BAE Systems hit by fears over Saudi arms contract. Fears over the future of BAE Systems (BA.) single most important weapons contract, selling fighter jets to Saudi Arabia, sent shares in the UK’s defence champion down sharply. BAE’s historic contract to sell 72 Lancashire-assembled Eurofighter Typhoons to Saudi Arabia has long been controversial, going back to the £40 billion oil-for-arms al-Yamamah contract signed with the Arab kingdom which became mired in allegations of bribery and corruption. Last year the British government signed a further £5 billion deal to sell Saudi Arabia a further 48 fighters. However the future of that deal has been thrown into doubt after the German government slapped a ban on the export of arms to Saudi Arabia in the wake of the murder of the journalist Jamal Khashoggi. Sections of the Typhoon are built in Germany, France and Spain.
Barclays sets aside £150m for Brexit disruption. Barclays (BARC) has taken a £150 million provision to cover the cost of potential disruption caused by Britain’s impending exit from the European Union as it posted a dip in profits last year. The lender said that it had taken the charge during the final three months of 2018 to account for the impact of “anticipated economic uncertainty in the UK”. The lender disclosed its Brexit hit in its annual results, which showed profits before tax dipped 1% to £3.5 billion last year. Stripping out £2.2 billion of conduct charges and litigation costs, pre-tax profits climbed 20% to £5.7 billion. At the bottom line, Barclays swung to a £1.4 billion net profit from a £1.9 billion loss a year earlier.
Purplebricks loses two bosses as US market proves a hard sell. Purplebricks Group (PURP) has given warning that its overseas expansion is not going as well as expected and that its chief executives in the United States and Britain are stepping down. In an unscheduled trading update, the online estate agency said that it now expected full-year revenue to be between £130 million and £140 million — lower than the previous forecast of between £165 million and £175 million. The shares fell by about 45½p to 119p, in morning trading in London. It cited lower-than-expected activity in the US and Australia as the reason for cutting its revenue forecast.
Fall in British Gas profits rattles investors. British Gas profits fell 19% to £466 million last year as almost half a million households switched away from Britain’s biggest energy supplier in a year and the pre-pay price cap squeezed margins. Centrica (CNA), the parent company, warned of a further £300 million hit to British Gas profits this year from the government’s cap on all standard tariffs and said that its cash flow would come under pressure as a result. The warning rattled investors, who fear that the FTSE 100 energy group will be forced to cut its dividend and the shares dropped 11% in early trading.
Sainsbury’s deal nears collapse. Competition watchdog raises serious doubts over merger with Asda. The merger of Sainsbury (J) (SBRY) and Asda is on the verge of collapse after the competition regulator raised extensive concerns. The provisional findings of an investigation by the Competition and Markets Authority into the combination of Britain’s second and third biggest supermarkets found that it could lead to higher prices, a poorer shopping experience and reductions in the range and quality of products. Officials, who are due to issue their final report by the end of April, suggested that they could either block the £12 billion deal entirely or force the two chains to offload hundreds of shops, potentially including either the Sainsbury’s or Asda brands, to a single buyer. Industry experts and analysts said the findings were more severe than expected and had effectively blocked the deal.
Bonuses at scandal-hit GRG were linked to Treasury targets. Senior bankers from Royal Bank of Scotland Group (RBS) scandal-hit restructuring unit had large chunks of their annual bonuses tied to targets set by a government agency, The Times can reveal. Derek Sach, the former boss of the bank’s Global Restructuring Group, was among more than 50 executives whose “incentive and bonus” payments were linked to “performance targets” established by the Asset Protection Agency, an arm of the Treasury that insured RBS’s toxic loans.
Flybe rejects last-minute swoop by Mesa. An American airline run by two former Virgin Express executives has emerged as the latest would-be saviour of Flybe Group (FLYB), the lossmaking British regional carrier. However, the bid by Mesa Air, a company trading as American Eagle and United Express, which has teamed up with Andrew Tinkler, the former Stobart Group executive, has been rebuffed immediately by Flybe, which says it still wants to sell up for a penny a share to a consortium including Virgin Atlantic and Stobart. Mesa, which is acting with Bateleur Capital, a secretive New York hedge fund, and is supported by Mr Tinkler, 54, is reported to have offered to inject £65 million of new cash into the airline. News of the approach, even after its rejection, more than doubled Flybe’s share price to just over 2¾p, up 1½p.
Investors force Glencore to place cap on Old King Coal. Glencore (GLEN) has bowed to investor pressure on climate change and agreed to cap its production of polluting coal. The world’s biggest exporter of “thermal” coal — the type burnt in power stations that is a big contributor to global warming — said that it would cap its total coal production, which also includes small amounts of “coking” coal used in steel production, at its present level of about 150 million tonnes per year. It added that it would prioritise investment in commodities that supported the shift to greener energy, such as copper and cobalt, which are used in electric vehicles. It made the commitment after discussions with the Church of England and other investors in the Climate Action 100+ group, which have $32 trillion of assets under management.
