Death of Christmas cards and junk mail kills Royal Mail (RMG) profits. Shares in Royal Mail plunged to new lows this morning as the postal network admitted that its profits would not be coming in as high as hoped. It blamed the slow death of the Christmas card and the business world’s anxiety about sending out junk mail that could breach privacy laws under GDPR, the European general data protection regulation. The number of letters that Royal Mail has delivered in the past ten months is down 8%, a far faster decline than the long-term average of between 4% and 6%. Reporting a less than satisfactory Christmas quarter, Royal Mail said that it was cutting operating profit forecasts to between £500 million and £530 million for the year to the end of March. Only ten weeks ago, just before its most important trading period, it was hoping that profits would be as high as £550 million.
Brexit is knocking investor confidence, warns Hargreaves Lansdown (HL.). Hargreaves Lansdown, Britain’s biggest fund supermarket, has reported a 6% fall in funds under management amid growing investor concerns about the US-China trade war, a slowdown in global growth and Brexit uncertainty. Negative market movements of £8.2 billion knocked assets under administration at the end of December down to £85.9 billion from £91.6 billion at the end of June, the FTSE 100 company said as it reported first-half results. Shares in Hargreaves Lansdown dropped 108p, or 5.8%, to £16.90 in early trading. Chris Hill, chief executive of Hargreaves Lansdown, said: “External market conditions have impacted investor confidence and driven industry-wide net outflows over this short reporting period. This includes our own UK measure of investor confidence, which is at its lowest point since the index was launched in 1995.”
CVS struggles to keep veterinary costs on a leash. One of Britain’s biggest veterinary companies has issued a profit warning, sending shares down by almost a third and triggering speculation that it was now vulnerable to a predatory takeover. CVS Group (CVSG) said that a shortage of vets had led to above-inflation salary rises and left the company reliant on contractor cover, pushing up costs and hitting profits. The company is quoted on the London Stock Exchange’s junior AIM market. It owns more than 500 veterinary surgeries and has been expanding by buying up practices and driving sales. It also operates four laboratories which perform diagnostic services for the veterinary industry, has seven pet crematoria and operates the online medicines, pet food and animal products business Animed Direct.
Bleak day for retailers as thousands of jobs at risk. Paperchase looks to close stores. Oddbins fights collapse. Tesco (TSCO) confirms threat to 9,000 staff. Thousands of retail jobs are at risk after another bleak day for the industry, with Tesco cutting costs, the off-licence chain Oddbins trying to avert administration and the stationery business Paperchase seeking to close stores. Britain’s biggest supermarket group confirmed yesterday that 9,000 jobs in its stores could be cut, with fresh food counters disappearing from at least 90 stores. The retailer said that customers were using its counters less frequently because they have less time to shop. The move represents the biggest cull yet under the leadership of Dave Lewis, the chief executive whose nickname in the industry is Drastic Dave. News of the Tesco cuts comes after a difficult Christmas for many retailers. Shops are under pressure from rising costs, intense competition, the rise of online rivals, and fragile consumer confidence. Tesco has more than 300,000 staff in Britain, making it one of the country’s largest employers, with more than 3,400 supermarkets and smaller convenience stories.
Big Four accountants bid to delay audit reform. Britain’s biggest accountancy firms are pushing to delay sweeping reforms to the industry, including a forced separation of their businesses, before parliamentary hearings this week. The heads of Deloitte, KPMG, EY and PWC have written to the Commons business committee to say the competition watchdog should postpone moves to overhaul the audit market until the completion of a separate review by Donald Brydon, chairman of the London Stock Exchange, which could take another 12 months. Mr Brydon was commissioned by Greg Clark, the business secretary, in December to investigate whether the work of auditors is good enough, but the review has not started. Proposals by the Competition and Markets Authority include separating firms’ audit and consulting businesses as well as the biggest companies having to appoint two auditors instead of one.
Deutsche Telekom free to call on BT. Deutsche Telekom is free to launch a takeover bid for BT Group (BT.A) after an agreement limiting the size of its stake in the company expires today. The German telecoms giant was subject to a three-year clause as part the £12.5 billion sale of EE to BT in 2015 meaning it could only increase its stake to 15%. Deutsche Telekom took a 12% stake in BT and a seat on its board and the deal was interpreted as paving the way for a future takeover. The passing of the lock-up has reignited speculation about BT’s intentions. However, BT has since fallen out of favour with investors amid an accounting scandal in Italy and financial underperformance.
Barclays bosses ‘panicked about their pay’ if bank was bailed out. Senior bankers at Barclays (BARC) feared the bank could be nationalised, putting their multimillion-pound pay packets at risk, a court was told yesterday. Southwark crown court heard that one of the four men charged with fraud, Roger Jenkins, was panicking in the middle of the night about the threat to his pay as the government announced a bailout package. Mr Jenkins, Richard Boath, John Varley and Thomas Kalaris are facing charges of conspiracy to commit fraud. They are accused of hiding £322 million in commission fees paid to Qataris in return for about £4 billion of rescue investment from the Gulf state in the depths of the financial crisis in 2008. Barclays raised more than £11 billion from investors in 2008 as it avoided a government bailout, unlike its rivals Royal Bank of Scotland and Lloyds.
Paragon turns fire on loan book critics. The boss of one of Britain’s biggest buy-to-let property lenders has defended the way bank’s loan books are regulated in the wake of a blunder at Metro Bank that wiped more than £800 million off its market value in one day. Nigel Terrington, the chief executive of the Solihull-based Paragon Banking Group (PAG), said that lenders did not need the key decisions they make about how much risk to assign to loans subjected to a regular external audit. “We have a very thorough process ourselves in applying the risk weightings,” he said. Metro was last week forced to raise the assessment of its risk-weighted assets by £900 million after it found a mistake in its assumptions, knocking its shares down by almost 40% and sparking fears that the lender will be forced to raise more capital.
