PRESS TIPS:
Tempus in The Times says that reading the news headlines and you might have expected HomeServe to have ceased to exist as a viable business. The provider of domestic cover for broken boilers, blocked drains and burst pipes, which was forced to suspend sales and marketing cold-calling last autumn, was fined £750,000 by Ofcom and is the subject of an investigation by the Financial Services Authority into mis-selling that is likely to result in a hefty fine.
The rate of business retentions, a key metric for insurers, fell below 80 per cent in the first half. Yet operating profits came in 12 per cent higher at £27.1m in the first half to the end of September. Much of this represents the decision to buy out the outstanding holding in Doméo, the French operation, in December; but without this, profits would have been only slightly lower. In truth, HomeServe has such a huge tilt towards the second half, when people tend to think about their boilers, that the full-year figures are a better guide. UBS is looking at a pre-tax figure down from a peak of £126m in 2011-12 to £107m this year and perhaps £92m in 2013-14, although this will depend on the rate of progress from the UK business.
This suggests that much of the damage will be contained. The halfway dividend is held at 3.63p, giving the shares the support of a 5.2 per cent yield, at last night's 248p close. They sell on almost 12 times' next year's depressed holdings. Prospects for the international side remain good, with few signs of reputational damage there. However, Tempus would not be queuing up to buy them this side of an FSA ruling (Last IC rating: Sell, 20 Nov).
Tempus writes that Halma, a specialist industrial products and sensors maker, is focused on areas that are either benefitting from tighter regulation or are not the subject of cost-cutting when times are hard. It has raised dividends by 5 per cent or more for 33 years and has increased revenues and profits in 37 out of the past 40 years.
Both revenues and pre-tax profits before one-offs were up 6 per cent in the first half to the end of September, to £298.1m and £60.8m, respectively, and the halfway dividend is raised 7 per cent to 4.06p, so that record looks safe for now.
Within that, the industrial safety division achieved a return on sales of 24.5 per cent, among the highest that the company has recorded in any business. The shares are up by 14 per cent since the start of the year and sell on about 16 times' earnings. A high rating; but one would not want to bet that this progress cannot be maintained (Last IC rating: Hold, 20 Nov).
Questor in The Telegraph says oil rig-maker Lamprell issued its fifth profit warning of the year on Monday - which counter-intuitively sent the shares up 17 per cent, with investors hoping that all the bad news was now out.
Lamprell warned that this year's losses will be seven times greater than previously expected at $105m (£84.5m). This includes bad debt of $8.1m, increased advisory fees because of the company's woes of $4m and additional losses in construction of wind farm installation vessels for Norwegian group Fred Olsen. This removed uncertainty that had been dogging the shares since a series of accounting and management cock-ups emerged. Pricewaterhouse-Coopers has trawled the books and hopefully this statement means a line can be drawn under the company’s issues and it can be rebuilt.
The shares are down by 70 per cent in the year to date and a number of brokers upgraded their rating on the shares to 'buy' after the latest warning. They are banking on hopes that all the bad news had been 'kitchen sinked' and released into the market. Investors looking for a punt may wish to speculatively buy some of the shares and wait for a recovery. However, Questor thinks the road back to credibility may be long and challenging. Therefore, Questor keeps a 'hold' rating (Last IC rating: Sell, 29 Aug).
Business press headlines:
Eurozone finance ministers on Wednesday yet again put off a decision to extend up to €44bn of long-overdue aid to Greece, after failing to overcome lasting divisions over how fast to cut Athens' mounting debt pile. After almost 12 hours of intense talks that stretched into the early hours, eurozone governments called a further meeting next week to finally settle differences between themselves and the International Monetary Fund. 'I don't know when [the aid disbursements] will happen,' said Jean-Claude Juncker, the chair of the eurogroup of finance ministers, as he emerged from the meeting. 'Greece has delivered, now it is up to us,' he added, in reference to austerity measures implemented by Athens. [Financial Times]
The millionaire founder of former FTSE 100 darling Autonomy was forced to defend his reputation yesterday as the US computing giant Hewlett-Packard wrote off $8.8bn (£5.5bn) on its acquisition of the software firm and accused managers of "serious accounting improprieties". The technology entrepreneur Mike Lynch, who set up Autonomy in 1996, sold it to HP for $10.3bn in August last year, making about £500m from his stake in the business. Mr Lynch, who left the US company in May, is worth £480m, according to the Sunday Times Rich List.
[…] Mr Lynch said he was "shocked" by the claims, saying: "It's completely and utterly wrong and we reject it completely." He also said the huge write-down was a "distraction" from the worst results in HP's 70-year history. HP's shares slumped 11 per cent as the company tumbled to a $12.7bn full-year loss as a result of the charge. The company "intends to aggressively pursue this matter in the months to come". [The Independent]
More money printing or lower interest rates would simply stoke inflation without driving growth, a Bank of England policymaker has warned. Martin Weale, a member of the Monetary Policy Committee (MPC), said that Britain's weak rate of productivity made it difficult to justify any further stimulus. His comments drive another nail into quantitative easing's (QE) coffin after the Bank voted against extending the £375bn programme this month. [The Telegraph]
Chevron, the US oil group, has filed a complaint calling for an investigation of the comptroller of New York state, alleging that he acted improperly in urging the company to settle a $19bn claim for environmental damage in Ecuador. The company alleges that Thomas DiNapoli, who as comptroller is the administrator of the state's employees' pension funds, backed shareholders' resolutions and made public statements to put pressure on Chevron, as an "apparent quid pro quo exchange" for campaign contributions. [Financial Times]
The first Monday in December is set to be a record day for online shopping in the UK, with transaction volumes on the internet surging by more than a fifth. Consumers are expected to spend £320m on Visa cards on 3 December alone, following the final pay day for many before Christmas on 30 November. Visa Europe forecasts that 6.8 million purchases will be made on "Mega Monday", 21 per cent higher than last year. [The Independent]
It may not be having much luck in its campaign to have the Health Lottery outlawed, but the setback did not prevent the National Lottery operator from pulling in record half-year revenues. Camelot, which is owned by Ontario Teachers' Pension Plan, of Canada, lifted sales by 8.1 per cent to almost £3.53 billion in the six months to September 29, driving a 3.8 per cent increase in the amount contributed to good causes to £952.8 million. It paid out a record £1.86 billion in prize money, a rise of 10 per cent, lifting the total paid to players since the launch of the National Lottery in 1994 to £43 billion. More than 3,000 lottery millionaires have been created. [The Times]
