Ofgem cuts profits for National Grid (NG.) investors. The energy regulator’s decision to press ahead with tough plans to curb profits for the companies that run Britain’s gas pipelines and power cables shook investor confidence in National Grid this morning. Shares in the FTSE 100 utility group fell 6%. National Grid said that it was “disappointed” by Ofgem’s proposals to slash the returns it could make even further than expected. The regulator said that the plans would save households £30 a year from 2021 or £6.5 billion in total. Citizens Advice, the consumer charity, welcomed the proposals, which it said would “curb excess profits networks have been allowed to make”. It urged the regulator to “hold its nerve” against industry lobbying. The companies that run the gas and electricity network get their revenues from levies charged on households and businesses’ energy bills. These network charges account for about £250 on a typical annual household bill.
Oil prices fell more than 3% in morning trading amid ongoing worries about supplies and a slowdown in global growth. The price of Brent crude fell to $57.78 per barrel in early London dealing as investors worried that production cuts from the Opec cartel of producer nations would not be enough to offset rising US stockpiles and output. Energy stocks tracked oil prices lower. Premier Oil (PMO) fell 2¼p to 62¾p; Royal Dutch Shell ‘B’ (RDSB) dipped 46p to £22.93; BP (BP.) edged down 6p to 502¾p.
Shire Plc (SHP), the FTSE 100 drugs company, fell 168p to £43.65 after the rating agency Moody’s downgraded Takeda, the Japanese drugmaker, saying that its takeover of Shire would result in a near six-fold increase in its debt.
The retail industry has taken another battering with just under £1.4 billion wiped off the stock market value of the sector after ASOS (ASC) raised new fears about consumer spending in the run-up to Christmas by issuing a profit warning. Days after Mike Ashley, the founder of , had warned that “incredibly bad” trading last month would “smash retailers to pieces”, Asos halved its profit forecast, blaming the weather, discounting and consumer uncertainty. The online retailer had been forecast to make profits of £119 million this year but will likely make only £52 million, despite sales rising by 14 per cent in the three months to November 30. The profit warning sent its share price down by 37.5% to £26.14 and robbed it from its leading position on Aim. It also led to a wider sell-off of retail shares. Those of Dunelm Group (DNLM), JD Sports Fashion (JD.), Card Factory (CARD) and Marks & Spencer Group (MKS) fell by 10.6%, 7.1%, 5.6% and 4.6%, respectively, collectively removing about £591 million from their market capitalisation. Other retailers to tumble included WH Smith (SMWH), Next (NXT), Kingfisher (KGF) and Halfords Group (HFD). Overall, the FTSE 350 general retailers’ index fell by 3.74%, erasing just under £1.4 billion of value from a set that on Friday had been worth £37.35 billion. Asos, originally standing for “as seen on screen”, was founded in 2000, primarily aimed at young adults. Its site sells more than 850 brands as well as its own range of clothing and accessories. The warning has added to a growing sense of concern that retailers could be in for one of the worst Christmas periods in years, which potentially could trigger high street collapses.
Landlords of Patisserie Valerie have said that they suffered lengthy delays for rent, including one who allegedly had to send bailiffs round each quarter to collect the money. The landlords made the claims after The Times reported allegations yesterday of late payments by the embattled café chain to suppliers. MPs on the business, energy and industrial strategy select committee have written to Steve Francis, the company’s new chief executive, to request details of its payment practices. Patisserie Holdings (CAKE) was bought by Luke Johnson, the entrepreneur and former chairman of Channel 4, in 2006. It now operates about 200 outlets. The business has been in crisis since the emergence of a £40 million hole in its accounts in October, which led to the suspension of trading in its shares and the arrest of Chris Marsh, its chief financial officer. He is on bail and is being investigated by the Serious Fraud Office. Mr Marsh resigned in October, while Paul May, the chief executive, did so last month. Emergency funding has been put in place.
Two of Britain’s biggest energy suppliers have scrapped their planned merger, blaming the government’s price cap and tough competition for rendering the proposed new company unviable. SSE (SSE) said that it had pulled the plug on the proposed combination of its household energy supply business with Npower, owned by Innogy, of Germany, after failing to agree revised terms to salvage the deal. The merger was first proposed a year ago and the new supplier had been due to be listed as an independent company in London early next year. However, SSE said that the combined company would no longer be viable. It blamed “very challenging market conditions” and highlighted heavy financial losses at Npower. SSE said that it would consider other options for its household supply business, including listing it separately or “a sale or an alternative transaction”. Innogy said that it was assessing options for Npower.
