The government’s decision to award the contract to run the west coast main line and HS2 railways to FirstGroup (FGP) could end up in the courts. The Department for Transport said yesterday that it had handed a newly created super-franchise, the West Coast Partnership, to a 70:30 consortium of First Group and Trenitalia, Italy’s government-backed operator of Frecciarossa high-speed trains. The contract is due to start in December. However, the decision by Grant Shapps, the transport secretary, to hand the operation of the most high-profile and lucrative services on the network to the struggling First Group in collaboration with the Italian state railway faced criticism in the industry.
is racing to find a new auditor before its shareholder meeting in less than four weeks’ time — and could face intervention from the government if it fails. The retailer said yesterday that Grant Thornton, its long-time auditor, had resigned, less than 24 hours after Sports Direct’s annual report had said that the accounting firm had agreed to remain and shareholders had been asked to vote on its re-election. The group could be delisted from the stock exchange if it is unable to present audited accounts next year. This is uncharted territory and accounting sources have said that the Big Four firms of EY, PWC, KPMG and Deloitte could cite concerns about governance to avoid being appointed under the financial watchdog’s international standard on auditing.
The recession in the car showroom has badly punctured profits at one of Britain’s leading motor dealers. Lookers (LOOK) yesterday reported a 40% crash in half-year profits to £25 million, despite a near-3% rise in revenues to £2.6 billion. With no end in sight to the market uncertainty, Lookers said that it was holding its interim dividend at 1.48p. With margins plunging as rival dealers chase fewer available buyers with ever more cut-price deals, Lookers said that it, like many other businesses, also had been plagued by higher labour costs because of the rising national minimum wage, taxation through the apprenticeship levy and the expense of automatically enrolling employees into pension schemes.
Prudential (PRU) will complete its planned break-up by the end of this year, demerging its British division, severing its centuries-old relationship with the Bank of England and submitting to regulation by a supervisory body in protest-rocked Hong Kong. Britain’s biggest insurer declined to comment yesterday on the turmoil in the former British colony, other than saying that it was “carefully monitoring” the situation. However, it said for the first time that the demerger of M&G Prudential, its UK asset management and life assurance division, would take place in the fourth quarter, at which point the larger part of the Prudential business would switch to the Hong Kong Insurance Authority as its lead regulator.
The insurance group behind Confused.com has scaled back its pioneering venture in the United States, admitting that it has struggled to persuade Americans to buy insurance via price comparison websites. Admiral Group (ADM) reported continuing losses in compare.com, its American business, and said that a recent tweak to the official formula for calculating personal injury claims would cost it between £50 million and £60 million. The insurer reported a 4% improvement in pre-tax profits to £220 million for the first six months of the year and lifted its interim dividend by 5% to 63p.
Its strongest half-year results in years prompted a rally in Balfour Beatty (BBY) shares yesterday, albeit to a level barely changed from nearly five years ago, when its chief executive arrived. Leo Quinn, 62, the turnaround specialist brought in to rescue the group in 2014, admitted that he was “constantly disappointed” by the reaction of the markets to the company’s recovery. Yesterday it reported a 14% rise in pre-tax profits to £64 million in the first six months of the year on revenues a little better at £3.88 billion. Strong cash inflows took average net cash holdings to £290 million, 50% higher than the year before. Its order book stands at £13 billion and the interim dividend is being increased by 30% to 2.1p a share. Mr Quinn, former chief executive of Qinetiq, the defence technology group, and De La Rue, the banknote company, said: “When I came in, we were having to divest businesses to stop the haemorrhaging of cash. We had 89 distressed projects, there were no risk review processes and no proper leadership. When I arrived, the shares went up to 212p. We don’t appear to have moved much.”
