Boeing is to halt production of its troubled 737 Max in a move that will send a shockwave through British industry. Hundreds of suppliers to the aviation giant will be affected by the temporary suspension, which begins next month. International Consolidated Airlines Group SA (CDI) (IAG) had signed a letter of intent to buy 200 Max jets and Ryanair Holdings (RYA) has 135 on order. Three British aerospace components suppliers will also be affected by the decision. Melrose Industries (MRO), the £12 billion FTSE 100 group, makes wing tips, engine casings and other parts for the Max. Melrose said in April that it expected to make about $500,000 from every jet. Senior (SNR), the FTSE 250 group based in Hertfordshire, has warned several times this year that its financial situation has been hurt by the Max groundings. The company, which has an outpost near Boeing’s Seattle factory, makes wing and wheel well components for the aircraft. Meggitt (MGGT), also a FTSE 250 constituent, supplies seals and composite parts for the Max’s control systems. The group has estimated that it makes about $155,000 per jet.
The Serious Fraud Office has charged two former Serco Group (SRP) directors with fraud in relation to the company’s prison tagging contract with the Ministry of Justice. Nicholas Woods, 50, former finance director of Serco home affairs, and Simon Marshall, 58, former operations director of field services, were charged with fraud and false accounting in relation to representations made to the Ministry of Justice between 2011 and 2013. Mr Woods was additionally charged with false accounting in relation to the 2011 statutory accounts of Serco Geografix, a subsidiary of Serco that ran the electronic tagging service. They both deny the charges.
– Mike Ashley yesterday revealed plans to hand £100 million to staff after his retail empire posted a rise in interim sales and profits, although he warned that losses at House of Fraser would lead to more shop closures. The company yesterday rebranded to call itself Frasers, a move unexpectedly announced last month as part of efforts to “elevate” its reputation. There is only one Frasers store, in Glasgow, but there are plans to open a second luxury department store in Belfast next year. Mr Ashley said that the retailer must get used to “canoodling the luxury brands”. Frasers Group announced a 58% rise in underlying pre-tax profits from £64.4 million to £101.8 million in the six months to September 27, while statutory profits rose 160% to £193.4 million, boosted by a £120 million sale and leaseback deal of its company headquarters. Group sales rose by 14% to £2.04 billion, including House of Fraser and Flannels’ stores. The UK sports business increased sales by 6.7% to £1.2 billion but, excluding acquisitions, sales fell by 8.6%.
Cineworld Group (CINE) is to increase its exposure to the North American market after announcing a C$2.8 billion (£1.6 billion) acquisition of Canada’s biggest cinema operator. The proposed takeover of the Toronto-listed Cineplex, which has a 75% share of Canada’s C$1 billion box office, follows the audacious $5.8 billion acquisition in February last year of Regal Entertainment, which is based in Tennessee. The C$34-a-share deal, which brings 165 cinemas and 1,695 screens, values Cineplex at almost C$2.2 billion, or C$2.8 billion including debt, a multiple of 6.3 times earnings including merger benefits. Cineworld said that the transaction was “highly synergistic”, forecasting at least $130 million of benefits by the end of 2021.
The restaurant group behind the Franco Manca and Real Greek chains is in talks with potential partners about establishing one of the brands internationally. The Fulham Shore (FUL) said that although both concepts had received interest, only one would be taken abroad and the international appeal of pizza made Franco Manca the likelier option. “We’ve had lots of inquiries about taking Franco Manca to Switzerland, Sweden, America and the Far East,” Mr Page said. “We haven’t got to any agreements yet but I’m sure we’ll try it in one of those territories over the next two years, either as a franchise or a joint venture in which we take a small stake.” To date the only franchise deal it has agreed has been with Giuseppe Mascoli, the founder of Franco Manca, who runs a branch on the Italian island of Salina, north of Sicily, albeit only during the busy summer months.
FirstGroup (FGP) could call time on its American operations after formally appointing advisers to “explore all options” for its student and transit businesses there. The transport operator, which is also offloading its North American Greyhound intercity coach network, has shelved plans to dispose of its British buses business. Investors including Coast Capital, the US activist which has built a 10% stake, have repeatedly called on First to clear up its strategy and overhaul its board. The company said yesterday that it was considering the future of its North American contract businesses, “including a potential disposal [and] has appointed advisers to formally explore all options”. Having previously raised the prospect of selling its First Bus division in the UK, the company believes that “greater value will be achieved by delivering . . . margin enhancement prior to any launch of a formal sale process”.
A £1.5 billion takeover of Centamin (DI) (CEY) has moved a step closer after the chairman of the Egypt-focused gold company met the boss of its Canadian suitor to begin talks. Josef El-Raghy, 48, chairman of the FTSE 250 miner, met Sébastien de Montessus, 44, chief executive of the Toronto-listed Endeavour Mining, in Australia on Saturday “to discuss the merits of the proposed transaction and proposed next steps”, Endeavour said yesterday. Endeavour said that the two companies had agreed to “conduct a reciprocal due diligence exercise” to better understand each others’ assets. This was “a critical precursor to allowing the parties to determine whether the financial terms of a transaction could be agreed that was in the best interests of both companies’ shareholders”.
Pearson (PSON) the education services provider missed out on the rally sweeping global equity markets, becoming just one of three companies to end the session in the red and the biggest faller. Analysts at Berenberg said that 2020 was set to be another exacting year, with the “accelerated deterioration in the higher education courseware market . . . likely to have a significant impact on next year’s numbers as well”. The broker said that management was likely to “guide cautiously when it provides its next update in mid-January”. This prompted Berenberg, which rates the stock a sell, to cut its target price to 525p from 660p.
British American Tobacco (BATS) was also among the biggest gainers after a double upgrade to “buy” from Bank of America Merrill Lynch. The broker said that BAT’s recent shake-up of its e-cigarette portfolio showed a “much-needed sense of urgency to compete in the new world of tobacco”. It also said the “competitive environment is turning favourable to BAT” and that although the regulatory threat from a potential reduction to nicotine levels and a menthol ban were significant “it has become unlikely we will see any major progress over the next 12 months”.
Ofwat proposed lowering the cap on the shareholder returns of water companies to their lowest level since the sector was privatised three decades ago. The changes, part of Ofwat’s pricing settlement over the next five years, intend to increase investment and raise standards. Severn Trent (SVT) added 77p to £24.97.
Clients of Selftrade could not complete buy or sell orders on fund products for almost three hours on a busy trading day following the general election. Selftrade said weekend maintenance work had caused problems that prevented some trades between 8am, when the London stock market opened, and 10.45am. It said the issues did not extend to other areas such as shares. Selftrade is owned by Equiniti Group (EQN). Selftrade says it has more than 100,000 customers. A spokesman said: “We had a small issue for a couple of hours which will have affected some customers placing fund orders. The issue has been resolved now and our fund customers will have been able to complete their orders at today’s price before our daily cut-off time.” The disruption is understood to have been limited by Selftrade having the capacity to process all trades in-house, so that orders could go through afterwards.
Tempus – Witan Inv Trust (WTAN): Hold. Recent signs of improvement in performance augur well, as do changes in wider sentiment
Tempus – Inchcape (INCH): Buy. Inexpensive and a less risky way to invest in motor market growth
