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

The Times 06/12/18

Bookmakers agree to stop advertising during live sports on TV. Some of Britain’s biggest bookmakers are poised to agree a voluntary ban on advertising during live sports broadcasts following growing concerns over their impact on children. The Remote Gambling Association (RGA), which includes Bet365, GVC Holdings (GVC) which own Ladbrokes, William Hill (WMH) and Paddy Power Betfair (PPB) among its members, is understood to have agreed the outline of a collective move to stop advertising during live sports on TV. Although a formal deal has yet to be signed off the mooted “whistle-to-whistle” ban is a response to growing concerns that the weight of advertising on TV is “normalising” betting, contributing to problem gambling and fuelling under-age gambling. The proposal is similar to one put forward by the Labour Party and Tom Watson, the party’s deputy leader, said he was delighted at the news. “With over 430,000 problem gamblers in the country, many of them children, the number of adverts during live sports had clearly reached crisis levels,” he said.

 

Thomas Cook flies thanks to sharp change in outlook. Investors sprang to the defence of Thomas Cook Group (TCG) yesterday, sending its shares up by 51% as the travel operator shrugged off concerns about its debts. Invesco, the fund manager that owns 15.2% of Thomas Cook, dismissed the sharp fall in the company’s share price since a profit warning last week as an “overreaction”. The shares were given further votes of confidence by Frank Meysman, the company’s chairman, who bought £80,400 of shares, and by a string of stockbrokers, which issued positive research notes. The turnaround in sentiment comes after a torrid week in which the company’s second profit warning in two months sent the stock tumbling from 48½p to 22¾p over six days of trading.

Exodus? What exodus? City offices in demand. Remember the scare stories? Many bankers, politicians and analysts predicted that Brexit would prompt an exodus of financial services jobs and businesses, weakening the City’s dominance as a global financial centre. Yet with less than four months to go before Britain is set to leave the EU, banks and financial services companies are looking for more new office space in the City than at any time since 2015, according to JLL, the property services company. The sector is actively looking for a combined 2.4 million sq ft of office space, 37% of total demand and higher than any other sector. Many of those requirements are driven by lease expiries, but some represent an expansion.

Capita invites its workers to join board for £65,000 a year. Capita (CPI) has invited 70,000 employees to apply to join its board as non-executive directors, becoming the first FTSE company since the 1980s to appoint workers to its board. The two successful employees, who must have worked for Capita for at least two years, will be paid an additional £64,500 on top of their existing salary. They will take on full boardroom non-executive duties as well as keeping  their day job. The appointment of worker-directors on big companies was one of the key ideas of Theresa May when she became prime minister in 2016. However, after a cool reception from the business community — which had not been consulted before the announcement on the steps of  Downing Street — Mrs May has quietly dropped the initiative. Capita’s plan is the work of Jon Lewis, who was appointed chief executive of 12 months ago. He hopes for applications to come in “from Colwyn Bay to Cape Town”.

Ted Baker boss alleged to have pushed worker in wedding row. The founder of Ted Baker (TED) allegedly pushed an employee against a wall in a row because he was not invited to the staff member’s wedding. Ray Kelvin is then alleged to have reached a compromise agreement and to have paid a sum of money to the employee when he subsequently left the business after the bust-up. It is the latest allegation to be made against the entrepreneur, who has been accused in a petition by staff of “forced hugging”, making “sexual innuendos” and “stroking people’s necks”.

Shareholders snub Takeda family to back £46bn Shire deal. One of the biggest global pharmaceuticals mergers and acquisitions to date is set to complete next month after Takeda shareholders backed the £46 billion takeover of Shire Plc (SHP). In a general meeting in Osaka, at least 88% of voting shareholders backed the Japanese drugs company issuing new shares as part of the deal, despite opposition from some members of the founding family. The vote paves the way for Takeda to finance what will be the largest overseas takeover by a Japanese company. A group of rebel shareholders, led by members of the Takeda family, including a former chairman, had come out publicly against the deal. They had said that the cash-and-shares buyout was too risky for Takeda and that the company could expand by  developing its own drugs pipeline.

