Barclays keeps activist at bay as it defies Wall Street gloom. Barclays (BARC) on Thursday defied a slump on Wall Street and continued to grab market share from the giant American banks that have traditionally dominated investment banking and trading. While profits for the year were flat at £3.5 billion, largely due to fines for misbehaviour, the bank said it is benefiting from being practically the last European bank standing in New York. Deutsche Bank, UBS and Credit Suisse have retreated from investment banking. Barclays chief executive Jes Staley said: “We believe in being a bulge-bracket investment bank. To be alongside the top American houses is very important to us. The results are supportive of the bank’s strategy.”
Serco Group (SRP) was upbeat about rewarding long-suffering shareholders on Thursday despite difficult conditions in the UK. The prisons-to-hospitals outsourcer’s chief executive Rupert Soames, who described the mood as “miserably cheerful, like Eeyore”, said dividends were on the cards again. Serco, which makes 40% of sales from the UK, said sales in 2020 would rise 5% due to new contracts, including a £1.9bn deal to house asylum-seekers in Britain. Free cash flow also turned positive for the first time in three years. Soames has never paid a dividend to investors but said prospects were increasing. “There’s an aviation term called being on short finals, which means you’re just coming into land approaching the runway. We are reaching the landing point where we will be able to pay dividends. “It’s been a miserable four years for shareholders but they can now see some light at the end of the tunnel. In 2014 we were early adopters of financial carnage. Finally the old tanker seems to be turning and we now have positive cash flow and increasing profits. It does feel a bit of a turning point.”
BAE Systems (BA.) shares fell on Thursday after it admitted a German freeze on Saudi arms exports in response to the murder of journalist Jamal Khashoggi could hammer its supplies to the kingdom. The FTSE 100 firm, which gets less than 15% of group sales from Saudi, said there were several planning and supply chain projects to cut disruption from the ban. Germany said in November it would halt arms export licences to Saudi following outrage over Khashoggi, who was slain in the Saudi Arabian embassy in Turkey in October. BAE has Saudi contracts for Eurofighter Typhoon and Tornado fighter jets using parts affected by the German ban, prompting fears shipments could be hit. Chief executive Charles Woodburn said: “This is not a cliff-edge scenario. The impact has been minimal to date but over time it could become more difficult.” He did not give details on how it was trying to cut disruption because the information is classified. BAE was less forthright about the problems than French plane maker Airbus’s chief executive Tom Enders, who has said Germany’s ban was “a kind of moral high ground attitude”.
British Gas owner Centrica (CNA) had more bad news for the City today as a £300 million blow to profits from the energy price cap triggered a fresh round of cost-cutting. British Gas is the UK’s biggest domestic supplier and this week announced a £119 hike in its standard variable tarrif to £1254, upping the bills for around three million customers from April 1. In the first quarter alone the cap — set at £68 below the level of the British Gas SVT at the end of last year — is expected to cost Centrica £70 million. The company is taking regulator Ofgem to court arguing over how it set the cap. Chief executive Iain Conn said: “We think Ofgem did not get its calculations right for the first part of the cap.” The gas and electricity supplier lost 450,000 customers at its consumer business last year, where operating profits fell 15% to £750 million, although Conn claimed to be stemming the bleeding. Its profit per customer was £56, down 4% on the previous year. Alongside the impact of the cap, Conn admitted the group’s financial targets this year were “under some pressure”, prompting traders to mark down the shares by 11% or 14.4p to 122.8p. Conn put the shortfall down to lower production volumes in its exploration and production and nuclear businesses.
