Consumer confidence at five-year low. Christmas cheer hard to find as gloom deepens. Households are the most pessimistic they have been in more than five years, with the gloom around Brexit rivalling the dark days in the aftermath of the financial crisis. In news that will do little to boost Britain’s beleaguered retail sector, the closely watched GfK consumer confidence index dropped to -14 in December, down one point to its lowest level since July 2013. “Consumers are ending 2018 on a pessimistic note with Christmas cheer in short supply,” Joe Staton, client strategy director at GfK, said. Consumer confidence is an important barometer of prospects because consumption drives two thirds of economic output. When confidence is low, households tend to delay purchasing decisions, which can have a self-fulfilling negative effect on growth.
Centrica (CNA) to challenge Ofgem price cap. The owner of British Gas is to bring a legal challenge against Ofgem, accusing it of setting the energy price cap too low, costing Britain’s biggest supplier £70 million. Centrica last night said it was seeking a judicial review against the regulator over how it calculated wholesale costs that suppliers face when it set the cap. The embattled FTSE 100 group insisted that it did not expect or intend to delay the implementation of the cap on January 1 but wanted to force Ofgem to change its methodology.
Kier gets the cold shoulder from picky investors. The group of banks and brokers underwriting the Kier Group (KIE) rights issue were left nursing estimated losses of almost £7 million after only 38% of investors took up the deeply discounted fundraising. The construction company said yesterday that almost 24.3 million shares, or only 37.7% of the issue, were taken up by shareholders. It was the lowest percentage uptake for a UK rights issue since 2012, according to figures from Dealogic, the financial data company, with most having rates above 95%. One City analyst called the low level of acceptance a “huge embarrassment”. However, with the rights issue fully underwritten, Kier raised the net £250 million it had targeted to help cut its debt. It prompted a group of five banks and brokers to launch a separate discounted share placing to offload the stock, paring their losses amid Kier’s shares trading sharply below the 409p per share issue price.
Employees of Wagamama will receive a £1,000 bonus as a result of the £559 million sale of the Asian noodle bar chain to Restaurant Group (RTN). The bonus payments, totalling £4 million, are being paid by Duke Street, its private equity backer, and Wagamama management to all employees who had worked for the company for at least 12 months as of November 28. The company told employees this week that waiting staff will each receive £1,000, while general managers and head chefs will collect £2,000. About 3,600 members of staff will benefit. Jane Holbrook, the outgoing Wagamama chief executive, told MCA, the industry news website, that the move had been inspired by Pret A Manger’s decision to pay a £1,000 bonus to all staff after the £1.5 billion sale of the sandwich chain to JAB Holdings.
Boots braced for cuts as US owner seeks $1bn savings after sales dip. The American owner of Boots has made its UK retail operations a focus of a new $1 billion cost-cutting drive after a further deterioration in its financial performance. Walgreens Boots Alliance said yesterday it had initiated “global smart spending and smart organisation” programmes focusing on its British retail business, its American pharmacies and other “global functions”. The company declined to elaborate on the cost- cutting programme or comment on whether it could affect jobs in Britain. Boots became part of Walgreens Boots Alliance in 2014 when Walgreens took over the Anglo-Swiss Alliance Boots. Walgreens today has 18,500 shops in 11 countries and employs about 415,000 people. It owns beauty brands including No7, Liz Earle, Soap & Glory and Botanics. The $67 billion retailer is run by Stefano Pessina, a billionaire Italian entrepreneur, who built the company from his father’s struggling pharmacy business in Naples.
Loan fears and Brexit undermine Funding Circle (FCH). A recently floated peer-to-peer business lender lost a fifth of its market value yesterday after a leading analyst raised the alarm over the quality of the loans arranged on Funding Circle’s platform. Citi, the Wall Street bank, warned that “evidence of a credit deterioration” had raised doubts over the group’s ability to continue growing at its current breakneck pace. It added that the spectre of a “hard Brexit” would act as a brake on the lender, which derives 70% of its revenue from small and medium-sized companies in Britain. Josh Levin cut his price target on Funding Circle by more than half, from 432p to 204p. He advised clients to “sell” the shares only ten days after starting coverage on Funding Circle with a “neutral” rating. In his gloomy research report, Mr Levin cited recent figures from Funding Circle SME Income Fund, a separately listed vehicle that buys loans originated on the platform. It provides 13% of the cash Funding Circle provides to borrowers, according to Citi.
