The Times 16/05/19 - Vox Markets | Vox Markets

The Times 16/05/19

Thomas Cook seeks to allay fears of cash crunch after profits warning. The turbulence that has buffeted Thomas Cook Group (TCG) over the past year intensified today as the travel group issued a fresh profit warning and reported a half-year loss of almost £1.5 billion after a goodwill write-off of £1.1 billion. Shares in the 178-year-old tour operator, already down by more than 80% over the past 12 months, slumped by a further 15.6%, losing 3½p to 19½p — close to the level they plunged to in 2012 when the company came close to collapse. The value of its debt also fell further, with the price of its bond maturing in 2022 falling by 9.2 cents to 58.3 cents on the euro, a distressed level, according to data from Bloomberg.

National Grid profits down 31% after US dispute. National Grid (NG.) profits slumped last year as it counted the £283 million cost of a protracted US industrial dispute and a £137 million bill for work on cancelled UK nuclear plants. The FTSE 100 utility group said that pre-tax profits had fallen by 31% to £1.8 billion due to the one-off charges on both sides of the Atlantic. The company had to bring in contractors to carry out its work in Massachusetts after locking out 1,250 of its own workers during a seven-month industrial dispute over pensions and healthcare. It said that it had also written off the costs of a decade of work it had carried out preparing network connections for Nugen’s cancelled nuclear plant at Moorside in Cumbria, and Horizon’s abandoned projects at Wylfa on Anglesey and Oldbury in Gloucester.

Bank of England chief cast doubt on Barclays (BARC) fraud case. MPs may question top official over trial warning. MPs are considering whether to question the Bank of England’s chief banking supervisor over claims he warned prosecutors that they risked triggering a systemic crisis if they went ahead with a criminal prosecution of Barclays. Sam Woods, a deputy governor of the Bank and head of its Prudential Regulation Authority (PRA) division, warned David Green, the former director of the Serious Fraud Office, in 2017 when he was weighing up whether to bring charges against Barclays over questionable payments to Qatar in the depths of the financial crisis in 2008.

Provident Financial (PFG) shareholders refuse to back takeover by Non-Standard Finance (NSF). The subprime lender trying to buy its bigger rival Provident Financial for £1.1 billion will seek to force through a hostile takeover after failing in its three-month campaign to win over opposing shareholders. Non-Standard Finance, led by John van Kuffeler, already had the support of three big Provident investors with 50% of the company’s stock when it launched its all-share bid in February. It set a cut-off of 1pm yesterday for remaining investors to accept its offer. NSF disclosed after the deadline passed that few other shareholders had decided to back the bid and that it had secured the support of investors holding just 53.53% of Provident’s stock.

Babcock fury at ‘misleading’ report by anonymous group. Boatman Capital Research yesterday launched its latest attack against Babcock International Group (BAB), saying that the company could be about to announce a £50 million writedown in one of its Ministry of Defence businesses and calling for the chief executive to go. The defence contractor rebutted the research note from the anonymous group, saying that it had no intention of writing down the value of its Defence Support Group (DSG) and calling Boatman’s statements inaccurate, misleading and malicious.

Playtech revolt on executive pay for second year in a row. Playtech (PTEC) has suffered a shareholder revolt over executive pay for a second consecutive year. More than 40% of voting investors at yesterday’s annual shareholder meeting voted against the software firm’s remuneration policy, which set pay for future years, and its remuneration report, which detailed boardroom pay for the last financial year. The rebellion came despite the company’s insistence that it had “introduced a number of substantial changes” to pay policy, having engaged with shareholders after last year’s vote. Almost 41% of voting shareholders opposed the pay report, down from 59.4% last year, while 41.8% rejected its remuneration report.

Europe’s biggest travel group has reported widening first-half losses amid 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 billion. The FTSE 100 group has issued two profit warnings this year, but despite yesterday’s losses it maintained its full-year guidance and insisted that it was on track to deliver “another solid year”. Fritz Joussen, 56, chief executive of Tui, dismissed suggestions that the industry was facing structural issues. “My view is that it’s down to cyclicality and we are currently in a downturn,” he said. “There will be winners and losers, and we will not be losers.”

Aston Martin Holdings (AML) has reset its sat-nav for June 10 when, in an update on the DBX, its 4×4 family car, it hopes to put the brakes on a downhill run in the share price. After a first-quarter update in which an up-and-down sales story and spending on its new factory in south Wales to build the DBX pushed it into the red, its shares recovered this week. Short sellers got their claws into Aston after its £4.3 billion, £19.50-a-share float last October. Some investors did not buy the story of a doubling of production into the next decade at the same time as building a factory and embracing electric cars, so bet heavily on the stock falling. That forced the share price down by 30% within three weeks.

The slowdown on the high street has wiped nearly £700 million off the value of British Land Company (BLND) 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 4.8% to £12.3 billion in the 12 months to the end of March. The landlord’s full-year accounts reveal the increasingly negative investor sentiment towards retail property, which has suffered from a number of familiar high street retailers shutting shops or falling into administration. The value of department stores owned by British Land was slashed by more than 40% to £70 million. Shopping centre valuations were cut by almost 10% to £2.1 billion, while retail park valuations tumbled 13.2% to £2.6 billion. Overall its retail property valuation dropped by 11.1%, or £752 million, to £5.6 billion.

Sales growth at Kingfisher (KGF) at the start of the year was weaker than forecast as the retailer struggles to patch itself up. The company behind the B&Q and Screwfix chains posted sales of £2.84 billion, up 0.8% on a like-for-like annual basis in the three months to April 30, and weaker than the 1.6% expected by City analysts. A 3.7% drop in sales in Kingfisher’s business in France, where it trades as Castorama and Brico Dépôt, was behind the miss. The update made no mention of a replacement for Véronique Laury, the outgoing chief executive.

