European price war puts squeeze on Vodafone Group (VOD) revenue. A price war in southern Europe has continued to squeeze Vodafone, with quarterly revenue dropping under its new chief executive. The world’s second largest mobile operator said that group revenue had declined 6.8% to €11 billion in the three months to the end of December on a statutory basis. Sales in Spain and Italy, where Vodafone is grappling with low-cost challengers, dropped 7.3% and 2.8% respectively during the third quarter and growth was also weighed down by weakness in its South African market. On an underlying basis, group service revenue rose 0.1% year-on-year in the final three months of 2018. This compares to 0.8% in the previous six months and analyst expectations of 0.3%. Despite the pressures, the company reiterated its full-year forecasts of growth of about 3% in underlying earnings.
Fuller, Smith & Turner offloads its beers to Japanese brewer Asahi. Fuller Smith & Turner (FSTA) is qutting the brewing business after more than 170 years with the shock sale of its beer business to the Japanese brewer Asahi for £250 million. The deal, which is subject to approval by the Competition and Markets Authority, includes its London Pride brand and the Griffin Brewery near the Thames in west London, as well as Cornish Orchards cider, Dark Star Brewing and its Nectar Imports wholesaling operations. Shares of Fuller’s, which will be left as a premium pub and hotel operator when the deal goes through in the first half of this year, rose 191p, or 21% to £11 in early trading.
Mastercard trumps Visa bid for Earthport. Mastercard gatecrashed an agreed takeover this morning by its arch-rival Visa of the UK payment processing minnow Earthport (EPO) and announced its own £233 million deal. Mastercard’s offer of 33p per share in cash trumped Visa’s 30p bid, which was agreed a month ago and valued the company at £198 million. Earthport, which had earlier agreed the Visa deal, withdrew its recommendation and instead urged shareholders to accept the Mastercard proposal. The arrival of Mastercard raises the possibility of a bidding war between the two deep-pocketed giants of payment processing. Shares in Earthport, which is lossmaking but is seen as having innovative and promising technology, soared by 7.25p or 26% to more than 35p. The AIM-listed shares have now grown more than six times from a low point of 5.6p in early December.
Taxman had café chain forgery fears. Concerns over Patisserie Valerie raised in 2016. HM Revenue & Customs raised concerns with Patisserie Valerie’s parent company that some of its invoices and cheques had been forged more than two years before the café chain revealed an alleged fraud that led to its collapse, The Times has learnt. The tax authority sent letters to Patisserie Holdings (CAKE) in 2016 questioning the authenticity of documents submitted as part of its tax return. The correspondence between HMRC and the company raises more questions about why the gap in the accounts was not revealed before October 2018. It also raises questions as to whether the tax authority alerted the Serious Fraud Office to its concerns over the possible forgery of documents. A spokeswoman for the fraud office, which is investigating the accounting irregularities, declined to comment yesterday. HMRC is believed to have begun sending queries about the possible forgery in 2016. Its questioning carried on into last year, when it issued a winding-up petition for £1.14 million against Stonebeach, one of Patisserie Holdings’ subsidiaries.
Metro Bank blunder triggers shake-up call. A leading accountancy body has called for an overhaul of the way lenders assess their loan books after a blunder that wiped more than £800 million off the value of Metro Bank (MTRO) in one day. The Institute of Chartered Accountants in England and Wales said the decisions that banks make about how much risk they should assign to loans should be subject to independent scrutiny by external auditors. Metro’s shares fell by 39% on Wednesday when the challenger bank disclosed it had mistakenly assigned risk weightings that were too low on some commercial property and buy-to-let loans, forcing it to lift its risk-weighted assets (RWAs) by £900 million to £8.9 billion. The move sparked concerns that Metro could tap shareholders for more capital. The more risky loans a bank has, the more capital it must hold as a buffer.
Barclays (BARC) boss joked about sex and bad food in jail, fraud trial told. A senior Barclays executive told a colleague that he did not want to go to prison as a result of a secret deal to pay multimillion-pound fees to Qatari investors during the financial crisis, a court was told yesterday. Tom Kalaris, 63, head of wealth management, made the comment to Richard Boath, a senior Barclays investment banker, as they scrambled to find a way to pay £42 million in undisclosed fees to Qatar alongside an agreement to invest £2 billion in the bank. “None of us want to go to jail here . . . The food sucks and the sex is worse,” Mr Kalaris said in a telephone call in June 2008 played at Southwark crown court on the second day of the trial of four former top Barclays bankers.