Stagecoach considers selling US business. Stagecoach Group (SGC) has been driven into the red after writing down the value of its struggling US business amid discussions about selling its American operations. Stagecoach first moved into the American market with the $1.8 billion takeover of Coach USA in 1999. Within three years, however, the company found that it had vastly overpaid for the business, took a $550 million writedown and dismantled large parts of it. That prompted a spectacular crash in Stagecoach’s stock price to a penny share and did for its chief executive, Keith Cochrane, who left but re-emerged 15 years later at the centre of the Carillion collapse.

Commodities giants accused of bribery. Three of the world’s biggest commodities traders have been accused of paying bribes to Brazil’s national oil company. Brazilian prosecutors have alleged that trading companies including Glencore (GLEN), Vitol and Trafigura paid more than $30 million to employees of Petrobras in order to obtain “more advantageous prices and sign contracts more frequently”. They alleged that senior executives at the international companies had “total and unequivocal” knowledge of the scheme and that the details being made public were the “tip of the iceberg”. Brazil has been gripped by a corruption scandal that began in 2014 with allegations that Petrobras executives had accepted bribes and defrauded the company.

Debenhams passes its own stress tests. Debenhams (DEB) has conducted various stress tests that show it will operate as normal and meet its debts within the next three years. The struggling department stores chain published a “viability statement” in its annual report, in which it assessed the long-term viability of the company over a three-year period to August 28, 2021. It said that it had selected the three-year span because it covered a period where the retail industry would have to adapt to significant change and uncertainty after Brexit. Debenhams said that in the wake of the assessment, the “board is in agreement that Debenhams is a viable business” and that the directors have considered the resilience of the retailer by taking into account its  “current position and historical financial performance, the principal risks facing the business in severe but theoretical scenarios, and the effectiveness of any mitigating actions”.

Patisserie Valerie turns to temporary finance chief. An interim finance boss has been parachuted into the company behind Patisserie Valerie after the resignation of Chris Marsh in October amid the discovery of “significant and potentially fraudulent accounting irregularities”. Patisserie Holdings (CAKE) said that Nick Perrin, until recently finance director of CVS, the veterinary group, had been appointed as interim chief financial officer pending the appointment of a permanent replacement. He will not join the board. Mr Perrin, 58, who spent almost six years at CVS, also has held finance director roles at Genting Casinos UK and the Co-operative Group’s  specialist retail division. He trained and spent 13 years with PWC and has a degree in economics and social studies from Manchester University.

Faroe Petroleum plans asset swap to lift production. Equinor and Faroe Petroleum (FPM) have agreed a deal to swap stakes in several Norwegian North Sea oil and gasfields, adding up to 8,000 barrels per day of production for Faroe but provoking thinly disguised scepticism from its would-be buyer. DNO, the Norwegian oil company that is Faroe’s biggest shareholder, launched a hostile £600 million takeover bid for the Aberdeen-based producer last month. Yesterday it said that it would take time to assess the merits of the transaction, but questioned if Faroe was  making the right call. “We need to ask if this is good value for a company seeking growth,” DNO said.

Kraken delays apply brake to EnQuest (ENQ) in North Sea. Technical problems and drilling delays at Enquest’s principal North Sea site are likely to result in the company’s oil and gas production growing by less than expected next year. Enquest said yesterday that the Kraken field, which started up in June 2017, continued to be affected by “a small number of system outages and equipment repairs”, while a drilling rig for a new well at the project also had been  delayed. The company said that it was making “conservative assumptions” and that it expected to produce between 30,000 and 35,000 barrels per day from Kraken in 2019, less than analysts had expected. Despite the setback, Enquest said that it expected total production to grow to between 63,000 and 70,000 barrels of oil per day in 2019, up 20% on the 54,000 to 56,000 barrels per day expected this year, thanks to its acquisition of Magnus, Britain’s most northerly oilfield, from BP.

