The Times 15/05/19 - Vox Markets | Vox Markets

The Times 15/05/19

Europe’s biggest travel group has reported widening first-half losses amid overcapacity in Spain, Brexit uncertainty, the grounding of its Boeing 737 Max fleet and the lingering impact of last summer’s heatwave. TUI AG Reg Shs (DI) (TUI), which owns First Choice Holidays and hotel brands including Sensatori, Blue and Sensimar, said that underlying seasonal losses increased from €170 million to €301 million even though turnover rose by 1.7% to €6.7 billon. The FTSE 100 group has issued two profit warnings this year but despite today’s update it maintained its full-year guidance and insisted that it was “on track, both strategically and operationally” to deliver “another solid year”.

British Land Company (BLND) swings to loss as retailers struggle. Turmoil in the high street has wiped nearly 5 per cent off the value of British Land’s portfolio in a year. The FTSE 100 property company, whose assets include the Meadowhall shopping centre in Sheffield, said that its like-for-like portfolio valuation fell to £12.3 billion in the 12 months to the end of March. Its net asset value, a closely watched benchmark for property companies, fell 6.4% to a worse-than-expected 905p a share after its retail portfolio valuation fell 11% to £5.6 billion. It reported a loss of £319 million for the year, down from a profit of £501 million a year earlier.

Standard Life £750,000 ‘golden hello’ sparks revolt. Standard Life Aberdeen (SLA) has suffered a substantial shareholder rebellion over plans to offer its incoming chief financial officer free shares worth up to £750,000 in one of the biggest pay revolts at a FTSE 100 company this year. It is doubly embarrassing, as the fund management group also often acts as a watchdog over the governance of companies in which it invests and is outspoken on remuneration rewards. Sir Douglas Flint, the chairman, acknowledged that the 42.02 per cent vote against its remuneration report arose out of concerns over the package put together to attract Stephanie Bruce from PWC, the accountancy firm.

Dividend U-turn is tough call for new Vodafone boss. Vodafone Group (VOD) chief executive defended the decision to slash the €4 billion dividend yesterday just months after he told investors the payment was safe. The FTSE 100 telecoms group cut its dividend for the first time since 1990, reducing the shareholder payout by 40% to 9 eurocents per share. The decision to “rebase the dividend” came despite Nick Read, former chief financial officer, and Vittorio Colao, his predecessor as chief executive, having said last year that the dividend would not be affected by the €18.4 billion acquisition of Liberty Global’s cable operations in a number of European markets, including Germany.

Weak retail markets take £550m off Landsec’s property portfolio. The value of the portfolio of one of the UK’s largest listed property companies fell by more than £500 million in a year because of fallout from the troubled retail sector. Land Securities Group (LAND), which owns the shopping centres Trinity Leeds and Gunwharf Quays in Portsmouth, reported a pre-tax loss of £123 million for the year to March 31 after writing down the value of its shopping centres and other assets by £557 million to £13.8 billion. The FTSE 100 developer lost £10 million of rent from retailers over the year as struggling businesses shut shops or used insolvency procedures to cut rents. Retailers’ failures contributed to an 11.7% fall in the value of Landsec’s shopping centres to £2.6 billion, while the value of its retail parks fell by 15.5% to £636 million. The value of its London offices’ portfolio was flat, at just under £5.3 billion.

Vegan option feeds appetite for Greggs (GRG). Opening more shops away from high streets and the hype surrounding the launch of vegan sausage rolls have boosted sales at Greggs, the bakery chain. Shares in the company climbed 270p to a record £20.60 after the group lifted its earnings forecasts for the third time in less than five months. Greggs now expects annual underlying profits before one-offs to be “materially higher” than previously thought after a 15.1% rise in total sales in the 19 weeks to May 11. Like-for-like sales at company-managed shops rose 11.1%.

Capita promotes two rank-and-file workers to board. Capita (CPI), the embattled outsourcing group, has joined a select band of large companies to promote rank-and-file workers to its board. The company has ushered Lyndsay Browne and Joseph Murphy into the boardroom, where they will earn £64,500 a year on top of their salaries. The pair beat competition from about 400 other internal candidates. Ms Browne, a finance manager who has been at Capita since 2003, and Mr Murphy, a project manager in its real estate division, will continue in their current roles. Capita said it would make “time allowances” for the pair to fulfil their responsibilities as directors.