‘Fat finger’ claim after $41bn shock for Jardine Matheson. Jardine Matheson Holdings Ltd (Singapore Reg) (JAR), a giant Asian conglomerate founded more than 180 years ago, temporarily lost $41 billion from its market capitalisation after an alleged “fat finger” trading error. Stock in the group fell more than 80% in Singapore yesterday after an influx of sell orders just before trading began. They exceeded orders from buyers and led to a collapse in its shares when the market opened. About 167,500 shares changed hands at only $10.99, which was markedly lower than the closing price of $66.47 on Wednesday. However, the stock soon recovered to close up 0.5%
Norwegian flying lower after BA owner bales out of hot pursuit. The aviation giant behind British Airways has abandoned its near ten-month pursuit of the no-frills carrier Norwegian. International Consolidated Airlines Group SA (CDI) (IAG) announced it would not make an offer for Norwegian and would instead offload the 3.9% stake it acquired in its rival last year as a precursor to a bid. Norwegian’s shares dropped 21.5% to 140 kroner, valuing the business at about £568 million, amid investor concern that IAG’s decision to walk away from a deal could leave the indebted airline’s finances exposed. IAG, listed on the FTSE 100, is one of the world’s biggest airline groups and was created in 2011 following the merger of BA and the Spanish carrier Iberia. Led by Willie Walsh, the company now also encompasses the Irish airline Aer Lingus, Spain’s Vueling and a new budget service, Level. The group generated €23 billion of revenues and flew 104 million passengers in 2017. Given the slump in Norwegian’s shares, IAG is likely to suffer a small loss on its shareholding once it sells the stock. The stake was worth about £22 million last night. An IAG spokeswoman declined to comment.
Revolt grows against RPC takeover bid. A second big investor in RPC Group (RPC) has protested against the £3.3 billion takeover of the British plastic packaging business by Apollo Global Management, the American private equity firm. Royal London Asset Management said it was “very surprised and somewhat disappointed” with the 782p-per-share cash offer from Apollo that RPC recommended to shareholders this week. Royal London is a top 20 investor in RPC with a 1.4% stake worth about £45 million. Another shareholder, Aviva Investors, warned on Wednesday that Apollo’s bid had “not delivered fair value” to investors in the business. RPC, based in Northamptonshire, is Europe’s biggest plastic packaging company making products used in everything from food and beverages to healthcare and vehicle parts. It employs almost 25,000 people in more than 30 countries. Adding an 8.1p dividend that RPC is due to pay shareholders, Apollo’s bid is 15.6% above the packaging group’s share price just before the company revealed it was in takeover talks last September. Investors typically expect a takeover to be pitched at a premium of about 30% to a company’s undisturbed share price.
Shopping centre owner counts cost of retail downturn. The pressure on retail landlords was laid bare yesterday as the shopping centre owner Capital & Regional (CAL) said the value of its properties outside London fell by more than 10% in the second half of 2018. The London-listed group, which fully owns or has stakes in eight shopping centres across Britain, suffered a £1.5 million hit to its rental income last year when 20 of its retail tenants used insolvencies and company voluntary arrangements to close stores or reduce rents. Tenants that have closed or taken new lease terms include the fashion retailers New Look and Select Fashion as well as Toys R Us and Poundworld. The landlord is in discussions with Debenhams, the troubled department store chain, about the potential to reduce the size of some of its stores. Debenhams has three stores in the company’s shopping centres and pays about £2.9 million in annual rent, or 5.8% of total income. Marks & Spencer, which pledged last year to close 100 stores by 2020, has recently announced the closure of its Luton store at Capital & Regional’s the Mall shopping centre.
Shareholders enjoy a large one as Fevertree lifts revenue guidance. Fevertree Drinks (FEVR) dismissed scepticism over its growth prospects after predicting that its full-year results would be “comfortably ahead of the board’s expectations”. In a full-year trading update yesterday, the maker of tonic water and other premium mixers raised its guidance for revenues from a previous consensus of £228 million to about £236 million, growth of 39% on 2017. The company did not comment on profits, although analysts raised their forecasts for underlying earnings by about 6% cent to £77.5 million, up 32% year-on-year. It is expected to end the year with net cash on the balance sheet of about £85 million, which it said it would “hold and invest for growth”. Shares of Fevertree, which have been volatile in recent months, rose by 350p, or 13.5%, to £29.48. In September they hit a record high of £39.56, valuing the company at £4.6 billion, only to fall to £21.06 in December amid fears over demand for premium mixers.
BP charged up by China’s electric cars. BP (BP.) has stepped up its drive into the electric vehicle market with an investment in a Chinese charging technology company. The oil giant’s ventures arm is understood to have invested up to $5 million in Powershare, which operates an online platform connecting drivers with charge point operators and power suppliers in China. While small-scale, the investment gives the company a foothold in “the world’s largest EV market and a key market for BP”, Lamar McKay, the oil group’s deputy chief executive, said. BP, which is based in London, employs about 70,000 people worldwide and reported profits of $2.8 billion in 2017, primarily from producing and selling oil and gas. It is expanding its presence in renewable energy and the power market and last year spent £130 million acquiring Chargemaster, Britain’s biggest electric car charging network with 6,500 charging points. BP’s investment is part of Powershare’s Series A funding round alongside Detong Capital Partners, the Chinese private equity firm.