Joules jolts City with strong half. After a big fall in its share price this year, the City was probably nervous, yet Joules Group (JOUL) cheered the market with a better first half than expected. The clothing and footwear retailer said yesterday that its revenues had risen 17.6% to £113.1 million in the 26 weeks to November 25. Retail sales were up 21.2% driven by online, which accounts for nearly 50% of all retail sales. Joules expects its underlying pre-tax profit to be slightly ahead of expectations.

There are plenty of people suggesting that the roof will fall in after a disorderly Brexit, but yesterday talk of a deal being agreed between Westminster and Brussels was enough to give housebuilders’ shares a much-needed boost. A no-deal Brexit may well hurt the sector as it would dampen consumer confidence, push sterling lower and increase labour and building costs. The Bank of England has warned that house prices could fall by 30% in the event of this hardest of Brexits. Yet analysts at Barclays said they thought that the recent share price  weakness of the big builders had already been factored in with a house price fall of about 8% and a drop of about 30% in transactions. They expect a surge in shares if a deal is agreed. Analysts at JP Morgan increased their probability of “no Brexit” at all from 20% to 40% and decreased their expectation of a “no-deal” Brexit from 20% to 10%. This lead to a jump in shares of larger and midcap housebuilders. Persimmon (PSN) led the way in the FTSE 100, closing 131½p, or 7%, up at £19.95½. Berkeley Group Holdings (The) (BKG) rose 193p, or 6%, to £34.23, Barratt Developments (BDEV) added 23p to 473¾p and Taylor Wimpey (TW.) put on another 5½p to 137p. In the FTSE 250, Bellway (BWY) rose 143p to £26.45, Crest Nicholson Holdings (CRST) added 12p to 337p, Bovis Homes Group (BVS) closed 31½p stronger at 880p and Redrow (RDW) ended 28½p higher at 496¼p. Traders said there were signs that hedge funds were covering short positions before the vote next week, which helped to push builders’ shares higher.

GlaxoSmithKline (GSK) fell 52¼p to £14.59 after Barclays downgraded its rating to “equal weight” in response to the $5.1 billion acquisition of Tesaro, an American cancer drug specialist. Further pressure was added to the stock after Moody’s changed its outlook for the company to “negative” from “stable” on the back of the deal.

NewRiver REIT (NRR), the FTSE 250 property investment company generally best known as a shopping centre operator, is understood to have agreed terms on the purchase of a package of about 76 tenanted pubs from Heineken in a deal worth an estimated £12 million. Its brings New River’s total pub estate to about 630. None of the parties would comment. Shares in New River Reit closed up ½p at 224½p.

An Aim-quoted biotechnology company backed by Neil Woodford has agreed an all-share merger with an American rival. Mereo Biopharma Group (MPH) and the California-based Oncomed Pharmaceuticals said that the tie-up to create a $230 million company was backed by the boards of both companies. The combined group would have seven assets in its portfolio at the clinical trial stage and a cash position of $115.5 million. Mereo shareholders are set to own about three quarters of the merged business. The combined group will have a dual listing in Britain and America. Shares in Mereo closed up 6p at 196p. Oncomed shares in New York have more than halved since October.

Tempus – Hiscox Limited (DI) (HSX): Hold long term. Efficient and well-run, with attractive and solid long-term growth opportunities

Tempus – Monks Inv Trust (MNKS): Buy long term. Diversified portfolio well placed to perform long term

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Mentioned in this post

BDEV
Barratt Developments
BKG
Berkeley Group Holdings (The)
BVS
Bovis Homes Group
BWY
Bellway
CAKE
Patisserie Holdings
CPI
Capita
CRST
Crest Nicholson Holdings
DEB
Debenhams
ENQ
EnQuest
FPM
Faroe Petroleum
GLEN
Glencore
GSK
GlaxoSmithKline
GVC
GVC Holdings
HSX
Hiscox Limited (DI)
JOUL
Joules Group
MNKS
Monks Inv Trust
MPH
Mereo Biopharma Group
NRR
NewRiver REIT
PPB
Paddy Power Betfair
PSN
Persimmon
RDW
Redrow
SGC
Stagecoach Group
SHP
Shire Plc
TCG
Thomas Cook Group
TED
Ted Baker
TW.
Taylor Wimpey
WMH
William Hill