The Times 16/04/19 - Vox Markets | Vox Markets

The Times 16/04/19

Employment hits record high and wage growth outpaces inflation. The number of people in work has reached another high and wages are growing at their fastest pace since the Brexit referendum despite a slowdown in the economy. The Office for National Statistics said 32.71 million were now in employment, after a rise of 179,000 people in the three months to the end of February, the highest since 1971. Unemployment fell by 27,000 to 1.34 million, putting the rate at 3.9 per cent, the lowest level since 1975. In explaining the robust performance of the labour market, economists pointed to the flexibility of the British labour market. It is easier and cheaper to recruit workers to meet demand than to commit to extra business investment, which has been falling.

JD defies high street gloom with record results. JD Sports Fashion (JD.), Britain’s biggest sportswear retailer, has overcome a challenging market in the UK to report record annual profits. Pre-tax profits rose by 15% to £339 million on the back of a 49% jump in revenue to £4.7 billion in the year to February 2. Like-for-like sales at its JD Sports stores rose by more than 6%, with double digit growth in Europe and Asia. Peter Cowgill, the executive chairman, said that while the company was “not immune” to challenges in the British retail market, such as lower footfall and increased labour costs and business rates, its UK and Irish business had delivered a rise in sales and profits.

Galliford Try’s shares fell by almost 20% in morning trading after the builder issued a profit warning and launched a review of its construction business. Galliford Try (GFRD) said that it expected its full-year pre-tax profit to be between £30 million and £40 million below analysts’ forecast of £156 million. The board expects the review of some legacy and current projects, as well as the costs of a restructure, to reduce its profits. The largest single element in the reduction in profit was attributed to payments related to its work on the Queensferry Crossing road bridge near Edinburgh, which was completed two years ago. The outcome of the review and a further update on trading is due to be published on May 21.

Aston Martin seeks spark as shares fall. Aston Martin Holdings (AML) new electric to be unveiled today as the carmaker seeks to revive its stalling performance. The company was listed in London at £19 a share late last year, but the stock has since crashed amid worries over future sales, Brexit and costs. The shares closed at 937p yesterday, meaning that almost £2.2 billion in shareholder value has been erased in little more than six months. Aston Martin has high hopes for its new DBX sports utility vehicle as well as its electric car, which is one of many electric launches at the show.

Legal & General Group (LGEN) – Fund giant Legal & General Investment Management ups pressure over corporate governance. Britain’s biggest fund management firm opposed proposals tabled by almost 400 UK companies last year, a sharp increase on the previous 12 months, as it pushed to improve corporate governance. Legal & General Investment Management voted against at least one resolution put to shareholders at 386 British companies in 2018, including one abstention. This marked a 53% increase on the 252 companies where it rebelled in 2017. LGIM is the fund management division of Legal & General, the insurer. It looks after about £1 trillion of savings and investments and is among the biggest investment firms in Europe.

We broke law on dividends, says Keywords. A video games company has admitted that it broke the law after handing millions of pounds in dividends to investors. Keywords Studios (KWS), which provides services to computer games developers, said that it had breached the Companies Act with a series of payouts between 2014 and 2016. The business, which is listed in London but based in Dublin, said that it had failed to move “sufficient distributable reserves” into its main holding company during the period. It also had failed to file accounts with Companies House before paying out its interim dividend, as required by law. It described the errors as “technical breaches” and insisted that “no party has been or is in a worse position as a result of these oversights”. It will put several votes to investors at its forthcoming annual meeting to rectify the shortcomings.

Regus office firm owner IWG (IWG) breaks model by sealing deal with TKP Corporation of Japan. The workspace company behind the Regus brand has sold its Japanese business in a deal that marks the start of a shift towards a new franchise business model. IWG said that it had struck a partnership with TKP Corporation, under which the Tokyo-listed company had paid £320 million in cash for 130 co-working centres. The deal also involves a long-term franchise agreement, providing TKP with exclusive rights for the use of IWG’s Regus, Spaces and Open Office brands in the country. IWG also will receive a fee for providing services to its Japanese partner, such as international sales, marketing and technology support. The City welcomed the deal, the valuation of which surpassed expectations, and forecast that IWG was in a position to clinch similar transactions in other markets that in turn could trigger returns to shareholders.

Edward Bramson appeals to Barclays investors. The activist investor trying to join the boardroom at Barclays (BARC) has made a fresh plea to shareholders to back his campaign. Edward Bramson, whose Sherborne Investors vehicle owns 5.5% of Barclays, wants other shareholders to elect him as a non-executive director at the bank’s annual meeting on May 2. “An alternative voice on the board would seem to be healthy for the company and its shareholders,” Sherborne said in its latest open letter to other Barclays investors yesterday.Mr Bramson, 68, believes that the bank should shrink its underperforming investment bank, putting him on a collision course with Jes Staley, 62, Barclay’s chief executive, who has made the division central to his plan to revive the company.

Brexit is no brake for recruiter Robert Walters (RWA). A leading recruitment group has brushed aside fears that uncertainty caused by Brexit will slow the jobs market by reporting a 10% rise in fees for its UK operations. The increase in net fee income in Britain, which makes up about a quarter of Robert Walters’ turnover, represents an improvement from the 2% growth reported in the final three months of 2018. The company, which takes its name from its founder and chief executive, operates in 30 countries and employs almost 4,300 people. It is one of the large listed recruitment companies, alongside Page Group and Hays.

