Jaguar stutters to £3.4bn loss after demand stalls. Financial problems blamed on diesel woes and China slowdown. Jaguar Land Rover slumped to a loss of £3.4 billion in the last three months of 2018 after writing down the net value of its assets by a third on the back of a collapse in sales of diesel vehicles and falling demand in China. The extent of the financial problems besetting Britain’s largest automotive manufacturer and employer has been laid bare less than a month after it announced 4,500 job cuts across its UK facilities, mainly in the West Midlands. JLR, which is owned by India’s Tata Motors, posted a pre-tax loss of £3.4 billion for the three months to the end of December after booking a writedown of £3.1 billion. This compares with a profit of £190 million in the same period last year.
Former Petrofac executive pleads guilty to bribery. A former senior executive at Petrofac Ltd. (PFC) has admitted bribery over payments that the oil services group made to secure almost $4.5 billion of work in Saudi Arabia and Iraq. Shares in the company fell by more than a quarter after the Serious Fraud Office said that David Lufkin, the former global head of sales, had admitted 11 charges of bribery in connection with its investigation into the company. Petrofac said that “a number of individuals and entities” were alleged to have acted together with Mr Lufkin, 51, but that none had been charged and that “no current board member” was alleged to have been involved. The admission relates to bribes of more than $50 million that the group allegedly paid “to influence the award of contracts worth $730 million in Iraq and in excess of $3.5 billion in Saudi Arabia”, the fraud office said.
Tui and Cook find life in travel sector is no holiday. The turmoil in the travel industry gathered pace yesterday as Thomas Cook Group (TCG) hoisted a £1 billion-plus “For Sale” sign over its airline while shares in rival TUI AG Reg Shs (DI) (TUI) tumbled after a surprise profit warning. The strategic review of Thomas Cook’s airline could lead to a sale, either outright or partial, enabling it to cut its net debt of £1.59 billion and allay investor fears over its future. It owns 103 aircraft and flies 20 million customers to 120 destinations worldwide each year. In addition to the airline, it has 600 British travel agencies and 22,000 employees. Its underlying seasonal operating loss during the three months to the end of December, the first quarter of its financial year, increased by £14 million to £60 million on a 1 per cent increase in revenues to more than £1.6 billion. While Thomas Cook issued two profit warnings late last year, Tui’s announcement came as a big surprise. It said that although bookings were in line with last year, its margins were lower and it would not be able to meet its target of double-digit growth in underlying earnings at constant currency. The impact of the profit warning was accentuated by the way that Tui, which owns 380 hotels and a fleet of cruise ships and runs 1,600 travel agencies across Europe and 150 aircraft, slipped the announcement out after the market closed on Wednesday. It released it Europe-wide via the EQS newswire, but did not alert British newspapers or post it on the Regulatory News Service.
Investors pull billions out of funds. Private investors in Britain cashed in their investment funds for the third successive month in December, inflicting a final blow in what has been a punishing year for the asset management industry. Investors pulled out £1.65 billion in December, following outflows of more than £2 billion in both October and November. Total net retail sales — which are gross sales less redemptions — slumped from £48.5 billion in 2017 to just £7.2 billion in 2018, according to the Investment Association. The average per year over the past decade has been more than £19 billion. The trade body represents 200 members who collectively manage more than £7.7 trillion on behalf of clients. Every month last year, private investors were net sellers of UK equity funds, redeeming a net £4.9 billion in 2018. A flood of money was also pulled from bond funds late in the year as investors reacted to expectations of rate rises or monetary policy tightening in the US and Europe.
Chain tries to weather the storm of criticism. Superdry (SDRY) has reported another three months of “subdued trading” as the struggling fashion retailer continues to plough ahead with a turnaround programme that aims to diversify its brand and range. The retailer, best known for its brightly coloured jackets featuring Japanese characters, said that group revenue was down 1.5% at£269.3 million, having been hit particularly hard by a sharp drop in sales at its shops. Revenue from its stores fell 8.5% to £126.8 million in the 13 weeks to January 26 and its e-commerce sales were down by 0.7%, at £69 million. The only part of Superdry’s business to grow during the period, which covered Christmas, was its wholesale division, where revenue climbed by 12.7% to £73.5 million. Superdry said that the slowdown in its shops and online was a result of the mild weather in November and December, which hit sales of outerwear, as well as “ongoing legacy product issues” as it updated its range.
Ocado Group (OCDO) feels heat after devastating fire. The Ocado warehouse where fire broke out on Tuesday has been completely destroyed, dealing a blow to the online grocer. The company said in a statement yesterday that the fire was under control at its robotic warehouse in Andover, in Hampshire, and that potentially explosive pressurised refrigerants had been removed so that residents of the town who had to evacuate could return. An exclusion zone has been lifted but firefighters may take another few days to extinguish the blaze fully. Ocado’s shares have fallen more than 15% since Tuesday as the extent of the fire became known. The fire has also raised questions about the longer-term impact for Ocado. More than 200 firefighters and 20 fire engines have battled the blaze at the centre where 600 robots pick groceries for 30,000 deliveries a week. The fire was thought to have been contained on Wednesday before it took hold much more seriously, leading to a partial collapse of the roof.
Gamble on Interserve loses £22m. The New York hedge fund attempting to derail the £905 million rescue plan at Interserve (IRV) is nursing losses of nearly 90% on a £25 million bet that the public services contractor could recover without falling into the hands of its lenders. Interserve this week announced proposals for the issue of £480 million of new shares to lenders and bondholders in a debt-for-equity swap, the loading up of £350 million of existing debt into RMD Kwikform, its profitable construction subsidiary, and the raising of a further £75 million of borrowing facilities. However, its largest shareholder, Coltrane Asset Management, is attempting to derail that by requisitioning an extraordinary general meeting to remove Glyn Barker, 65, Interserve’s chairman, and most of the rest of the board.
