Services sector saves stalling economy. UK growth came close to stalling in February despite a slight rebound in the powerhouse services sector that gave the pound a lift, according to a key survey. The full monthly set of purchasing managers indices, a key barometer of private sector activity, suggested that the economy has slowed from 0.2% growth in the final quarter of 2018 to only 0.1% and employment is falling at the fastest rate in nine years. New orders fell for a second month running. The PMIs, a closely followed early economic indicator, have deteriorated sharply in recent months. Activity in both manufacturing and construction slowed in February and services, which accounts for four fifths of national output, was expected to follow suit in today’s release. Instead, February’s services PMIs jumped from a two-and-a-half year low of 50.1, where 50 separates growth from contraction, to 51.3. The rebound, which beat forecasts for a decline, helped sterling edge a little higher before persistent concerns about Brexit dragged the pound back down.
Debenhams warns on profits despite plan to shut 50 stores. Debenhams (DEB), the department store chain, has rattled investors with another profit warning as it races to agree a deal to overhaul its balance sheet. The shares slumped by 6.6% to 2.98p after the company cautioned that a looming financial restructuring, economic uncertainty and rising financing costs meant that its previous forecasts, issued in January, were “no longer valid”. Debenhams traces its history back 241 years to when William Clark set up a drapers shop in the West End. It now has 166 sites. It has struggled in recent years amid a high street decline as more shoppers move online. Last month the company secured a £40 million cash injection from its lenders that would act as a “bridge” while it tries to complete a more radical restructuring, which Sergio Bucher, the Debenhams chief executive, has warned will lead the closure of about 50 stores.
Ladbrokes owner GVC hits target but warns of shop closures. The gambling operator behind Sportingbet, Ladbrokes and Coral has hailed a strong set of 2018 results on the back of market share gains in all its key territories. Despite its impending eviction this month from the FTSE 100 after a weak share price performance, GVC Holdings (GVC) performed “ahead of expectations and materially ahead of the market”. The group, which after last year’s acquisition of Ladbrokes Coral Group claims to be the world’s biggest online-led sports betting and gaming company, reported proforma underlying earnings — adjusted for the deal— up 13% to £755.3 million and net gaming revenue up 9% to £3.57 billion. Its underlying earnings came in at the top end of the guidance range of £750 million to £755 million provided in January, when it upgraded the guidance from £739 million.
Vodafone Group (VOD) was the biggest riser on the FTSE 100 this morning after the telecoms company said that it planned to raise about €4 billion by issuing bonds. The company said that the proceeds would be used to help finance the acquisition of assets from Liberty Global, the owner of Virgin Media. The announcement sent its shares, which have been under pressure amid concerns about the sustainability of its dividend, up by about 4p to 135½p.
‘Dirty money’ penalty for estate agent. Countrywide (CWD) fined for money-laundering failings. Britain’s biggest estate agency group has been fined a record sum for failing to carry out proper money-laundering checks in the latest embarrassment for a sector dogged by falling sales. Countrywide, whose 50 agency brands include Hamptons, Bridgfords and Bairstow Eves, was served with a £215,000 penalty by HM Revenue & Customs under regulations aimed at keeping dirty money out of Britain. Countrywide’s profits halved last year as it struggled during the property slowdown. The group, which is also battling heavy debts, reported a 16% drop in income from property sales and issued a string of profit warnings. The London-listed company publishes its annual results this week. The fine raises questions about due diligence by the property industry on the rising number of wealthy buyers from Russia, China and the Middle East.
Ted Baker (TED) is poised for a boardroom clearout after the resignation of its founder yesterday. Ray Kelvin, 63, quit as chief executive three months after he had been accused of overseeing a culture in which employees were forced to hug him against their will. He also was alleged to have “stroked people’s necks” and made sexual innuendos. He denied misconduct, but said yesterday that it would be “in the best interests of the company” if he stepped aside. He will retain his shares and said that he would be on hand to offer advice to the new bosses. David Bernstein, 75, was named executive chairman, but will resign in November next year at the latest. Lindsay Page, 59, will continue as acting chief executive.
US hedge fund dishes up sweeter Interserve (IRV) rescue package. The biggest shareholder in Interserve has returned with a sweetened offer to save the struggling contractor. Coltrane Asset Management, a New York-based hedge fund, said that it would underwrite a £110 million share offer and would convert £435 million of debt into equity. Creditors would end up owning 55% of the business and shareholders would be left with 37.5%, compared with only 5% under a proposal set out by Interserve itself.
Senior Barclays (BARC) executives worried that investors in the bank’s 2008 emergency fundraising would “go nuts” if Qatar were given a better deal unfairly, a court was told yesterday. Richard Boath, one of four former Barclays bosses on trial over fraud charges, told Roger Jenkins, the bank’s former Middle East head, that they had to be careful to ensure the legality of a plan to pay Qatar extra fees in the form of a separate advisory agreement. “We can’t do a capital markets transaction in which we give one set of fees to one set of investors and a different set of economics for another set of investors because, if they found out, they’d go nuts,” Mr Boath, 60, said he told Mr Jenkins, 63, in a 2014 interview with the Serious Fraud Office that was played at Southwark crown court.
Findel’s board shuns ‘low’ takeover offer from Sports Direct. has urged its shareholders to spurn a takeover offer from after Mike Ashley’s company triggered a mandatory £139 million bid for the online retail group by lifting its stake above 30%. Sports Direct, Findel’s biggest shareholder with 29.9%, is lifting its investment to 36.8% by purchasing a further six million shares from another investor for 161p apiece. Under City rules, Mr Ashley’s company is obliged to make an offer to buy out the remaining shareholders in a deal that values Findel at £139.2 million. Sports Direct’s 161p takeover offer comes at a 1p discount to Findel’s closing share price on Friday, the last trading day before the offer was submitted. Findel’s board, chaired by Ian Burke, said that it had unanimously rejected the cash bid.