888 shuffles pack with new chief executive. One of the gambling industry’s biggest London-listed companies surprised the market yesterday by announcing a change of chief executive. 888 Holdings (888) said that Itai Frieberger, 47, who had been in the position for three years, had stepped down and handed the baton to Itai Pazner, 46, chief operating officer. Mr Frieberger said that the pressures of running an international company had been a factor. “Being CEO is definitely quite a challenging role, with constant pressure, whether it’s travel or whether it’s the responsibility,” he said. One analyst wondered whether he had become frustrated over failed bids. In 2016, 888 made a bid for William Hill but it was unsuccessful. The year before it lost out to GVC Holdings in an attempt to take over Bwin.party. Mr Frieberger insisted that his departure was not a result of failing to land a deal. “You win some, you lose some,” he said. Ivor Jones, an analyst at Peel Hunt, said that the “seamless” transition between the two Israeli businessmen — which will include Mr Frieberger staying as a director for up to a year — was “a model of succession planning from which many companies could learn”. He said that Mr Pazner’s 17 years at the company, the last two as chief operating officer, had been ideal preparation for the top job: “We regard the passing of the baton between insiders as a clear sign that no radical change of direction is planned.”
BT wins licence to sell service direct to Chinese consumers. BT Group (BT.A) has become the first international group to receive two national telecoms licences from China’s Ministry of Industry and Information Technology which will enable it to sell services direct to Chinese customers. The Chinese licences give BT a domestic virtual private network (VPN) licence and a nationwide internet service provider licence, in a first for a western company. The British telecoms company already has operations in China but the new permits allow it to have contracts direct with its business customers and bill them in Chinese yuan. Bas Burger, chief executive of BT global services, said the licences would allow BT to “significantly simplify the process of delivery connectivity”. Liam Fox, the trade secretary, hailed the move: “Close co-operation between the UK and Chinese governments has resulted in BT securing these licences, which will enable it to operate across the country.”
Digital adverts offset print fall for Mail’s publisher. A surge in online advertising revenues for the owner of the Daily Mail has more than offset declines at its print division. The publisher said that turnover rose by 1% on an underlying basis between October and December at its consumer media business, which also includes Metro. Advertising revenues rose 4% during its financial first quarter, with a 10% jump in digital sales outweighing a 1% decline in print revenues. Advertising income from the Mail print titles fell by 11% but at Mail Online it rose by the same proportion, with the publisher enjoying a boost from its Daily Mail TV project. The update marked a turnaround for the consumer division of Daily Mail and General Trust A (Non.V) (DMGT), which had suffered a 4% revenue decline during the previous financial year. The publisher has in the past blamed Brexit for hitting advertising revenues.
Chiquito owner regrets lack of Star attraction. Weak cinema admissions in December took the shine off the turnaround of Restaurant Group (RTN) Frankie & Benny’s and Chiquito brands in what its chief executive called a “pivotal year”. With a large number of its leisure brands located next to multiplex cinemas, the group relies on a strong film slate to attract diners, but the absence of a Star Wars movie this year meant admissions last month fell 8.7%. As a result, like-for-like sales for the whole group fell by 2%, slightly worse than the forecast 1.3% decline, although better than the 2.2% fall after the first 42 weeks. The group said the underlying sales trend had been positive since the end of the World Cup, with its pubs business “continuing to consistently trade ahead of the pub restaurant sector” and its airport concessions also trading strongly. It opened 21 new pubs and 21 concessions during the year, helping to lift total sales by 1%, and it said it expected to deliver adjusted pre-tax profits for 2018 in line with market expectations. However, investors will be far more interested in what happens this year after the controversial £559 million acquisition of Wagamama, the Asian noodle bar chain, which was completed on Christmas Eve.
Gordon Dadds has eye on buy-ups as share offer raises quick £11m. One of Britain’s few listed law firms has raised £11.5 million in four hours through a surprise placing of new shares that led to its stock price falling by a quarter. Gordon Dadds Group (GOR) priced the new tranche of shares — which make up 22% of its enlarged share capital — at 140p and will use the cash to fund a string of acquisitions. The placing means new investors have bought into Gordon Dadds at the price it listed at in August 2017, while existing shareholders have seen their holdings substantially diluted. Its share price had risen to 189p before the placing, which sent its stock tumbling to 143½p. The law firm closed the “oversubscribed” placing after four hours, having raised the cash from institutional investors. Adrian Biles, chief executive, said there was “substantial appetite from blue-chip investors to get on to the share register”.