Government ‘betraying UK shipbuilding’ as 150 jobs go. The government has been accused of betraying the shipbuilding industry after Babcock International Group (BAB) said that it would be cutting 150 staff. Unite, the trade union, said that putting contracts for the Royal Navy fleet out to international tender and uncertainty over the Type 31e frigate programme were putting at risk thousands of jobs in this country. The Ministry of Defence said in December that it had shortlisted three consortiums to build the five new frigates for £1.25 billion and wanted the first ship delivered by 2023. BAE Systems (BA.), Babcock and Atlas Elektronik UK were the three lead partners in the groups that will be competing for the contract. Babcock, the London-listed engineering group, said yesterday it was shedding staff at its yard in Rosyth, Fife, where about 1,700 people are employed. Up to 150 jobs are to go as the company’s work on the Queen Elizabeth aircraft carriers starts to wind down.
We’ll build on record year despite Brexit, says Bellway. Bellway (BWY) expects to sell more homes this year and at higher prices, despite the impact of Brexit uncertainty on consumer confidence. The FTSE 250 housebuilder sold 10,307 homes last year, the highest in its 73-year history. However, it said it expected sales for the full year to beat that record, while it forecasts the average selling price will be over £290,000, compared with just under £285,000 last year. Bellway was founded in Newcastle upon Tyne in 1946. It listed on the stock market in 1986 and is ranked among the top five housebuilders by market value. In a trading update the company said early signs suggested customer demand and reservations would follow their usual seasonal trend. However, it said the board remained cautious given the uncertainty around Brexit and how it will affect customer confidence. The company said it had temporarily slowed its investment in new sites pending the outcome of the exit from the EU.
Mitie leads way as outsourcers cash in on collapse of Carillion. Mitie Group (MTO) and Capita (CPI) have emerged as the big winners from the demise of Carillion but public sector spending and activity appears to have slowed, according to analysis of the public sector contracting market. Interserve, the latest outsourcing group to suffer a run on its shares because of fears over its future, appears to be holding its own in the market for public sector support services. A report by Tussell, a data analytics firm specialising in government contracting, found that there was a £2.4 billion, or 36%, slump in the value of contracts awarded to the 30 designated “strategic suppliers” to the Cabinet Office. “The public sector marketplace is diversifying, with the top firms, including the strategic suppliers, seeing their market share start to diminish,” Tussell said.
Cranswick plant costs unnerve investors. More than £190 million has been wiped off the value of Cranswick (CWK) as investors took fright at a warning that the costs of the meat supplier’s new £60 million chicken factory and tough trading conditions would hit profits next year. Shares fell by 374p, or 12.6%, to £25.90 after Cranswick cautioned that the start-up costs for the plant and the “potentially challenging commercial landscape” were expected to push its operating margin lower in 2020. City analysts cut their forecasts for the business, with Nicola Mallard at Investec, Cranswick’s house broker, lowering her 2020 pre-tax profit estimate to £85 million from £100million.
Advertising company WPP (WPP) fell more than 8% yesterday as a revenue miss from Publicis, its French rival, sent shivers across the sector. Publicis shares tumbled 15% after weaker than expected fourth-quarter revenues, which raised concerns over the company’s ability to offset a decline in its traditional advertising business with new consultancy work. After the update worries resurfaced about the ability of traditional advertising companies to fight back against Google and Facebook, which have dominated the digital advertising industry. WPP has lost more than half its value in the past two years and has announced plans to merge some of its biggest agencies.
On The Beach Group (OTB) overcame downbeat sentiment in the travel sector as it reported revenue growth of 20% after marketing costs for the first four months of the financial year. It also reported strong growth in mobile traffic and repeat purchases after spending on online marketing.
EI Group (EIG), the pubs business, fell 8p to 200p, despite reporting 2% like-for-like income growth for the 18 weeks to February 2. Like-for-like sales at its managed pubs over the same period were up 5.7%. Shareholders at its general meeting approved the £348 million sale of a portfolio of 370 properties to Tavern Propco.
Interserve (IRV) fell for a second day after it emerged that Coltrane Asset Management, the largest investor in the public services contractor, wants to sack most of the board in an effort to derail a £905 million rescue of the company.
Accesso Technology Group (ACSO) fell 560p to 930p after it said that its full-year results would be hit by $1.7 million of one-off exceptional costs relating to professional fees associated with “a significant and well-advanced acquisition opportunity”. The Aim-listed technology services group provides ticketing, mobile and ecommerce services to more than 1,000 leisure, entertainment, cultural and hospitality customers in 30 countries.
Victoria (VCP), the Kidderminster-based flooring company, edged up 5p to 455p after it said it had sold a former sports ground in its home town for £2 million. The site was sold after a change of planning consent to housing was secured.
Loss of a partner proves painful. Oxford Biomedica (OXB) shares tumbled more than 6% after the cell therapy group said that Sanofi, the French pharmaceutical company, will find a new partner for two of its gene therapies. The gene therapies affected relate to Stargardt disease and Usher’s syndrome, which are both eye disorders. Oxford Biomedica said that the decision had “no short or medium-term material financial impact on the group”. It added that its $105 million haemophilia gene therapy collaboration with Bioverativ, a Sanofi company, was unaffected by the decision. John Dawson, chief executive of Oxford Biomedica, said the gene therapies affected by Sanofi’s decision had the potential to treat “unmet medical needs” and the company was “ready to support” Sanofi’s transition to their new partner.
Tempus – Smith & Nephew (SN.) Hold. Signs of operational improvements and capacity for mergers and acquisitions
Tempus – Compass Group (CPG): Buy. The shares are trading at a handsome multiple but with every expectation it should continue to deliver
