Deal of the Day: Galliford Try has been named as the preferred bidder on a £70 million contract to build and maintain 240 homes for vulnerable adults in Kent. It will also create a special purpose vehicle to create social housing for vulnerable people in the area. However, the 25-year deal did not stop the shares dipping 13p to £10.75.
Bet of the Day: Aureus Mining, the AIM-quoted company hoping to build Liberia’s first goldmine, was boosted by a preliminary metallurgical report from two projects within 20 miles of its New Liberty site, which is under construction. The results suggest that ores should be able to be processed with relative ease. The shares rose ½p to 34.6p.
Gilts: The yield on ten-year gilts dipped a basis point lower to 2.88%, as softer stock markets in Europe made fixed-income securities more attractive. Sam Hill, at RBC, said that Mark Carney’s recent comments on the housing market may be suppressing yields because bond investors were more confident interest rates would not rise.
SFO red faced as £40 million bribery case collapses: A billionaire metals magnate with links to Tony Blair and Lord Mandelson was acquitted of bribery charges yesterday after Britain’s white-collar crime-fighting agency pulled the plug on a landmark prosecution.
Payday lender adverts escape curbs: Broadcasting authorities are resisting imposing tougher limits on advertisements for payday lenders, despite fears that the soaring number being shown on television is putting children at risk.
Questions still haunt Madoff’s victims: “So it is a scam, after all.” That was the first, terrifying thought that struck Lord Jacobs of Belgravia when the former joint treasurer of the Liberal Democrats received an early morning phone call five years ago.
Tesco throws down gauntlet to big banks: Tesco will launch a current account next year, posing what may be the biggest challenge yet to traditional banks.
Tax avoidance crackdown ‘goes too far’: The Treasury has been accused of taking its tax avoidance crackdown too far by targeting legitimate business practices that are used to support investment.
Antofagasta: Added 4p, closing at 765¾p, despite downgrading its gold production forecast
BHP Billiton: Slipped 36½p to £18.14 despite showcasing its petroleum division’s plans in Houston.
Weir Group: Rose 60p to £21.33 amid speculation that General Electric was weighing up a bid.
African Barrick Gold: Rose 6.8p to 162p after an environmental order was lifted at one of its four mines in Tanzania.
Victrex: Climbed 66p to £16.30 after raising its dividend 15%.
Banking union framework set out by EU Ministers: EU Finance Ministers on Wednesday framed the political bargain for the Eurozone’s next big step towards banking union, but put off the fight over the crucial details of sharing bank failure costs until next week.
First Group under attack from U.S. activist: FirstGroup, the U.K. bus and rail operator, is under attack from one of its biggest shareholders, which has called for the sale of its U.S. businesses in order to pay down debt.
Bus routes cuts cause concern over social and economic damage: The network of buses laid on by local authorities to link towns and villages across the U.K. to shops, hospitals and schools is withering yearly with severe social and economic consequences, campaigners have warned.
Private placements catching a European wave: Cheaper, more convenient and creating better relationships with investors – all reasons why growing numbers of European companies are sidestepping the public bond markets to raise funds through private placements.
MPs set to approve bank reforms after Osborne makes concessions: Legislation to make banks safer and improve corporate governance is expected to be finally signed off by MPs on Wednesday, after George Osborne agreed a series of last-minute concessions to toughen up the bill.
Dutch sales drop hits Carpetright’s U.K. turnround: A sharp drop in sales in the Netherlands wiped out a modest improvement in Carpetright’s U.K. performance in the carpet retailer’s first-half.
Women stuck in corporate slow lane as men dominate race to top: A man who starts his career with a FTSE 100 company is four and a half times more likely to reach the executive committee than his female counterpart, says research that questions many assumptions on which companies base gender diversity policies.
Aldi £80 tablet sells out within 24 hours: Cut-price supermarket chain Aldi sold out of its £80 tablet within 24 hours after it launched in the U.K. this week, in a sign of burgeoning consumer appetite for cheap mobile devices in a competitive market.