Compass Group (CPG) was hailed as “brilliantly boring” as the catering group shrugged off economic uncertainty and rising costs to lift its full-year growth guidance and raise the dividend. Shares jumped by 50p to £17.78½ as it lifted revenues by 6.6% on an organic basis to £12.5 billion in the half year to the end of March, with operating profits up 5.8% at £951 million and pre-tax profits up 7.4% to £852 million. North America reported organic revenue growth of 7.9%, while Europe was up 5.5% on the back of the highest growth rate on the continent for a decade. Its rest of world region grew by 3.2%. The interim dividend was increased to 13.1p a share and, depending on acquisitions, the group is expected to look at returning more cash to shareholders at the full year by a special dividend or share buybacks.

CYBG ‘puzzled’ by failure to win bank competition grants. CYBG (CYBG), the owner of Clydesdale Bank, Yorkshire Bank and Virgin Money, declared itself disappointed and puzzled after failing to win anything in the first two phases of the disbursement of £775 million in special grants to boost competition in business banking. Shares in the group rose by 6¼p to 197½p as it revealed a resilient first-half performance, with its key net interest margin barely dented by the mortgage price war hurting some rivals. It also said it was making good progress in integrating Virgin Money, which it bought in an all-shares deal last October.

American sports betting pays out for William Hill (WMH). The government’s clampdown on fixed-odds betting terminals may be hitting Britain’s betting shops, but the opening up of the American sports betting market is offsetting at least some of the losses for William Hill. In a trading update covering the 17 weeks to the end of April, William Hill said the cutting of the maximum stake from £100 to £2 on April 1 had reduced gaming net revenues by 15%, in line with expectations. Analysts estimated that machine revenues in the first month had fallen by 40 to 50%.

Lloyds Banking Group (LLOY) has been accused of “feverish desperation and boundless greed” by MPs over pension arrangements for its executives. The work and pensions committee and the business, energy and industrial strategy committee recently wrote to the bank to question the remuneration packages of António Horta-Osório, 55, chief executive, and other directors. It has since emerged that the bank put together a video for staff encouraging them to vote at the annual meeting in Edinburgh today.

Marston’s (MARS) reported like-for-like sales growth of 2.2% in the six months to the end of March, with a 3.2% acceleration in turnover in the last ten weeks of the period. The pubs group has been trying to allay concerns over its leverage by cutting its debt and improving its cash generation. It said in January that it planned to reduce new openings to lop its £1.4 billion debt to £1.2 billion by 2023. The interim results showed initial progress had been achieved with cash generation up 6% to £66.8 million. It also said it was on course to sell non-core properties valued at up to £50 million this year. Management said it was confident of meeting its earnings expectations for the full year. It also said it was committed to maintaining the dividend at the current level during the debt reduction.

Utilities were friendless thanks to Labour’s plans to nationalise Britain’s energy networks at below market value. Jeremy Corbyn is due to set out today how a government led by him would nationalise the cables that deliver gas and electricity around the country. SSE (SSE) dropped 28p to £10.83 and National Grid (NG.) fell 7½p to 842¾p.

Indivior (INDV) jumped 7½p to 52¾p after a stock exchange filing showed Shaun Thaxter, its chief executive, bought 100,000 shares at 44½p on Tuesday. Two non-executive directors also bought a combined 32,000 shares. The embattled drugmaker is dealing with increased competition for its key product and is facing a US Department of Justice indictment and damages claim of more than $3 billion. Last week it showed it was making progress with its other drugs, having agreed a licensing agreement with HLS Therapeutics, the Canadian pharmaceutical company, who will sell its schizophrenia treatment, Perseris.

TP ICAP (TCAP) reported a decline in first-quarter revenue because investors’ reduced appetite for risk led to lower volatility in equity and interest rate markets. Nicolas Breteau, chief executive, said: “The uncertainty created by Brexit, the softening of the Fed’s interest rate stance, and the potential for more quantitative easing in the eurozone has impacted our traditional banking customers’ first quarter performance, weighing on market volatility and volumes.”

Vesuvius (VSVS) was under pressure after a slowdown in growth at the end of last year extended into the first quarter of 2019. In a trading update, it said market conditions were unchanged since it warned of weakness for some products at the end of last year. It cited slower sales growth for some of its products in China, Europe and the Middle East as well as raw material and cost inflation. But the company said that sales for the first three months of 2019 were in line with last year as a result of its restructuring programme. Management expects full-year results to meet expectations. JP Morgan Cazenove, the broker, issued an overweight rating. “Vesuvius’s trading update indicates an unchanged market backdrop, with the weakness described at the full-year results having continued, but not worsened.” The analysts expect further scope for cost savings and synergies from its acquisition confirmed earlier this year of CCPI, a specialty refractory producer.

Tempus – RIT Capital Partners (RCP): Hold long term. Highly defensive trust with strong track record of capital growth

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Mentioned in this post

AML
Aston Martin Holdings
BAB
Babcock International Group
BARC
Barclays
BLND
British Land Company
CPG
Compass Group
CYBG
CYBG
INDV
Indivior
KGF
Kingfisher
LLOY
Lloyds Banking Group
MARS
Marston\'s
NG.
National Grid
NSF
Non-Standard Finance
PFG
Provident Financial
PTEC
Playtech
RCP
RIT Capital Partners
SSE
SSE
TCAP
TP ICAP
TCG
Thomas Cook Group
TUI
TUI AG Reg Shs (DI)
VSVS
Vesuvius
WMH
William Hill