Boeing’s decision to halt production of its bestselling 737 Max wiped nearly £300 million from the value of three leading British aerospace components manufacturers yesterday as investors worldwide sold out of companies linked to the American aviation group. Senior (SNR) suffered the sharpest fall, with its shares losing 11%. Boeing accounted for 11% of the group’s revenue last year and the company expected to make $354,000 in sales on every Max built. Melrose Industries (MRO) fell by 1.1%. The company makes windows, wing tips and engine casings for the Max and had expected to make $400,000 a jet. Meggitt (MGGT) makes seals and composite parts for the Max’s control systems and expected to make $155,000 revenue per Max. Its shares declined by 1.5%. Senior said it “continues to work closely with Boeing” and that it would give an “update on the potential implications to its 2020 performance once it has clarification”. Melrose declined to comment and Meggitt did not respond to requests for comment.
Muddy Waters issued a 34-page report yesterday on NMC Health (NMC) raising “serious doubts” about statements, including its asset values, cash balance, reported profits and debt levels. The report sent shares in NMC down by a third to £17.47½, wiping £1.75 billion off its market value. Muddy Waters alleged that NMC had “invested in large assets at costs that we find too high to be plausible — including from parties we believe are de facto under common control”. The company was founded in the 1970s in Abu Dhabi by Bavaguthu Raghuram Shetty, 77, an Indian pharmacist, and has expanded through acquisitions. Dr Shetty’s other ventures include Finablr PLC (FIN), the foreign exchange company, which floated in May with a valuation of about £1.2 billion. Its shares closed down 10.8% at 187¼p.
Unilever (ULVR), the consumer goods group behind Dove soap and Ben & Jerry’s ice cream, has warned it will miss its sales target this year as it faces pressure in several global markets. Unilever said it expected underlying sales, which strip out currency movements and acquisitions and disposals, to be below its previous guidance of the lower half of its 3% to 5% range. The unscheduled trading update pushed the shares down 331½p to £42.99. Analysts at RBC, said: “We believe Unilever needs to increase investment in the business, even if it comes at the expense of margins.” Mr Jope said Unilever would step up its cost savings plan to fund greater investment and would consider offloading weaker businesses. “We are far from crisis conditions,” he said. “This is just a little bit more turbulent than normal.” Despite the slowing sales growth, it said earnings, margins and cash were not expected to be affected.
Persimmon (PSN) has been criticised for having a corporate culture that results in “poor workmanship” and “potentially unsafe” homes, following an independent review of its operations. Persimmon commissioned the £1.5 million review by Stephanie Barwise, QC, of Atkin Chambers in April after it came under scrutiny over the quality of its work and an executive pay scandal. Demand for its homes has been supported by the government’s Help to Buy equity loan scheme, which accounted for about 60% of its sales last year. The scheme helped it to almost triple its profit per house between 2012 and 2018. The review has uncovered a range of concerns about the company’s practices, including the absence of policies in areas relating to its building process, training and inspections. It also found that the housebuilder has a “nationwide problem” with missing or incorrectly installed cavity barriers in its timber frame properties. The barriers are essential for slowing the spread of fire.
Petrofac Ltd. (PFC) has reported a further decline in its order backlog as it struggles to win new business. Shares in the company fell by 6.6% yesterday after it said that it had won only $3 billion of new orders this year, compared with $5 billion at this point a year ago. Its backlog of work was $7.4 billion at the end of November, down from $10.2 billion a year earlier, as it failed to win enough orders to offset its completed work. The company previously said that it had lost out on billions of dollars of new work in the first half of the year after the bribery conviction of one of its former executives. It added yesterday that it had seen “delays in engineering and construction bidding processes in the second half of the year”.
The exodus at the top of Ted Baker (TED) accelerated as a director resigned from the fashion retailer’s board, a week after the chairman and chief executive said they were departing. Ron Stewart, 72, who was Ted Baker’s senior independent director, stepped down yesterday with immediate effect following nine years as a non-executive, the period after which directors are no longer deemed to be independent under corporate governance rules. Jon Kempster, 56, has joined the board. He is the former finance chief of Sports Direct who resigned in July as Mike Ashley’s retail group, which this week changed its name to Frasers, shocked the City with a €674 million Belgian tax bill in its delayed results.
Trainline Plc (TRN) said yesterday that it was set to hit its annual targets after British and international ticket sales rose by 18% to £2.85 billion. The rail and coach ticketing app confirmed that it would meet ticket sales and revenue forecasts for the financial year, with group revenue up by 26% on the year to £198 million in the nine months to November 30. Rail strikes in France have not yet had a significant effect on trading but are expected to hit sales. The industrial action, in which transport staff walked out over proposed pension reforms, is at the end of its second week. Trainline said that it would report between 15 and 20% growth in ticket sales, and revenue growth of between 20 and 25% for the year to February 2020.
The world’s fund managers are buying equities again as they grow increasingly optimistic in their outlook for next year. In June, a net 50% of the stock pickers surveyed by Bank of America Merrill Lynch expected global growth to weaken over the next 12 months. They appear to have changed their tune, with the latest report showing that a net 29% think the global economy will pick up next year. On top, nearly two-thirds reckon a recession, which had been mooted in some corners of the City, is unlikely to materialise in 2020. In a reflection of their new-found bullishness, fund managers’ allocation to stocks which are considered riskier investments has risen ten percentage points on the month to a one-year high. Money has flowed into UK equities, in particular, over the past two months, where investment is at a four-year high. It is not all sunshine and rainbows, though; a third of managers believe the trade war between the US and China remains the biggest tail risk facing the markets, which could put a dent in the global economy next year.
Whitbread (WTB) shares took a dive after analysts at UBS replaced their “buy” rating with “neutral”. The investment bank warned that the threat posed by Airbnb has “grown significantly”, while it expects Premier Inn’s revenue per available room to underperform its competitors in the near term.
Investors have taken fright at an overhaul of bank capital buffers over concerns that the changes will hit lenders’ plans to return money to shareholders. Shares in Lloyds Banking Group (LLOY), Royal Bank of Scotland Group (RBS) and Barclays (BARC) fell sharply yesterday after the Bank of England revealed on Monday that it was tweaking the rules governing the capital that lenders must hold. City analysts said that the changes could hit the level of share buybacks by the lenders next year, as well as the dividend at Barclays and the special dividend that Royal Bank of Scotland is expected to pay. The Bank said that it would double the “countercyclical capital buffer”, which can absorb losses, from 1% of risk-weighted assets to 2% by the end of next year and at the same time reduce other capital requirements. The regulator said that the change would enable lenders to withstand up to £23 billion of losses without cutting lending. Analysts at Jefferies, the investment bank, said that it appeared to be a “Brexit buffer”.
Tempus – Royal Dutch Shell ‘B’ (RDSB): Buy. Ability to generate very large cashflow and commitment to return value to shareholders
Tempus – Halfords Group (HFD): Avoid. Unappealing bet hinges on recovery in retail sector