Faroe rejects shareholder’s hostile bid. An oil and gas explorer has warned that a hostile bid from its largest shareholder could mean it will miss out on acquisition targets of its own. Faroe Petroleum (FPM) is on the defensive as DNO, a Norwegian oil group, has made a 152p per share proposal, valuing the Aim-quoted company at £610 million. Faroe issued a circular to shareholders yesterday, again urging them to reject the “opportunistic, unsolicited and inadequate offer”. Faroe was founded in 1997 and listed on London’s junior market in 2003. It produced 12,400 barrels of oil a day in the first half of this year but hopes to increase that to 35,000. DNO produces about 81,500 barrels a day through interests in Iraq and Oman. Analysts at Cantor Fitzgerald Europe said: “We continue to believe that [Faroe] shareholders should receive far better value for one of the sector’s most respected names.”
Shell splashes out $175m to crack US wind market. Royal Dutch Shell ‘B’ (RDSB) has boosted its expansion into the offshore wind sector with two deals to establish a significant position in the nascent US industry. The Anglo-Dutch energy group has splashed out $175 million over the past week on the rights to develop hundreds of turbines in the waters off New Jersey and Massachusetts, which could power more than 1.5 million homes. Dorine Bosman, vice-president for wind development at Shell, below, said its expertise from developing offshore oil and gas fields should help it to compete against established offshore wind players to secure subsidy contracts needed for the proposed wind farms to go ahead. Royal Dutch Shell reported net profits of $12 billion last year from operations spanning more than 70 countries. It generates the bulk of its earnings from producing and selling oil and gas but recently increased its expansion into low-carbon energy and is investing up to $2 billion of its annual $25 billion capital expenditure in its new energies division.
The world’s largest cruise operator sank to the bottom of the FTSE 100 yesterday after forecasting a stormier first quarter of next year than previously expected amid higher fuel costs and a stronger dollar. Carnival (CCL), which has more than 100 vessels across ten brands, including the Queen Elizabeth and Queen Mary 2, reported record full-year revenues of $18.9 billion, up 8% on the previous year. However, profits fell by about 10% in the final quarter because of rising fuel costs and the company downgraded its expected returns for the first quarter, which it now expects to be flat with the previous year, because of fuel costs.
Miners were among the biggest fallers as the price of copper retreated amid concerns over lower demand. Antofagasta (ANTO) fell 29p to 757p; Glencore (GLEN) dipped 9¾p to 284¾p; and Rio Tinto (RIO) retreated 77p to £37.46½. Oil companies were also on the back foot after brent crude sank to its lowest since October 2017, having fallen 9.2% so far this week because of worries about oversupply in a slowing global economy. BP (BP.) fell just over 10p to 492½p; Royal Dutch Shell ‘B’ (RDSB) dipped 27½p to £22.90½. Utilities, which are seen as offering reliable dividend payments in times of trouble, were among the top risers. Severn Trent (SVT) gained 53p to £18.73; National Grid (NG.) rose 18½p to 796p; and United Utilities Group (UU.) rose 10½p to 760p.
Greencore Group (GNC) rose 7.2% after the FTSE 250 sandwich maker announced a £509 million share buyback at 195p per share — a near 9% premium to last night’s close. It closed up 12p at 178p.
A Shanghai-based pharmaceuticals company backed by Li Ka-shing’s CK Hutchison Group tumbled almost 9.5% after it announced that it was investing an extra $12 million in research costs for the development of a cancer drug. Hutchison China Meditech Ltd (HCM) is developing fruquintinib with its US partner Eli Lilly. As part of a change to their collaboration deal, Chi-Med will make the additional investment in return for more reward for the future returns from the drug. It closed down 445p at £45.05.
Chamberlin (CMH), the 128-year old foundry group, shot up 16.4% after announcing the £10 million sale of Exidor. Some of the proceeds will be used to pay down the group’s debt. It closed up 11½p at 81½p.
Neil Woodford, the fund manager, has upped his stake in a waterless washing machine maker whose share price has fallen 94% this year. Xeros Technology Group (XSG), which uses a patented polymer technology to try to reinvent intensive industrial and commercial processes, launched a discounted share placing last month as part of plans to raise £20 million to invest in its business divisions.
Tempus – 888 Holdings (888): Hold. Strong prospects in the US and continental Europe but with significant associated regulatory risks
Tempus – AA (AA.): Buy. Shares should respond to a sensible turnaround plan