Standard Chartered: Lost 2.3% to £12.84 on fears of a third cash call in five years.
Vedanta: Lost 2.1% to 804p ahead of its likely relegation in this week’s FTSE index review.
Ashtead: Up 3.7% to 740p on forecast-beating interim results, was probable for promotion.
Smiths Group: Added 1.5% to £13.99 as Morgan Stanley revived break-up hopes.
Vodafone: Drifted 1.2% to 230.7p as AT&T Boss Randall Stephenson added no new colour on the group’s European ambitions in a conference speech in New York.
TUI Travel: Eased 1.5% to 378.3p on profit-taking after its full year results provided few surprises, with earnings slightly better than consensus forecasts
Volcker rule: Overruled: Ludwig Wittgenstein wasn’t too keen on rules. “Can’t we imagine a rule determining the application of a rule … and so on?” the philosopher asked, warning of infinite regress. He would have immediately spotted the flaw in the Volcker rule, the final text of which was released on Tuesday. Its relentless specification of rules and exceptions obscures a hard fact: that the role of regulatory judgment cannot be eliminated. This is especially the case in something as slippery as preventing trading desks from using risk hedges to hide proprietary trading. Such activity caused $6 billion in losses for JPMorgan in the ‘London Whale’ debacle last year, and revealed that the bank’s regulators had little idea about how its enormous synthetic credit portfolio functioned. So, rule after rule in the Volcker text orders banks to explain the specific risks they are trying to reduce, and to ensure via “ongoing recalibration” of hedges that prop-trading does not slip in. But one problem with the Whale trade was its never-ending recalibration. Traders doubled down as the market wrecked their hedges. The Volcker rule’s final text says that trading-desk compensation must not reward either prop trading or “excessive or imprudent risk-trading”: broad language, requiring regulators to make hard calls. That is as it should be. And since banks will have to put their pay arrangements for hedgers in writing, there is every reason to give this disclosure to investors as well.
Prudential: target tapering: It is early December and Prudential is setting out targets, promising a mixture of cash and growth. History has a habit of repeating itself – in December 2010 it was also setting out targets and promising cash and growth. The big difference is the backdrop. In 2010, it was getting over its failed bid for Asian rival AIA. Today, Tidjane Thiam, Chief Executive, can point to a 126% increase in the share price and £1.8 billion of dividends in the intervening period. The Asian secular growth story – more middle-class people, so more demand for financial products – is as compelling as it was three years ago. Prudential promises that its Asian business will produce surplus cash (after investment in new business) of about £1 billion in 2017, against £0.5 billion in 2012, and will increase profits by 15% a year until then. But Asia is only a third of group profits. The prospects for the U.K. and U.S., which provide the rest, are not so clear. Unlike in 2010, the company has not set specific targets for these operations. The only non-Asian target is that the group as a whole will produce surplus cash of at least £10 billion between 2014 and 2017. That is a hefty 43% increase over the previous four-year period. But almost all of that comes from Asia. Assume £2.5 billion of surplus cash in 2017, of which £1 billion comes from Asia. That would leave the remaining businesses producing no more cash then than they do now, and the group looking very reliant on Asia.
General Motors: new driver at the wheel: Mary Barra is taking the wheel of a car that is not only zooming, but has caught up with its arch-rival. For much of this year, the valuation of General Motors, where Ms Barra will become Chief in January, lagged Ford’s. But since late October, GM’s shares have rocketed 15%, while Ford’s have slipped. Their forward earnings per share multiples are now essentially in line: a worthy tribute to the efforts of departing CEO Dan Akerson. Capital allocation is the most intriguing strategic issue facing Ms Barra – the first woman to run one of the major global carmakers. GM spent $5.5 billion buying back a portion of the Treasury stake last December, and another $3 billion buying back preferred stock from the United Auto Workers this year. It is expected to take in $1 billion from selling its share in its former auto-lending subsidiary, Ally Financial. With $37 billion in liquidity, there is some expectation of a dividend (Ford already pays one). But with another $8 billion of preferred stock held by unions and Canada, Ms. Barra would be prudent to repay that before returning capital to shareholders. Ms Barra, a GM lifer, has an impressive CV, including running the company’s vast supply chain. She needs to keep her foot on the gas.