Aviva’s international boss Maurice Tulloch becomes CEO. Aviva (AV.) has selected the head of its international business as its new chief executive following a near-five month search. The choice of Maurice Tulloch, 49, surprised the market as he was picked over the internal favourite, Andy Briggs, who runs its UK business, its largest division. Having been turned down for the role, Mr Briggs may decide to leave the company. Aviva’s board, led by Sir Adrian Montague, has been searching for a chief executive after ousting Mark Wilson, 52, in October, due to frustrations that his plan for the insurer had ground to a halt and after several contentious issues that led to clashes with shareholders.
Metro Bank fends off attacks on payments to founder’s wife. Metro Bank (MTRO) is looking for a firm of architects to oversee the fitting out of some of its new branches after criticism of multimillion-pound payments to the wife of its founder for such services. The plan could avoid an awkward situation where Metro uses millions from a grant awarded to expand business banking to pay for the services of Shirley Hill, 74, wife of Vernon Hill, the bank’s billionaire founder. Metro disclosed its plan to bring in an architectural firm in addition to Inter Arch, which is owned by Mrs Hill, in its annual results last week. Inter Arch was paid £4.6 million by Metro last year and has had £26.4 million in total from the bank since it was set up.
Syncona finds Americans’ offer for Nightstar too good to refuse. A biotechnology investment company backed by the Wellcome Trust has sold its first business in what is said to be the third biggest exit by a British company in the sector in 20 years. Nightstar Therapeutics, a clinical-stage gene therapy specialist founded by Syncona Limited NPV (SYNC), the FTSE 250 investment company, has agreed an $877 million sale to Biogen, the $66 billion US-listed biotech group. The deal values Nightstar, which also is listed in the United States, at $25.50 per share, a premium of about 70%. According to Syncona, citing research from Mergermarket, the financial data company, the £663 million deal ranks as one of the most valuable British biotech exits of the past two decades, behind the $2.4 billion acquisition of Celltech Group by UCB, the Belgian drugs company, in 2004 and the $1 billion takeover of Cambridge Antibody Technology Group by Astrazeneca two years later.
Life sciences sector ‘laid low in Britain’, says Abcam (ABC). A Cambridge-based biotechnology company has warned that Britain’s life sciences research market has weakened amid uncertainty over Brexit. Abcam, which supplies products and tools to two thirds of the world’s scientific researchers, said that it had heard from customers that Brexit was affecting collaborations between researchers in the UK and on the Continent as they faced changes to funding programmes. Alan Hirzel, 51, chief executive of Abcam, said that its trading in Britain was a “little bit slow”, though business in other markets was picking up. Germany, he said, was “booming”.
Shares in Fairfx Group (FFX) rose by more than 4% per cent yesterday after it said that it had renegotiated terms with some of its supply chain partners. In an update, the company said its plan, announced in January, to rationalise its supply chain and improve margins in its corporate card division was ahead of schedule and that it would benefit from a “greater share of revenues” in future. Last month, the Bank of England granted it access to settlement accounts, allowing it to process payments for customers using apps in real time. It is only the fourth non-bank to win access. Ian Strafford-Taylor, 58, its chief executive, said: “An integral part of our strategy has long been to enhance our supply chain, both in terms of internalising processes where appropriate to increase share of revenues and securing better commercial terms to reduce our costs, the benefits of which improve as the business scales.”
International Consolidated Airlines Group SA (CDI) (IAG) issued a clarification to statements made last week about its cashflow and its shares promptly lost altitude. The problem began during a call with analysts that followed IAG’s latest results. Enrique Dupuy de Lôme, its chief financial officer, said that the company was forecasting an increase in free cashflow. “At the end of the day, we are forseeing improvement in free cashflow in the range of €200 million,” he said after being challenged by Andrew Lobbenberg, an HSBC analyst, about how that could be the case. Yesterday, however, came a sharp about-turn. The company behind BA, Aer Lingus and Iberia, told analysts that in fact its free cashflow would be lower in 2019 because it was increasing annual capital expenditure from €2.2 billion to up to €2.7 billion against a forecast of flat operating profit.
Investors bought into Rightmove (RMV) after its shares had fallen by 2.1% on Friday. The shares regained 24¼p to close at 496¼p yesterday. Analysts at JP Morgan Cazenove said the property portal’s business model appeared to be resilient and that its full-year results were in line in all aspects. However, they said that revenue guidance for 2019 was below expectations and they remained “underweight” on the stock.
NMC Health (NMC) added 102p to £28.56 after Barclays said that it had conducted a forensic health check on the Middle East-focused private healthcare group. Analysts said that concerns over some potential accountancy “red flags”, including low cash conversion, were misplaced, with much of that low cash conversion driven by expansion in the Middle East.
Shares in Synthomer (SYNT) fell by more than 8% after investors were spooked by its report of softening markets in Europe and North America at the end of last year. Results for 2018 were broadly in line with expectations and the board said that the outlook for the year ahead remained unchanged. However, the company cited currency headwinds and blamed a fall in raw materials prices that affected customers’ buying behaviour for a softer trading environment in the final quarter of the year.
Daily Mail and General Trust A (Non.V) (DMGT) rose 29p to 676p after the publisher of the Daily Mail announced plans to return all its shares in Euromoney Institutional Investor (ERM) and £200 million in cash to eligible shareholders. The group holds more than 49% of Euromoney, the financial publisher.
Tempus – Rolls-Royce Holdings (RR.): Avoid. For a loss-making company that has much left to prove, shares seem expensive
Tempus – Pantheon International (PIN): Buy long term. Has clearly shown ability to achieve returns over time
