PRESS TIPS:
Tempus in The Times writes that outsourcers have had a largely positive reporting season this autumn and Mitie was sounding upbeat yesterday, even if the shares, which went above 300p briefly last week, fell 10p to 280p because of profit-taking.
Revenues were up by 5.6 per cent to £1,027m in the first half to the end of September, with 4.3 per cent organic growth (Mitie is not noticeably acquisitive, Enara excepted). Stripped of one-off factors, pre-tax profit came in only 2 per cent higher at £48.8m, although the interim dividend is up 4.5 per cent to 4.6p. The markets in which Mitie operates are tough, with corporate customers focused on cost-cutting, but the order book stands at £9bn, with 72 per cent of next financial year's revenues already secured. The pipeline of potential work is down a little, reflecting two large contracts that now will not be won.
Mitie shares sell on a little more than 11 times' earnings. Although the company has its detractors in the City, who believe this is too high a rating, it looks about right for now. Hold (Last IC rating: Hold, 19 Nov).
Tempus writes that there has been a slew of disappointing trading updates in the past few weeks from industrial companies so there is a degree of relief when one such, with exposure to a wide range of industries worldwide, comes in unscathed.
Diploma, which makes seals and other technical products, has two significant advantages: it sells a large proportion of its output to the aftermarket - about 60 per cent of revenues in the case of seals - which is more resilient; and it counts only about half of all its sales to the United States, giving it a wide geographical spread. There are some slow spots - British retailers are not investing as much on chilled cabinets, for which Diploma provides controls, while the German market is weak - but demand continues to be strong from America, for seals for logging and other heavy equipment and vehicles.
The company has achieved 20 per cent compound earnings growth over each of the past five years and this continued into the year to the end of September, even if growth slackened off into the fourth quarter. Pre-tax profits were up by 17 per cent, then, to £52.6m before one-offs. As a gesture of confidence (and Diploma seems to be able to achieve organic growth of up to 5 per cent), total dividends are up 20 per cent to 14.4p. The shares are on about 13 times' this year's earnings and remain a solid core holding (Last IC rating: Buy, 19 Nov).
The Independent is inclined to buy Majestic and says it is impossible to ignore yesterday's results. For the six months ending October 1st pre-tax profits increased to £9.2m, up 4 per cent. Total sales eased back 1.4 per cent to £126m, but that's explained by the company pulling out of the wholesale trade to concentrate on fuelling retail growth which offers much better margins.
The shares are not cheap, at 16 times full-year forecast earnings, albeit with a solid 3.7 per cent prospective yield. A business that can do so well in a difficult economy ought to really motor if there is even a mild improvement (Last IC rating: Hold, 19 Nov).
Business press headlines:
France has suffered a serious blow to its economic credentials after being stripped of its prized AAA credit rating by Moody's. The rating agency said France's long-term economic growth had been hit by its inflexible labour market and low levels of innovation eroding its competitiveness and industrial base. Moody's also flagged up the country's exposure to the continuing eurozone crisis. [The Telegraph]
It is one of the biggest deals of the year, and has taken nine months of wrangling over price and executive pay as well as needing the services of Tony Blair to overcome being outmanoeuvred by a sovereign wealth fund. But commodity trader Glencore may finally be on the verge of clinching its £50bn takeover of Xstrata. In what might resemble an election night special - only without commentary from a Dimbleby - Glencore's chief executive Ivan Glasenberg will spend the day staring at a screen waiting for the results from a series of shareholder polls at his target Xstrata, waiting to see if his long-held ambition to own the mining group is to be achieved.
What the screen will show him, if City psephologists are to be believed, is Xstrata investors waving through the takeover while delivering yet another snub to its architects as a controversial £140m pay deal is scrapped. The results should start coming in just after an 8am (GMT) vote at Glencore – which looks like a shoo-in – before attention turns to the first in a series of Xstrata votes at 1pm (2pm in the company's base in Zug). [The Guardian]
Comet's delivery men have become the latest victims of the store's collapse, taking the number of redundancies to more than 1,000. Deloitte, the administrator for the electrical goods chain, announced a further 735 job losses yesterday - 603 from its home delivery network. Another 132 staff have lost their jobs from the head office and support teams. More than 300 head office staff were made redundant last week. Administrators confirmed over the weekend that 41 of its stores would close before the end of the month unless a buyer emerged. The chain had 236 stores and employed 6,600 staff before its collapse. [The Times]
JPMorgan Chase replaced chief financial officer Doug Braunstein on Monday with Marianne Lake, a 43-year-old internal recruit, now charged with managing the US's biggest bank by assets and dealing with the aftermath of the "London whale" trading scandal. The UK-born Ms Lake was most recently CFO of JPMorgan's consumer business and worked as global controller of the investment bank from 2007-2009 at the height of the financial crisis. [Financial Times]
Mervyn Davies has become the third former minister from Gordon Brown's government to land a top City job in a matter of days, following fellow peers Peter Mandelson and Paul Myners. Lord Davies, a former business minister, is to be chairman of Chime Communications, the sports marketing and advertising group. He replaces Lord Bell, who quit in June as part of a management buyout of public relations subsidiary Bell Pottinger. Bell earned a basic salary of £675,000 for his executive role but Davies is likely to earn far less as a non-executive. [The Independent]
US banks are racing to fill a little-noticed capital shortfall by issuing billions of dollars of preferred shares, taking advantage of low interest rates and investors' need for yield. After four years shoring up their balance sheets, most large US banks are closing in on a tougher target to hold more common equity as a buffer to absorb losses at times of crisis. By 2019, banks will have to hold common equity equivalent to 7 per cent of their so-called risk-weighted assets. These are an estimate of the value of assets adjusted to a bank's real-world exposure to potential losses. On top of this requirement, the largest banks are facing an equity surcharge as part of the Basel III accord agreed by international regulators. [Financial Times]
More than 40,000 families living in Armed Forces accommodation will soon have private-equity millionaire Guy Hands for a landlord after his Terra Firma vehicle agreed a £3.2bn takeover yesterday. Mr Hands is buying Annington Homes, the owner of the Ministry of Defence's Married Quarters Estate, from its owner, Japanese bank Nomura, in a deal due to complete by the end of the year. [The Independent]