Shortage of talent hits cybersecurity consultant. NCC Group (NCC) warned that Brexit uncertainties and a slowdown in risk management work would hit profits, wiping more than £100 million from the value of the cybersecurity consultancy. The Manchester-based company said that growth in its risk and governance division had weakened because of a lull in work after the introduction of Europe’s internet privacy rules in May. Its cybersecurity advisory wing has been held back by a shortage of skilled workers, while some of its UK-based clients have delayed orders because of Brexit, the company revealed. It expects to report underlying earnings of £43 million in the current financial year, about £1 million below forecast. The company said a plan to boost margins was a year behind schedule. The warnings sent its shares tumbling 54p to 130p, giving it a market value of £375 million. Its stock is down 60% from its high point two and a half years ago.
Merger creates health property giant. An owner of GP surgeries around the country has agreed a merger that will create Britain’s largest healthcare real estate investment trust. Primary Health Properties (PHP) will buy the entire issued share capital of MedicX Fund Ltd. (MXF), creating a combined group with a £2.3 billion portfolio of properties rented to primary care providers. PHP was founded 24 years ago by Harry Hyman, a chartered accountant. It has since grown into one of the largest providers, floating on the Alternative Investment Market in 1998. It joined the FTSE 250 last April and has a market capitalisation of £866 million. Medicx, the healthcare fund of the investment manager Octopus Healthcare, also invests in purpose-built healthcare properties in the UK and Ireland. It listed in 2006 and has a market capitalisation of £382 million. The merged group will own 479 freehold properties in the UK and Ireland with a rental income of more than £120 million. The properties are let to GPs and other primary healthcare providers, which provide a reliable income as the NHS guarantees to reimburse doctors for their rent. The merged company hopes to make savings and access cheaper debt to help grow its portfolio.
Reckitt needs a remedy as boss heads for exit. The City is not happy about Rakesh Kapoor’s departure from Reckitt Benckiser Group (RB.). The consumer goods group’s shares have fallen by more than 6% since the surprise announcement that he would leave by the end of the year. The chief executive’s departure “crystallises long-brewing anxieties”, said Martin Deboo, an analyst from Jefferies, which downgraded the stock to “underperform” from “hold” yesterday. “There are strong runners and riders for the role aplenty,” he said. “But this is a challenge beyond mere fresh legs.” The broker raised concerns about the group’s “pay-for-performance” remuneration policy, which it said was now under pressure because the company has the “weakest culture and work-style ratings” within the sector. Jefferies suggested that Reckitt’s losing out to GlaxoSmithKline (GSK) in the race to buy Pfizer’s consumer healthcare division might have prompted Mr Kapoor’s exit. Worse, it believes the loss leaves the business overly reliant on staples such as Nurofen, Strepsils and Gaviscon, while cutting off the potential for innovation. Jefferies said that there were potential upsides, such as the planned spin-off of Reckitt’s hygiene and homecare arm, but claimed that the gains looked uncertain given that the full separation is not expected until mid-2020.
OnTheMarket plc (OTMP), the property portal, was buoyed after a legal case against it was dismissed. Gascoigne Halman, an estate agent, had claimed that its “one-other-portal” rule was
anti-competitive. The rule means that agents who sign up to advertise on its site have to agree to list with only one of the other two main players, Zoopla and Rightmove.
Tritax Big Box Reit (BBOX), specialising in buying large storage facilities, announced after the market’s close that it had agreed to buy an 85% stake in DB Symmetry, a logistics business owned by Delancey and Barwood Development. Tritax said the new asset provides the potential to add about 38.2 million sq ft of new warehouse space to the company’s portfolio.
US engineer seeks Aim listing. An entrepreneur is seeking to raise up to $60 million through a listing of his vehicle component manufacturing and logistics business on London’s junior Aim market. Techniplas was founded in 2010 and remains wholly owned by George Votis, its executive chairman. Its core business is in manufacturing plastic modules primarily used in vehicles, such as innovative lighting products and sensors to manage air and water usage. The company is based in Wisconsin and has about 2,000 employees and 12 production sites in the US, Mexico, Germany, Switzerland, Brazil and China. It reported revenues of $515 million in 2017 and $403 million in the nine months to September 2018. It has $190 million of debt and is targeting a valuation of $280 million to $360 million. The company also has a division that matches third-party manufacturing capacity with demand, which Mr Votis likened to an “Airbnb or Uber” to make supply chains more efficient. Mr Votis said he had chosen Britain for a listing venue because Techniplas generated more than half of its revenues outside the US.
Tempus – St James’s Place (STJ): Hold. The shares should create value over longer term but are not a must-have addition
Tempus – CMC Markets (CMCX): Avoid. Trading has stabilised but the shares remain unappealing