Royal Dutch Shell ‘B’ (RDSB) and Eni were aware that their $1.3 billion deal for a Nigerian oilfield would result in corrupt payments to politicians and officials, an Italian judge has said. The two oil majors and former executives are on trial in Milan over alleged corruption in their 2011 deal to secure control of the prized OPL 245 block off the country’s coast. Prosecutors allege that most of the proceeds of the deal went to a company linked with a convicted money launderer and ended up being paid in bribes and kickbacks. Shell and Eni have denied wrongdoing. The conclusion that they were aware of corruption was made by a judge in a separate case in Milan that resulted in the conviction of two middlemen in the OPL 245 deal. Judge Giusy Barbara wrote that the management of both Eni and Shell had been “fully aware of the fact” that part of the money they had paid “would have been used to compensate Nigerian public officials who had a role in this matter”. She added: “It was not mere connivance, but a conscious adhesion to a predatory project damaging the Nigerian state.”
Big players jostle for place on the West End stage. If Sammy Tak Lee was contemplating having another tilt at Shaftesbury (SHB), the secretive Hong Kong property billionaire may have to think again after Norway’s central bank raised its stake in the West End landlord to almost 25%. Talk of a bid had been fuelled in early October when Mr Lee lifted his stake in Shaftesbury from 25.02% to 26.15%, taking him closer to the 30% level at which a takover bid would become mandatory. However, yesterday Norges Bank, which also manages Norway’s government pension fund, shadowed the move by lifting its own holding from 23.15% to 24.46%. While much of the property sector has been hit hard by the retail downturn, the owner of 15 acres that covers Carnaby Street, Covent Garden, Chinatown and Soho in central London has been resilient. At last month’s full-year results, Brian Bickell, its chief executive, said: “Footfall and spending in our locations continues to be largely unaffected by the widely reported headwinds affecting the national economy and consumer confidence.”
, the world’s biggest miner, rose by 43¼p to £16.59¾ after it completed a $5.2 billion buyback and announced a $1.02-a-share special dividend from the sale of its American shale business. Rio Tinto (RIO) shares gained 87p to £37.62½p and Antofagasta (ANTO) added 18p to 796p.
Thomas Cook Group (TCG) fell 4.9%, or 1½p, to 27¼p, despite a vote of confidence in the battered travel group’s future from its chief executive. Peter Fankhauser acquired just over 172,000 shares at 29½p, equating to a total outlay of £50,000. The impact of the company’s miserable year, when underlying profits fell by £58 million to £250 million, also hit Mr Fankhauser’s pay packet. According to the annual report, his total remuneration fell from £1.84 million to £1.02 million as his failure to hit financial targets meant that he received no bonus. It is not all gloom at the tour operator, though. Today, it will unveil a tie-up with Orascom Development Holding, a resort developer, to open two own-brand hotels in the Egyptian resort of El Gouna next year.
The recent demotion of Just Eat (JE.) from the FTSE 100 has sparked an outburst of activism from Cat Rock Capital Management. The American firm, which has a stake of about 2%, has written to the board of the takeaway delivery group calling for action to address the near-30% decline in the share price this year. Alex Captain, Cat Rock’s managing partner, said that Just Eat’s 2018 remuneration scheme was flawed because it offered incentives for revenue growth “without accounting for profitability or capital efficiency”. He claimed that since the appointment of Peter Plumb as chief executive in September last year, the targets had been “undemanding”. He called on the board to detail a new three-year plan within the next thirty days and to link management’s rewards directly to the achievement of that plan. He also called for a review of non-core assets, such as its 33% stake in iFood, of Brazil, which he estimated could fetch as much as £650 million.
Tempus – FTSE 100: cheap doesn’t necessarily mean cheerful after a market sell-off: In short, while these shares look undeniably cheap using the traditional metrics, don’t be fooled by the apparition that they offer a free lunch. There is no such thing, so be wary. Exercise caution. There’s no point buying a company just because it’s cheap; there’s probably good reason and it could get worse