Miners’ retreat rebalances FTSE 100 index: Vedanta and Croda, the two companies set to make their farewells to the FTSE 100 on Wednesday, are two of the only four groups in the blue-chip index with all-male boards. Their likely departures – to make way for Royal Mail and Ashtead – are not due to some strange power exercised by Vince Cable, even though he has been cross about their lack of diversity. Chemical maker Croda was promoted just last year, and it could be a company like John Wood Group and the London Stock Exchange that quite often drift between the lower reaches of the FTSE 100 and the upper realms of the FTSE 250. For 2013 has been a year of rebalancing for the FTSE 100. Since mid-2007 the mining and metals sector have almost always accounted for more than one-tenth of the index’s market value, reaching as high as 17%. It slipped into single figures in June and once Vedanta has left will stand at little more than half its peak. As the miners have shrunk, the banking sector has revived. The most striking examples are Barclays, whose market value has risen more than 15% in the past 12 months and Lloyds Banking Group which has gained more than 50%. By September, banks had overtaken oil and gas producers and mining groups to become the largest sector in the FTSE 100 by market value. Thank goodness there’s nothing to worry risk-averse passive investors there.
French Disconnection: France is the world’s most popular holiday destination. It is also – surely – the least popular country for tour group TUI Travel. Over the year to end-September, customers in Germany and the U.K. obligingly generated significantly more revenues and underlying operating profit, even though in Germany their numbers were slightly down. France has gone in a different direction, producing a substantially worse performance, with an underlying operating loss of £59 million – sharply up on the £32 million the previous year. Having risen more than 30% over the past 12 months, the share price saw a mild dip on Tuesday morning to 374.6p, leaving Europe’s largest tour operator trading on a forward p/e multiple of a little more than 12 times. TUI is a well-run business, but it is in a sector so vulnerable to events that investors need a spirit of adventure.
The Daily Telegraph
Former Asda executive given top Walmart job: Former Asda executive David Cheesewright named Chief Executive of Walmart International.
Andor agrees to £176 million Oxford Instruments takeover: Andor Technology’s board backs improved 525p per share takeover offer after a period of stalemate between the companies.
Costa Coffee and Premier Inn drive sales at Whitbread: Leisure giant Whitbread on course for full year as Premier Inn hotels and Costa Coffee boost third-quarter sales.
Chipmaker CSR retreats from camera market as smartphones take over: Investors cheer as company abandons digital camera makers but 200 jobs will be lost.
J&J taps U.K. research hubs: U.S. drug giant partners with U.K. life science hubs in drive to discover new drugs.
Centamin: Added 0.51 to 44.82p on news it was buying West Africa-focused digger Ampella, which is listed in Australia, for A$40.9 million (£22.8 million).
St James’s Place: put on 3½ to 647p in the second-tier index, despite Lloyds Banking Group offloading its 21% stake in the group for £680 million.
The Questor Column:
RWS Holdings reports soaring profits: Patent wars are a growing global phenomenon as corporations seek to protect their technology across highly competitive markets in the U.S., China, Europe and Japan. Aim listed patent translation firm RWS Holdings provides a one-stop shop for multinational companies such as Siemens and Ford, who want one technology patent translated into many languages to protect their technology across different markets. RWS has an unbroken 10 year track record of growing revenue and profits. The company’s core operation of translating patents 69% of group revenue reported a 10.5% increase in revenue to £53.5 million. As the company has grown revenue and earnings it has also provided investors with healthy income growth. There is a slight drag on results next year as share options to management will cost £1 million. That said, the company has a solid balance sheet with net cash of £18.2 million at the year end. The shares, on 20 times forecast earnings, trade on a premium to sector peer Murgitroyd on 14 times, but part of this is because as a qualifying company they could attract 100% inheritance tax relief as the Aim share can get business property relief. RWS Holdings at 849½p+74. Questor Says “Hold”.