Demand for privacy and antivirus products has helped Avast Software (AVST) to increase its revenue in the six months to the end of June, with the promise of more to come. The cybersecurity company said yesterday that it had lifted half-year revenue by 9.2% to $421.7 million, excluding discontinued businesses and disposals, and was raising its full-year sales guidance to the upper end of its “high-single-digit percentage” range. The news drove an upsurge in Avast shares, which rose by 28½p to a new high of 356p. The shares have increased by 46% since last year’s £3 billion flotation.
The cloud cast by global trade tensions offered a bright silver lining for Hochschild Mining (HOC) yesterday. Though profits fell in the first half of the year because of lower silver prices and weaker production, the company said that a potential revival in prices, driven by economic uncertainty, could lift its performance. The precious metals specialist said that six-month, pre-tax profits had fallen to $29.5 million from $54.9 million a year earlier. Production fell to 245,325 gold equivalent ounces, about 5% down from record high output in the same period a year earlier, after the company halted operations at its Arcata mine in southwestern Peru. The lower production, a 7% fall in the price of silver sold and only a 2% rise in the price of gold together resulted in revenues falling to $355 million from $372 million a year earlier.
Glencore (GLEN) could face a backdated tax bill after losing a case to stop the Australian taxman using information that was leaked as part of the so-called Paradise Papers. Jeremy Hirschhorn, of the Australian Taxation Office, said that the case against Glencore was a win for Australia’s taxpayers, “who rightly expect [the tax office] to use all information available to ensure large corporations are paying the right amount of tax”. The Paradise Papers are a cache of millions of confidential electronic documents that revealed how wealthy individuals had exploited offshore tax havens. First details from the papers were released in 2017 and companies named in them include Apple, Facebook, Nike and Allianz.
China reported a surprise drop in industrial output growth, rekindling fears of a slowing global economy. The figures knocked miners, as China is the world’s top metals consumer. Evraz (EVR) dropped 29p to 527½p; Anglo American (AAL) lost 75p to £17.89; Antofagasta (ANTO) fell 25p to 819¾p; and Rio Tinto (RIO) eased 56p to £40.61½. The inversion of the yield curve on UK and US government bonds for the first time since 2007, which means that short-term bonds pay more than long-term bonds, was another blow as investors worried about a possible recession. Michael Hewson, an analyst at CMC Markets, said that the data had created “a tempest in a tea pot”.
BGEO Group (BGEO) reported a 36.9% rise in first-half profit, thanks to strong lending at its retail banking business. The London-listed lender said that a flight ban imposed by Russia could slightly reduce Georgia’s GDP growth, but was unlikely to hurt the country’s economy.
Standard Chartered (STAN) said that it planned to boost its private banking assets by 50% to $100 billion in three to five years and would hire dozens of bankers in Hong Kong and Singapore to achieve it. The bank is a small player compared with UBS and Credit Suisse in terms of private banking, which accounted for 3.8% of its pre-tax profit in the first half. Despite the announcement, the shares dropped 14¾p to 607½p, dragged down by continuing protests in Hong Kong.
TLA Worldwide (TLA) is an Aim-listed marketing and management group that represents some of the world’s top sporting stars, more than tripled its share price to over 1½p after it announced the sale of its Australian businesses to QMS Sport Holdings for A$28.2 million (£15.8 million).
Petro Matad Ltd. (MATD), an oil explorer, shot up 1¾p to 7p after it received verbal approval from the Mongolian government to resume operations on its Heron-1 well. The stock is up by 135% this year.
Analysts at Bank of America Merrill Lynch advised investors to buy B&M European Value Retail S.A. (DI) (BME), which they said should see signs of improvement next year as its £39 million distribution centre in Bedford becomes fully operational. They estimated that the European non-apparel, general merchandise discount sector could be worth about €60 billion in the next decade, of which B&M could take €19 billion of sales.
Tempus – AstraZeneca (AZN): Hold. Pipeline of new medicines set to feed through to bottom line and to cut its leverage
Tempus – ITV (ITV): Avoid. Propects for new streaming service unclear amid sluggish advertising