Amazon teams up with Next (NXT) for click and collect. Amazon customers will be able to collect their orders from Next shops after the US online retailer and UK high street chain launched a “click-and- collect” partnership. After a pilot scheme the service is being offered across hundreds of Next shops. Amazon’s vision is to attract so many other retail partners that a “counter” location will be only a short walk or drive away from each customer. The online shopping giant already offers 2,500 self-service lockers at libraries, post offices and shops to which customers can have purchases delivered. Now it has created an app so that shop staff can quickly process barcodes on behalf of the company. A similar service is already in operation in Italy.

Mr Kipling owner takes hit from pension ruling. The food group behind Mr Kipling cakes and Ambrosia custard sank to a pre-tax loss of £42.7 million for the full year on the back of new pension rules treating women on a par with men. Premier Foods (PFD) estimated the cost of equalising benefits dating back to the 1990s at £41.5 million. It is one of the first big employers to reveal the cost of the High Court judgment handed down in October in a case involving Lloyds Banking Group, relating to the rights of those contracting out of the state earnings related pension scheme.

A precision engineering company has issued a profit warning for the second time in eight weeks, blaming a slowdown in consumer electronics manufacturing in China and a downturn in the semiconductor market. Renishaw (RSW), which is based in Gloucestershire, said that given “recent order trends and customer feedback” it was downgrading its pre-tax profit guidance to between £111 million and £126 million for the year to June. That was down from a range of £123 million to £141 million in March and original expectations in January of between £146 million and £166 million.

BHP embraces nickel as car industry goes electric. The world’s biggest mining company is to keep its nickel mines, anticipating growing demand for electric vehicles. BHP Billiton (BLT) had planned to sell Nickel West in Australia in 2017 but now sees the division as a “future growth option”. Andrew Mackenzie, chief executive, said: “Developments such as climate change and dramatic shifts in technology present both challenges and opportunities.” He said that the company was monitoring strategic themes such as decarbonisation and the electrification of transport.

Pubs group Ei brings cheer to investors. Britain’s biggest pub company announced a fresh £30 million share buyback and promised to return 50 per cent of future available cash flow to its shareholders. EI Group (EIG), formerly Enterprise Inns, has committed to return £85 million this year, some of which will come from the proceeds of the £332.7 million sale of its commercial property division. Simon Townsend, 57, chief executive, played down suggestions that it might resume dividend payments, suspended a decade ago, but confirmed there would be regular cash returns, probably via buybacks.

Metro Bank (MTRO) shares bounced off a record low yesterday as investors regained confidence that it will be able to carry out a £350 million capital raising. Metro Bank is understood to be in talks with institutional investors and sovereign wealth funds about the fundraising. A market source said investors had begun to think the capital-raising could take place at the current share price so fears of a big discount were receding. Investors were also pleased at the lack of any further reports, which emerged at the weekend, of customers withdrawing their cash.

Euromoney Institutional Investor (ERM) jumped 108p to close at £13.90 ahead of its trading update tomorrow. Peel Hunt, the broker, issued an “add” recommendation with a price target of £14.75 ahead of the update. Analysts said additional liquidity and higher free float since Daily Mail and General Trust sold its 50% stake should raise Euromoney’s profile with international investors. A “robust marketing campaign” could see any perceived overhang from involuntary new share owners seeking to sell “mopped up”, they added.

Conygar Investment Company (CIC) dropped 5½p to 147½p after its interim results worried investors. The company said its net asset value, a closely watched benchmark for property companies, fell 11.3% to 178½p per share in the six months from September. This was largely down to an £18.5 million writedown of its 86-acre development in Pembrokeshire because of weak demand from housebuilders.

Portmeirion Group (PMP) lost a quarter of its market value after warning that pre-tax profits would be “significantly below” market expectations. The pottery company cited problems at its South Korea business, where export market sales were lower than expected. “We have been working with our Korean distributor on new product development during 2019 which we see as critical to protect and grow this market for the long term,” the company said. “However, this new product development, by nature, will take time to bring to market and optimise for manufacturing efficiency.” The company said it did not expect the revised profit guidance to affect its dividend payments this year.

 

Tempus – Anglo American (AAL): Buy. Well-balanced, efficient producer, disciplined on costs and attractively priced shares

Tempus – Quilter PLC (QLT): Buy. Lots of growth potential and the shares should recover

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Mentioned in this post

AAL
Anglo American
BLND
British Land Company
BLT
BHP Billiton
CIC
Conygar Investment Company
CPI
Capita
EIG
EI Group
ERM
Euromoney Institutional Investor
GRG
Greggs
LAND
Land Securities Group
MTRO
Metro Bank
NXT
Next
PFD
Premier Foods
PMP
Portmeirion Group
QLT
Quilter PLC
RSW
Renishaw
SLA
Standard Life Aberdeen
TUI
TUI AG Reg Shs (DI)
VOD
Vodafone Group