The Times 18/02/19 - Vox Markets | Vox Markets

The Times 18/02/19

The outgoing boss of Reckitt Benckiser Group (RB.) raised expectations that sales growth was set to pick up this year as he delivered his last set of annual results. The consumer goods group posted a 3% rise in like-for -like sales in the year to the end of December, after they rose 4% in the final quarter. Two per cent of the growth came from volumes and 1 per cent from the price mix over the year, with Reckitt saying that the growth in both its health and hygiene and home divisions balanced in the fourth quarter. The results come after Reckitt announced last month that Rakesh Kapoor, 60, would be stepping down as chief executive at the end of the year having been in charge for more than eight years.

Footasylum (FOOT) raced up the Aim junior market after the sportswear retailer JD Sports Fashion (JD.) snapped up an 8% stake and said it was in the business of buying more. The chain best known for its trainers leaped in value by as much as 70% as the stock market opened this morning after JD Sports said in a filing that it was happy to increase its holding in Footasylum to as much as 29.9%. Going any higher than this would mean that under takeover rules JD Sports would be forced to table a mandatory offer to buy the rest of the business. Footasylum was still more than 55% higher, up 16½p to 45½p in late morning trading, adding more than £15 million to its market value of £30 million as at the end of last week.

Citigroup hands Britain £1.2bn vote of confidence. Citigroup is close to agreeing a £1.2 billion deal to buy the skyscraper in Canary Wharf that houses its European headquarters. In what would be a striking financial commitment to Britain only weeks before Brexit, and one of the largest UK commercial property transactions on record, Citi is in advanced talks to buy the 42-storey Citi Tower, or 25 Canada Square, according to EG, a property trade publication. Banks are considering moving staff and assets out of the country amid concerns about Brexit, but the potential investment by one of the world’s largest banks underlines that they expect London to remain a global financial centre.

Germany objects to Shell’s rig disposal plan. Britain and Germany are at loggerheads over plans to let Royal Dutch Shell ‘B’ (RDSB) abandon oil platform legs in the North Sea. The Times can reveal that last month the government endorsed the oil major’s plans to leave the concrete legs of three platforms and the steel footings of a fourth at the Brent field, about 186km northeast of Shetland. It did so despite serious environmental and safety concerns raised by Germany, which claims that the British assessment process may be biased in favour of dumping at sea, according to documents obtained by Unearthed, the investigative unit of Greenpeace, the campaign group. The German environment minister has written to Michael Gove, the environment secretary, urging the UK to reconsider.

European Commission puts spotlight on Formula One deal. The European Commission is examining tie-ups between Formula One racing teams and big tobacco companies amid concerns from public health campaigners. British American Tobacco (BATS) and McLaren last week unveiled a global partnership before the 2019 championship next month. The sponsorship marked BAT’s return to Formula One 13 years after the sport banned tobacco advertising amid stricter international regulation. BAT, a constituent of the FTSE 100 with headquarters in London, is valued at £61.7 billion and generated £20 billion of revenue last year. Its cigarette brands include Lucky Stripe and Dunhill and its “potentially reduced-risk” brands include the e-cigarette Vuse and its Glo device, which heats tobacco instead of burning it.

Six face arrest in Patisserie Valerie accounts scandal. Up to six people face arrest over the Patisserie Valerie scandal, it can be revealed. Their names are highlighted in a report by the accountant PwC into the alleged fraud at the cake shop chain. They are said to have signed fraudulent cheques and sent emails discussing fabricating invoices. The revelation is the latest chapter in the biggest AIM scandal in recent memory. Patisserie Holdings (CAKE) collapsed into administration last month, three months after discovering a £40m hole in its accounts. Trading of its shares was suspended in October and it was revealed that cheques worth millions of pounds had been used to artificially inflate the company’s cash reserves.

Domino’s Pizza, led by David Wild, calls off annual awards day over fears of boycott. Domino’s Pizza Group (DOM) has been forced into an embarrassing climbdown as its store owners grow increasingly disgruntled over profits. The FTSE 250 company has written to franchisees to announce that it will cancel its annual awards day in April, after almost all its shop owners said they would boycott the event. Domino’s said in an email on Friday that it was “disappointing” to hear there was “currently less appetite to celebrate as one team”.

Sainsbury’s boss Mike Coupe gambles on go-ahead for Asda deal. Consultants called in before watchdog rules on merger. Sainsbury (J) (SBRY) has drafted in consultants to help with the mammoth task of merging with Asda as it awaits a key ruling on the £14bn deal this month. Chief executive Mike Coupe is understood to have called in the management consultancy Bain before Christmas to work on knitting together 330,000 employees, as well as IT systems and disparate parts of the supermarket chains. The move underscores Sainsbury’s confidence in a favourable ruling from the Competition and Markets Authority (CMA), which is this week expected to reveal how many shops it will require Sainsbury’s and Asda to sell for the deal to be waved through.

