High Street banks and a Scottish pub tycoon are among creditors set to take control of contractor Interserve (IRV) in a deal to save it from collapse. HSBC, Royal Bank of Scotland and others who are owed money are to get £480million of new shares in the ailing company, which has 75,000 staff. Alan McIntosh, the co-founder of Punch Taverns, whose investment firm has been buying Interserve’s debt on the cheap for a year, will also number among their ranks. The deal will stop the business going under. But existing shareholders will be nearly wiped out, losing almost everything. One furious shareholder has tabled an emergency vote to remove nearly all the firm’s board members.
Bailed-out Royal Bank of Scotland Group (RBS) has won approval from shareholders to buy back its shares from the Government. At a meeting in Edinburgh yesterday, investors said that RBS could buy up to 4.99% of its stock from the Treasury in any one year. It would cost RBS around £1.5billion at current market prices. The Government did not vote, but more than 98 per cent of voting shareholders approved the resolution, well above the 75% threshold it needed to pass. Howard Davies, RBS’s chairman, said that the bank had strong cash reserves to support the buyback. And he pointed to the fact that it paid a dividend last year for the first time in a decade.
Housebuilders Barratt and Redrow have raked in bumper profits on the back of Help to Buy and low interest rates. The results cheered investors and boosted shares in the companies despite sluggish house prices and warnings about Brexit. Barratt Developments (BDEV) profits surged by nearly a fifth to £408million in the second half of 2018, on sales of £2.1billion. In that period, it sold 7,622 homes, up 4.1%. Around 38% of buyers used Help to Buy loans which are funded by the taxpayer and have been strongly criticised as a subsidy for developers. Barratt said it would use its massive earnings to return cash to shareholders in a dividend bonanza worth £350million over the next two years. Redrow (RDW) brought in record profits, as chairman Steve Morgan prepares to retire with a 9% rise in sales to £970million for the same period and profits of £185million, up 5%. But sales were hit towards the end of the year as a result of uncertainty surrounding Brexit, as well as higher stamp duty for more expensive homes, which is causing the market to seize up. Sales in the first five weeks of 2019 have fallen from £166million last year to £156million, it said. Redrow said it sold 2,970 homes, up 12%. The upbeat results came despite a string of rivals such as Crest, Telford Homes and Bellway sounding the alarm bell over Brexit.
Cambridge video games developer Frontier Developments (FDEV) was a winner for investors, as revenue for the six months to November 30 shot up from £19million in 2017 to £64.7million last year. Frontier launched its Jurassic World Evolution game. It plans to release its fourth game franchise, based on its own ideas rather than a blockbuster film, later this year. Frontier said it was ‘comfortable’ with analysts’ revenue predictions of £79million to £88million for the year to May 31.
Clydesdale and Yorkshire Banks’ owner CYBG (CYBG) impressed investors with a better-than-expected trading update, even though critics dismissed the figures as nothing special. The banking group, which bought Virgin Money last October, said lending in the last three months of 2018 was 1.4% higher than the year before, at £71.9billion. Its net interest margin, a key benchmark which weighs how much money the bank is making from loans, should improve for 2019, to rest in the range of 1.65% to 1.7%.
A warehouse fire at Ocado Group (OCDO) on Tuesday night, continued to push down the grocery firm’s shares. The blaze in Andover, Hampshire, where Ocado holds around 10% of its goods, was initially contained but then grew again, and Ocado confirmed yesterday that part of the roof had collapsed and there was ‘substantial damage’ to most of the warehouse. No one was injured, and FTSE 100-listed Ocado emphasised it had comprehensive insurance. But it will now struggle to meet customer demand, and sales growth will be squeezed.
Drugs giant GlaxoSmithKline (GSK) warned profits are set to be hit by tough competition in the US and its £4billion takeover of cancer specialist Tesaro. The turmoil means the drug-maker’s takings this year are expected to fall by between 5% and 9%. Despite the warning, Glaxo said shingles vaccine Shingrix continues to be a star performer after its launch in 2017. It reported group sales of £30.8billion and profits of £4.8billion, with Shingrix bringing in more than £780million in its first year, earning it blockbuster status. That offset trouble in America, where a cheaper generic competitor to Glaxo’s Advair inhalers has arrived. Glaxo has undergone a major shake-up since chief executive Emma Walmsley took the reins in 2017 – selling Horlicks, spinning off its consumer healthcare unit into a separate business and spending a small fortune on its cancer treatments portfolio. Nicholas Hyett, an analyst at Hargreaves Lansdown, said: ‘These are all big calls and only time will tell if they prove the right ones, but we can see the logic.’
Ukraine-focused iron ore miner Ferrexpo (FXPO) boosted the FTSE 250 after getting the thumbs-up from Barclays, despite an accounting irregularity earlier this week. Barclays said the drop in Ferrexpo’s shares following the blunder, combined with declining supply from miners in Brazil, made it an interesting prospect.
Electronics manufacturer Electrocomponents (ECM) sparked investor interest, as it revealed like-for-like sales for the four months to January 31 climbed in every region except emerging markets. It is on track to make savings of £12million by March 2021.
