (FCA) said: “The FCA has been aware of these matters since the first tweet and price movements on Tuesday of last week and at that point we began undertaking wide-ranging enquiries. We will continue to make enquiries using the wide range of data and resources at our disposal,” it added.

HSBC Holdings (HSBA) biggest shareholders are divided over the bank’s next steps after its board stunned the City last week by ousting chief executive John Flint. Two top 15 investors told The Daily Telegraph that they want to see a wider boardroom reshuffle amid fears nobody on the current board will challenge chairman Mark Tucker. “With the exception of Tucker they are a pretty dull bunch and Tucker will dominate,” said one investor. “You don’t want the chairman running the show. For what is a huge global bank, it should have a better slate of non-executives”. Another major shareholder agreed that stronger characters need to come into the fold, adding: “We really pressed Tucker on the [Flint] appointment as we felt something like this could happen”. Mr Flint’s surprise exit was announced a week ago, only 18 months after he took on the job.

Questor: this franchising firm has bags of ambition and is already profitable. Buy. Questor share tip: Franchise Brands (FRAN) founders are Domino’s Pizza alumni so they know how to make the business work

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Mentioned in this post

ACA
Acacia Mining
BUR
Burford Capital
ECO
Eco (Atlantic) Oil & Gas NPV (DI)
FRAN
Franchise Brands
HSBA
HSBC Holdings
RR.
Rolls-Royce Holdings
SAA
M&C Saatchi
TCG
Thomas Cook Group
TLW
Tullow Oil