Partnerships give Sensyne Health (SENS) a boost. A healthcare technology company founded by Lord Drayson, the entrepreneur and former science minister, has struck a series of potentially lucrative research partnerships. Sensyne Health has signed separate agreements with the George Eliot Hospital NHS Trust and Wye Valley NHS Trust to allow it to analyse anonymised patient data using artificial intelligence technology in an attempt to improve patient care and find new treatments. Sensyne has also reached a three-year collaboration with the University of Oxford’s Big Data Institute to use AI to explore the “complexities of chronic disease” and has signed a non-exclusive agreement with Jefferson Health, a US healthcare provider.
Flybe backs chairman as tycoon calls for sacking. Flybe Group (FLYB) insisted yesterday that it had acted in the best interests of shareholders and stakeholders after a fund management tycoon called for the airline’s chairman to be replaced. Hosking Partners, led by the Vote Leave donor Jeremy Hosking, is seeking the requisition of an extraordinary general meeting of Flybe, less than a month before the planned sale of its main assets for £2.8 million to a consortium of Virgin Atlantic and Stobart Group Ltd. (STOB), which runs Southend airport, and the sale of its shares for 1p each. Flybe confirmed in a stock market statement that Hosking Partners is demanding the removal of Simon Laffin, a former finance director of Safeway supermarkets, as chairman and his replacement by Eric Kohn, an investment banker with airline experience at Flybe’s former rivals Cityjet and VLM. Flybe also said that Hosking Partners wanted Mr Kohn to investigate the process behind the sale of the airline.
Activist investor plotting Playtech (PTEC) board overhaul. The American activist investor militating for change at Playtech is plotting an overhaul of the gaming technology group’s board in a bid to pep up its flagging share price. The Times understands that Jason Ader, from Springowl Asset Management, a New York hedge fund, has been inteviewing candidates with a view to putting them forward as directors at the next Playtech annual meeting in May. Mr Ader, who has a stake of almost 5%, is believed to want at least three existing board members replaced, including Alan Jackson, its chairman since 2013, and Andrew Thomas, the senior independent non-executive director. He is thought to have run the idea by other shareholders.
Fears over weak prices at its vast Cullinan mine in South Africa carved out a fifth of the value of Petra Diamonds Ltd.(DI) (PDL). The largest diamond miner on the London market also sparked concern over escalating debt as it issued a half-year update. Its shares fell 9¼p to 35½p yesterday as investors overlooked an 8% rise in revenues to $207.1 million in the last six months of 2018. Petra reported the price of rough diamonds fell from $140 per carat to $96 per carat last year. To make matters worse, analysts highlighted how net debt at the miner crept higher from $520.7 million in June to $538.9 million in September and $557.2 million in December. Brokers have been keeping a close watch on Petra’s debt as heavy investments and a stronger South African rand piled pressure on the company, which pays in rands and earns in dollars. RBC Capital Markets downgraded the stock from “outperform” to “sector perform,” slicing its target price from 65p to 40p. “The significantly lower realised Cullinan pricing and the impact on cashflow generation sees us take renewed caution,” it told investors. Barclays also revised its target from 57p to 52p.
Ocado Group (OCDO) dominated after reports that the digital grocer has held talks with Marks & Spencer Group (MKS) over a potential partnership. Shares in Ocado topped the index, up 19½p to 966p, as M&S closed broadly flat at 290¼p. Talk of the possible tie-up knocked rival delivery chains. Delivery Hero fell 2.3% in Frankfurt and Takeaway.com eased 0.4% lower in Amsterdam.
The arrival of Riccardo Tisci’s first Burberry Group (BRBY) collection since arriving from Givenchy to take over the role of chief creative officer won a glowing review from Vogue this month. But how confident is Marco Gentile, president of Europe, Middle East, India & Africa, about the repositioning of the brand? He sold more than £200,000 of shares yesterday, according to a regulatory filing after market close. Shares in the fashion house closed down 27½p at £17.58.
CYBG (CYBG) led the fallers before its annual meeting tomorrow, down 10¼p, or 5%, to 185p. It is also due to update investors on its progress in the first quarter next week.
TI Fluid Systems (TIFS), the car parts manufacturer, was driven higher after a strong trading statement. It expects to report full-year revenue of about €3.5 billion in March, in line with expectations. Shares in the company rallied 8¾p to 169¾p. JP Morgan Cazenove welcomed what it called “a solid performance in a volatile year”.
Dixons Carphone charged up. Having slumped below 70p as 2018 drew to a close, Dixons Carphone (DC.) has been charging ahead this month. The electronics retailer — up by a fifth since the turn of the year — received a boost from optimistic analysts at Morgan Stanley. Shares in the business advanced 2¼p to 144¼p after the bank made the positive case for the British retail sector. While many investors are bearish on retail, it pointed out in a note to clients that real income growth is rising, unemployment is low and costs are broadly stable. It homed in on Dixons, upgrading the company behind Currys and PC World from “equal weight” to “overweight” and arguing that its shares have been “very oversold”. Analysts at Morgan Stanley believe the retailer’s Carphone Warehouse chain is now likely to generate strong cashflows.
Tempus – Coca-Cola HBC AG (CDI) (CCH): Buy. Undervalued relative to peers and has plenty of growth potential
Tempus – Kingfisher (KGF): Speculative Buy. It may take longer, but the plan is the right one