Intu scraps dividend after shop failures’ heavy toll on portfolio. The growing pressure on retailers has hit Intu Properties (INTU), which has seen £1.4 billion wiped off the value of its portfolio last year, and its investors, who were told yesterday that the shopping centres owner was scrapping its dividend. The value of Intu’s portfolio fell by 13.3% to £9.2 billion in 2018, after a further 3% valuation slide in the final quarter. Since this had pushed the company’s debt-to-asset ratio up from 45.2% to 53.1%, Intu said that it would not issue a final 2018 dividend and would try to sell assets to bring its debt-to-asset ratio back below the 50% level.
Lloyds dismisses Brexit fears and adds £4bn sweetener for investors. Lloyds Banking Group (LLOY) has defended its decision to return £4 billion to shareholders despite mounting concerns about the potential impact of Brexit. George Culmer, its finance chief, insisted that Lloyds, which conducts more than 95% of its business in Britain, was “not at all” complacent in deciding to raise its dividend and return as much as £1.75 billion of capital to investors through a share buyback. He made the comments as Lloyds published its results for 2018, which missed market expectations. Lloyds posted a 24% rise in annual net profits to £4.4 billion, about £200 million less than analysts had forecast. Pre-tax profits rose by 13% to almost £6 billion.
Laura Ashley lays bare decline in sales. A first-half fall in sales has led Ashley (Laura) Holding (ALY) to warn yesterday that its full-year results are set to fall short of market expectations. The homewares and fashion retailer said that a drop in demand for its furniture and decorating ranges had sent it to a £1.5 million loss for the first half of its financial year, down from a pre-tax profit of £4.3 million a year previously. Group sales fell by about 9% to £123 million in the six months to the end of December. Furniture and decorating were the worst performers, with like-for-like sales falling by 14% and 13.5%, respectively.
Ford gives AA call for roadside help. AA (AA.) has signed a new contract to sell roadside assistance with Ford, the biggest seller of cars in Britain. The corporate contract is an important win for the country’s leading provider of help for broken-down motorists, after the AA last week reported a fall in the number of individuals signing up for its services. Most of its customers, about ten million, come through contracts with companies such as Ford or those that bank with Lloyds. It also has a small motor and home insurance operation. It is valued on the stock market at £560 million. The deal with Ford extends by three years a relationship that has been in place for the past thirteen. It says that the deal will mean that a million Ford drivers are covered with the AA. “This Ford contract is incredibly important,” an AA spokesman said. “The partnership gives us the opportunity to engage with a new generation of drivers.”
Indivior to make generic of own drug. The drugs maker Indivior (INDV) has launched a generic version of its blockbuster Suboxone Film opioid addiction drug in the United States. The move came a day after the US Supreme Court had cleared the way for Indivior’s rivals to market their own copycat versions of the drug, in a victory for the India-based Dr Reddy’s Laboratories, which previously had been blocked from doing so.
McBride warns on profits. A household cleaning products maker issued a profit warning yesterday, sending its shares down by almost a third. Mcbride (MCB), which supplies own-label detergents as well as toothpastes and mouthwashes to supermarket chains, said that higher costs for raw materials and distribution would hit its annual underlying pre-tax profits by between 10% and 15%. The company is due to publish its half-year results today.
There was light at the end of the tunnel yesterday for Acacia Mining (ACA) after the goldminer secured a deal with the government of Tanzania to settle a $190 billion tax dispute that has hung over the business for nearly two years. Barrick Gold, Acacia’s Canadian parent, said that it had negotiated a $300 million payment to resolve the tax claims in the country. That ended four months of uncertainty for shareholders after a preliminary agreement with Tanzania in October failed to develop into a firm proposal. Analysts at Credit Suisse said that the payout would remove a significant overhang for both Barrick and Acacia, while Investec said that it meant the Bulyanhulu mine could be restarted, recreating some value in the company. The deal is expected to be implemented by the end of March, the Tanzanian government said.
There was some recovery in the share price of Plus500 Ltd (DI) (PLUS), the financial betting group, with a 47p rise to 767p. Its share price had plunged by more than half in the past week after a surprise profit warning and after it was forced to issue a correction to its accounts and an apology to shareholders for a “drafting error”.
Share buyback at San Leon Energy (SLE). An Irish oil and gas group will return up to $30 million to shareholders after announcing an expanded share buyback plan. Shares in San Leon Energy rose by 5¼p, or more than 17%, to just below 36p, giving the company a market valuation of about £178 million. The energy group, which is listed on Aim, will buy the shares at 46p each, a 50% premium on their closing price the day before the announcement.
Tempus – Aviva (AV.): Avoid for now. It’s hard to see how a new boss can bolster growth and the lacklustre share price
Tempus – Ascential (ASCL): Buy long term. Its reinvention as a business serving the digital age is impressive