Premier Oil downgraded on slow recovery: Premier Oil announced it was walking away from exploration licenses in Kenya. The setback represents only a small part of the company’s larger exploration portfolio, but caps off a miserable year for the FTSE 250 listed oil exploration and production group. It has been a difficult year for Premier. Production delays in the North Sea have weighed heavily on the share price. The Huntingdon field, of which Premier has a 40% share, was expected to produce gas at the end of last year, with full production reaching 30,000 barrels per day (bpd). Premier’s problems have certainly not been in discovery. It has been an excellent year, with six discoveries out of seven prospects, including the Luno II field off Norway that is thought to be worth $144 million, or up to 17p per share. The issue has been around getting discoveries to produce in a reliable fashion. That is because Premier’s oil reserves are in parts of the world that are costly to reach and difficult to extract from. The other big question around all the explorers is the price of oil. The price of Brent crude has fluctuated between $86 per barrel to $105 per barrel over the past 12 months. However, analysts have recently downgraded the outlook for the price to about $92 per barrel; as a rough measure, each $10 oil price fall equates to a 15% reduction in the net asset value, or 45p, from the current share price. Premier Oil at 297.2p-3.6. Questor Says “Hold”.
Children pester parents for payday loans after adverts blitz: Fears that payday lenders are grooming children accelerated yesterday after new figures revealed that the number of loan advertisements seen by Britain’s kids has soared by almost 20,000% in just four years.
Rule to curb risky trades by banks in U.S. is finally passed: Nearly four years after President Obama first proposed curbs to rein in the risky bets on Wall Street, U.S. regulators have finally ratified a strict new regime aimed at stopping banks from making speculative trades that could cause another meltdown.
Chancellor comes knocking for fat foreign incomes: Government moves to clamp down on tax loophole: For the multimillionaire FTSE-100 Director Massimo Tosato, having one employment contract with the fund management giant Schroders is clearly not enough. Unconventionally, the suave boardroom executive with a house in one of the most sought after squares in London’s Knightsbridge has two.
Cost of state pensions to quadruple in the next 50 years: The cost of the state pension will soar 466% in the next 50 years, according to official statistics.
Twitter hits fresh high as investors cheer new advertising tool: Twitter has climbed to a new all-time high in New York trading as investors welcomed the social network’s new targeted advertising feature.
U.S. taxpayers lose $10 billion after Treasury sells final stake in General Motors: American taxpayers have lost $10 billion (£6 billion) as a result of the U.S. government’s bailout of General Motors during the global financial crisis.
RBS Finance Director Nathan Bostock resigns after 10 weeks in position: Royal Bank of Scotland was facing fresh management upheaval on Tuesday night when the bailed-out bank’s newly-appointed Finance Director suddenly quit.
Youth unemployment could prolong Eurozone crisis, Christine Lagarde says: Christine Lagarde, the Managing Director of the International Monetary Fund, has warned that long-term prospects for Eurozone growth look bleak unless politicians act urgently to stoke domestic demand and tackle youth unemployment.
Wall Street facing tighter scrutiny as regulators move on Volcker rule: Wall Street is facing tighter scrutiny of its trading activities after U.S. regulators moved on Tuesday to impose stricter rules on the types of trades banks can make following the financial crisis.
Foxtons estate agents gains promotion to FTSE 250 index: Foxtons, the estate agent that Londoners love to hate but cannot do without, is set to join the ranks of Britain’s leading companies on Wednesday when it is promoted to the FTSE 250 index.
Tesco putting up prices faster than any other U.K. grocer, claims analyst: Tesco’s U.K. strategy has been slammed in an outspoken note by a U.S. stockbroker that claims the retailer has put up prices faster than any other British grocer while its non-food ranges are more expensive than those at John Lewis.
Tui Travel profits rise as package holidays make a comeback: Package holidays are back in vogue, according to Tui Travel, as strong demand boosted underlying profits to record levels.