Buyout firms circle WPP’s market research sleuths. Private equity titans are circling WPP (WPP) data company Kantar as the advertising giant prepares to sell a majority stake in the £3.5bn business. Buyout funds TPG, Apax, Bain Capital and Cinven are understood to have shown strong interest in Kantar. WPP said its adviser, Goldman Sachs, would send details to prospective bidders soon. The advertising giant announced plans last October to offload a majority stake in Kantar to a “strategic or financial partner”. The move is a key plank of a strategy, drawn up by chief executive Mark Read, that will lead to 3,500 job losses and 180 offices closing or merging across the globe.

Even De Beers knows diamonds aren’t for ever. The market in synthetic gems grown in laboratories is booming as the real thing becomes harder to find. Tiaan Boshoff has worked at one of the world’s largest diamond mines for years — but, like most of his colleagues, he has yet to see a diamond there with his own eyes. The burly engineer is among hundreds of staff who man trucks and crushers 1km underground at Petra Diamonds Ltd.(DI) (PDL) Cullinan mine in South Africa, digging out rock to be taken up and x-rayed. “Sometimes during the blast process the rock does disintegrate and it falls on to the ground,” said Boshoff over the roar of machinery. “They say when you see it, you will know it.” Extracting diamonds from the earth is arduous and expensive, and for the workers who scurry deep below ground at Cullinan, near Johannesburg, a growing threat is challenging the centuries-old way of doing things: technology. Synthetic diamonds can now be grown in a lab within weeks, with much lower costs than mining and much higher profit margins. That has triggered a rush of start-ups producing cheaper, lab-grown gems that look the same as natural diamonds to the naked eye — raising questions over marketing, consumer behaviour and the future of the industry.

A trio of former Barclays (BARC) bankers shared almost £160m in pay and bonuses over seven years while a key interest rate, Libor, was being rigged, it can be revealed. Mike Bagguley, Eric Bommensath and Harry Harrison shared the sum between 2005 and 2011. The fixing of the interbank rate saw three junior traders jailed. The disclosure of their pay came through the efforts of Jay Merchant, a former Barclays trader who was jailed for 5½ years in 2016 for rigging the interest rate benchmark. He is seeking to clear his name. The three bankers were Merchant’s superiors; Bagguley was his supervisor. Merchant, 48, who served half his sentence before being extradited to India — the country of his birth — has accused Barclays and the Serious Fraud Office (SFO) of sharing a common goal: “To cover up the truth and deflect blame on to a handful of low-level traders.”

BT slammed by Frank Field MP for refusing to accept pension rulings. BT Group (BT.A) has come under fire for seeking to appeal against two court rulings that stopped the telecoms giant making changes to its pension scheme, writes Ben Woods. Frank Field, chairman of the Commons work and pensions committee, said he was “appalled” that BT was trying to overturn the decisions. About 88,000 members could be left worse off financially if the company succeeds. In December, the Court of Appeal ruled that BT could not change the measure of inflation used to calculate increases for its Section C pension scheme. BT wants to switch from the retail price index to the consumer prices index. RPI tends to be higher than CPI, but is no longer considered a national statistic. BT also lost a High Court case against the Treasury in November. It had wanted to prevent changes that mean it will have to pay more money to some of its defined-benefit pension scheme members to shield them from inflation.

OnTheMarket plc (OTMP) looks as if it might soon get the keys to a bigger market value. The upstart rival to Rightmove and Zoopla, which listed on AIM last year, is ramping up plans to turn a profit. The estate agent-owned company boasted this month that it had delivered more than seven times as many phone and email leads as this time last year. Its secret? Offering free listings under introductory offers to get agents to make the switch from Rightmove and Zoopla. OnTheMarket has now signalled that it will start converting new customers into fee-paying subscribers. The shares closed on Friday at 106.5p, valuing OnTheMarket at £65.7m. It made sales of £7m in the six months to the end of July, losing £5.7m. If it can prove it can turn a profit, there should be value ahead. Buy.

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Mentioned in this post

BARC
Barclays
BATS
British American Tobacco
BT.A
BT Group
CAKE
Patisserie Holdings
DOM
Domino\'s Pizza Group
FOOT
Footasylum
JD.
JD Sports Fashion
OTMP
OnTheMarket plc
PDL
Petra Diamonds Ltd.(DI)
RB.
Reckitt Benckiser Group
RDSB
Royal Dutch Shell \'B\'
SBRY
Sainsbury (J)
WPP
WPP