Rio Tinto pours extra cash into American copper mine. Rio Tinto (RIO) has pledged another multimillion-pound investment in a vast copper project in the United States as it seeks to capitalise on the rise in demand for electric vehicles. The London-listed Anglo-Australian company and BHP Billiton (BLT), its joint venture partner in the Resolution Copper project in Arizona, have committed an additional $302 million, bringing the total invested since 2004 to more than $2 billion. Rio is the senior partner on the project, with a subsidiary holding a 55% stake in the vehicle behind it and an offshoot of BHP 45%.

Sub-prime merger is facing further delay. The mergers watchdog has delayed the next steps of an attempted hostile takeover of Provident Financial (PFG) by Non-Standard Finance (NSF) while the competition regulator considers the impact of combining the sub-prime lenders. The Takeover Panel said that tomorrow’s deadline for Provident to publish new information related to the bid would be delayed until two days after a decision by the Competition and Markets Authority. The CMA has been considering whether to investigate the proposed deal and it issued an enforcement order to stop the companies from integrating until it had completed its work. No date has been set for the CMA to give its decision, but the Takeover Panel also has extended the last date for Non-Standard Finance to publish a revised offer for Provident, although it added that the first closing date for an offer on May 8 would not be changed.

Crisis forces Kier boss into overhaul. Kier Group (KIE), the construction and local council services group, said that its new chief executive — who started work yesterday — would embark on a “strategic review” of the company’s struggling businesses. One of the great beneficiaries of the private finance initiative, Kier builds and maintains public infrastructure such as roads, hospitals, schools, student accommodation, prison facilities, airport buildings, offices, retail parks and affordable homes. It is also one of the largest household refuse collectors and is a main contractor on the construction of the HS2 rail link between London and Birmingham.

Next (NXT) shares were on the rise, gaining 72p to £56.88 amid growing confidence in the City that it should have benefited from an early spring. Jefferies stoked expectations ahead of a first-quarter trading update on May 1, telling its clients that Next “should confirm a strongly weather-boosted start” to 2019. Its analysts highlighted industry reports of healthy demand for clothing during February and March and they expect full-price sales growth of 3.7% during the first three months of the year — “well ahead” of Next’s annual guidance of 1.1% — with in-store sales down by 5.4% and online sales climbing by 13.2%. Jefferies, which maintained its “hold” rating and increased its target price from £46 to £52, warned, however, that there were downsides to an early spring. It said: “While supportive trading conditions at the start of the season bode well for markdown needs later in that same season, we are also aware of the extent to which Next expects [second-quarter] sales softness to balance out a buoyant [first quarter].”

Investors took a punt on Paddy Power Betfair (PPB), which is poised to change its name to Flutter Entertainment after its annual meeting next month. Goodbody, the Irish broker, believes that the gambling company is best placed to capitalise after the US Supreme Court paved the way for the legalisation of sports betting across the country. It highlighted Fanduel, one of the largest sports betting companies in America, which Paddy Power swooped on last year. The business “is in a prime position to obtain a podium position” in the United States, Goodbody said. “Product and marketing are the two things any business has to get right in online sports betting and [Fanduel] is already ahead on both fronts.”

WPP (WPP), the world’s largest advertising company, rose 13¼p to 885¼p as a deal by Publicis drew the sector into focus. The Paris-based company said over the weekend that it had agreed to pay $4.4 billion for Epsilon, a data-focused digital marketing agency.

Production woes rock Acacia. Shares in Acacia Mining (ACA) fell by almost 13% after the precious metals miner revealed a sharp dip in gold production. The company maintained that it was on course to deliver its annual production forecasts, despite issues at its North Mara mine in Tanzania. Gold production at the site fell by 14% to 66,324 ounces in the first quarter. Acacia attributed the drop to an unexpected rock movement at its Gokona underground mine and the breakdown of an excavator at its Nyabirama open pit. Analysts said that total gold production had failed to meet expectations in the first three months, falling by 13% to 104,899 ounces. Acacia is in the midst of a lengthy tax dispute with the Tanzanian government, which banned the export of mineral concentrates in 2017. It has since cut its output by a third. Peter Geleta, 55, interim chief executive of Acacia, said that “unanticipated production issues” had hit production. “We have taken immediate steps to address these, introducing a revised mining plan in mid-March,” he said.

Tempus – City of London Investment Group (CLIG): Buy. High-quality portfolio, carefully managed, generates strong and consistent returns over long run

Tempus – Aston Martin Holdings (AML): Avoid. A string of uncertainties could further depress shares

twitter_share

Mentioned in this post

ACA
Acacia Mining
AML
Aston Martin Holdings
BARC
Barclays
BLT
BHP Billiton
CLIG
City of London Investment Group
GFRD
Galliford Try
IWG
IWG
JD.
JD Sports Fashion
KIE
Kier Group
KWS
Keywords Studios
LGEN
Legal & General Group
NSF
Non-Standard Finance
NXT
Next
PFG
Provident Financial
PPB
Paddy Power Betfair
RIO
Rio Tinto
RWA
Robert Walters
WPP
WPP