PRESS TIPS:
Capita, which has 68 per cent of its existing work pipeline coming from the public sector, says that the expected public sector outsourcing work was beginning to flow through at last.
The company is back to organic growth, a 6 per cent rise in the second half expected to contrast with a flat outcome in the first, with 7 per cent achievable next year. Tempus in The Times says that whether that will satisfy the doubters is questionable; Capita has always been a stock that has attracted scepticism. But the rate of contract flows in the third quarter was impressive. In all, £400m was awarded and £300m from the pipeline abandoned as being unlikely to arrive; but that pipeline was little-changed at £4bn, which means potential new work arrived at a higher rate than it could be won. This may look academic, but such work flows are one of the few ways to value the outsourcing sector.
Capita shares have been erratic performers this year. Down 5p at 722p, they sell on about 14 times' earnings, or about in line for the sector, but merit only a "hold" at this level (Last IC rating: Sell, 1 Nov).
Tempus writes that building products provider CRH is taking a cautious view of prospects for continental and American construction markets by identifying another €450m of cost-cuts between now and 2015 - and third-quarter figures, though affected by a couple of one-off factors, give an idea why.
In Europe, a 5 per cent sales decline in the first half accelerated to 7 per cent in the third quarter after difficult trading in the Netherlands and Poland. In the US, CRH was lapping a mild winter last time and a strong performance that continued into the spring and saw some work pulled forward from the third quarter. So sales were up by 8 per cent in the first half but only 1 per cent in that quarter, while superstorm Sandy will mean disruption, and a sales decline, in the last three months of the year. Across the group, then, sales were off by 3 per cent in that third quarter.
Although reconstruction work will start after Sandy next year, with volumes across the group off by 30 per cent since the peak, clearly even the accelerated cost-cutting will not bring CRH back to where it was. With the uncertainties of the US fiscal cliff and further disruption in the Eurozone, a price-earnings ratio of 16 for next year does not suggest much room for any upside (Last IC rating: Sell, 4 Oct).
Questor in The Telegraph writes that Cineworld reported that the London Olympics hit cinema attendances, with total admissions in the 19 weeks to November 8th down 4.1 per cent. Film distributors in the UK - quite wisely - decided not to release any major titles during the Games. This goes to demonstrate that a cinema is only as good as the releases on offer - and in the run up to Christmas we have some strong offerings such as the last film in the Twilight saga and a film of JRR Tolkien's The Hobbit.
However, the release schedule is not the only factor that could grow earnings over the next few years. Cineworld is expanding. It plans to open about 25 new complexes by 2017, which analysts reckon could boost earnings by up to 40 per cent. Three are scheduled to open next year - in St Neots, Wembley and Gloucester. The cinema group has also scrapped online booking fees, with a view to growing its MyCineworld loyalty scheme. This appears to be going well, although no data on MyCineworld was released in the statement.
Group cashflow is strong and the dividend remains attractive at 4.8 per cent rising to 5.1 per cent. The shares are trading on a December 2012 earnings multiple of 12.2, falling to 11.4 next year. After yesterday's strong performance, the shares are just a touch below their all-time high in September of 252p apiece. Last named a buy in August at 233p the shares are a "hold" for now on valuation terms (Last IC rating: Buy, 17 Aug).
Business press headlines:
The catch-up boom in China, India, Brazil is largely over and will be followed by a drastic slowdown over the next decade, according to a grim report by America's top forecasting body. Europe's prognosis is even worse, with France trapped in depression with near zero growth as far as 2025 and Britain struggling to raise its speed limit to 1 per cent over the next three Parliaments. The US Conference Board's global economic outlook calls into question the "BRICs" miracle (Brazil, Russia, India, China), arguing that the low-hanging fruit from cheap labour and imported technology has already been picked. China's double-digit expansion rates will soon be a romantic memory. Growth will fall to 6.9 per cent next year, then to 5.5 per cent from 2014-2018, and 3.7 per cent from 2019-2025 as the aging crisis hits and investment returns go into "rapid decline," The Telegraph reports.
The UK Government may have to hand back as much as £5bn to £7bn in taxes to major UK-based companies after a European court found HM Revenue & Customs had breached EU rules. The judgment, handed down on Tuesday, threatens to open the floodgates for businesses to claim refunds that go back as far as 1973 and comes despite mounting public furore over tax avoidance by multinational companies. However, rather than seeing money returned, the ruling by the European Court of Justice means that HMRC now faces paying out billions of pounds to companies. British American Tobacco, along with other litigants thought to include BA's pension fund scheme, have been fighting a class action lawsuit against HMRC both in the UK and in Europe since 2006. The claimants - which are headquartered in the UK - say they have been taxed unfairly by HMRC for decades, The Telegraph says.
Anglo American, the mining company hit by the resignation of its chief executive and continuing wildcat strikes at its South African operations, said costs at a large iron ore project in Brazil would be $2bn higher than expected. Shares in the company fell by 3.15 per cent to close at £17.70 on Tuesday, after Anglo American confirmed it now expected capital expenditure at its Minas-Rio development to exceed $8bn. The company's shares have lost over a quarter of their value since the start of the year. The company said its board had commissioned an external report into the causes of the cost overrun and delays at the project. Poor progress there has long been seen as a blot on Anglo's plans to lower its cost of production, the Financial Times explains.
Workers angry over austerity cuts and tax rises have launched a Europe-wide string of rallies and strikes on Wednesday, shutting transport, grounding flights and closing schools. General strikes in Spain and Portugal will spearhead a "European Day of Action and Solidarity" called by unions in the region. Unions in Greece and Italy also planned work stoppages and demonstrations against austerity policies, which labour leaders blame for prolonging and worsening the continent's economic crisis. For Spain, the Eurozone's fourth-largest economy where one in four workers is unemployed in a deep recession, it is the second general strike in eight months in protest against draconian budget cuts. Spain's main CCOO and UGT unions have urged people to rally under slogans such as "They are taking away our future!", deploying pickets during the night at airports, bus and railway stations, according to The Telegraph.
Millions of people fleeing violence in Syria will be left to face winter alone after aid agencies admitted that it was becoming too dangerous to provide relief across many parts of the country. The UN's refugee agency (UNHCR) now expects that more than four million Syrians will be in need of emergency aid by next year. But the worsening crisis is forcing international non-governmental organisations (NGOs) to abandon thousands of desperate families, as more and more of the war-torn country becomes a no-go zone for aid-workers, The Times says.
The troublesome Russian oligarch partners of BP have bent, finally, to the will of the Kremlin and made peace with the British oil group. The four billionaires who make up the AAR consortium have called off their long-running $10bn legal action against BP over their TNK-BP joint venture. It is understood that BP paid $325m to the oligarchs in return for settling all outstanding disputes. AAR launched the action last year, claiming that BP had broken their shareholder agreement by excluding the joint venture from the British company’s proposed alliance with the Kremlin-controlled group Rosneft. AAR secured an injunction in the High Court blocking the alliance but claimed that TNK-BP had lost billions of dollars of future revenue by being denied the opportunity, The Times reports.