U.K. economy continues to recover despite Europe fears, new research shows: The economy grew by 0.8% in the past three months as the recovery continued, a report showed yesterday.
GM is first major car manufacturer to have a woman in the driving seat as it appoints Mary Barra as Chief Executive: Vauxhall-maker General Motors is the first major car manufacturer to have appointed a woman Chief Executive.
Hedge fund guru Crispin Odey aims to net result on poor Manchester United shares: Hedge fund guru Crispin Odey has made a £22 million bet that Manchester United’s poor performance on the field will be echoed in the stock market.
CSR: Leapt 49.5p to 559.5p after analysts applauded the upgrade of its fourth-quarter revenue expectations after the management’s decision to halt development of products for digital cameras due to the weak digital camera market.
BG Group Plc: RBC Capital Markets reiterated the stock with “Outperform” rating and a target price of 1,400.00p
Verona Pharma Plc: N+1 Singer reiterated a “Buy” rating on the stock, with a target price of 5.10p
Vectura Group Plc: N+1 Singer retained a “Sell” rating on the stock, with a target price of 97.00p
Hammerson: Liberum Capital reiterated a “Buy” rating on the stock, with a target price of 605.00p
Little Black Dress ends year in fine style: Swish party frocks site LittleBlackDress.co.uk is rounding off the year in sparkling fashion after securing £300,000 of private angel funding to expand and develop own-label lines.
HSBC plays down reports of spin-off company for stock market use: Britain’s biggest bank HSBC yesterday played down speculation that it would spin off its U.K. business into a separate stock market listed company.
Jupiter Fund management’s Chief to step down next March: Jupiter Fund Management’s Chief Executive Edward Bonham Carter is to step down in a move seen as signalling an international expansion drive at the FTSE 250 Asset Manager.
Co-operative Group sees boom in sales of savings stamps: The Co-operative Group’s food shops have seen a sharp increase in the number of savings stamps sold in the run-up to Christmas.
Lloyds Banking Group in new sell-off of management company: Lloyds Banking Group last night put up for sale its remaining stake in wealth management company St James’s Place.
Airbus to cut 450 jobs: The Owner of Airbus plans to axe 450 military and space jobs in the U.K. as part of 5,800 European job losses sparked by defence cuts.
Petrofac: Reversed 20p to 1174p as UBS cut its rating from buy to neutral, citing risk around the company’s move into offshore construction.
Marston’s was: Left with a 2p hangover at 145p after Barclays cut its buy rating to neutral.
Aviva: Up 9½p to 429p amid upbeat comments from Bank of America Merrill Lynch.
Admiral Group: Accelerated 9p to 1215p as it extended a tie-up on improved terms with Munich Re, which underwrites 40% of Admiral’s car insurance business.
U.K. banks get break from Volcker’s toughest plans: British banks with U.S. arms will be allowed to trade in U.K. government bonds on their own books, U.S. authorities revealed yesterday, diluting earlier plans to ban the transactions.
U.S. budget plan aims for cross-party support: U.S. politicians from both the country’s major political parties announced a suggested budget deal yesterday, with the aim of avoiding another government shutdown.
Barclays to end its sponsorship of Boris Bikes: Barclays will not renew its sponsorship of the London bicycle hire scheme when it ends in 2015, it confirmed last night.
U.K. momentum to continue into fourth quarter: THE British economy is still growing at the robust pace set during the third quarter of the year, as official statistics record another boost to industrial production.
Draghi attacks Bank of England style plans for narrow policies: Mario Draghi revealed he disagrees with Mark Carney’s plan to tackle bubbles yesterday, laying out an alternative set of guidelines for central banking.
Think tank calls for less state intervention in energy market: Government policies will push up customers’ energy bills, a new report from the Institute of Economic Affairs warned yesterday.
Prudential sets aggressive Asia growth targets: Prudential set out ambitious targets for growth in Asia yesterday, boosting investor confidence and sending its shares higher.