No big deal on the horizon but at 14 times earnings they look like good long-term value is The Times' Tempus view of industrial turn-around specialist Melrose. That towards the end of last year the company's share price was able to regain almost all of what it lost following a profit warning in November. As well, the shares could gain fresh impetus from further good news from Elster, which makes smart meters sold to utilities for fitting in homes, such as if revenues re-accelerate or if the company begins its roll-out across Europe. Likewise, the market could take the view that the shares are still lagging a bit behind and re-rate them (Last IC rating: Hold, 19 Nov).
The transformation of Pace, under the new management team led by Allan Leighton, the chairman, has been truly remarkable. The shares were the second-best performer in the FTSE 350 last year. The news flow of late has been negative however - the company lost the contract to supply the much-delayed YouView TV service and an attempt to take over Google's own set-top box maker Motorola Home late last year. But the other view is that these are positive developments. The YouView contract was of marginal profitability, at best. Pace refused to pay over the odds for Motorola, leaving this to Arris, of the United States. Not only that but, as can be gleaned from the company's trading statement yesterday, the company's current cash-flow means that it could be debt free by the end of the year, after which it could either reinvest those funds or return them to investors. The shares sell on about eight times this year's earnings. That still looks like good value, though some might care to take some profits, The Times' Tempus adds (Last IC rating: Hold, 24 Jul).
Business press headlines:
Senior Royal Bank of Scotland bankers may step down in the coming weeks as part of the bailed-out bank's multimillion-pound settlement with regulators over the Libor-rigging scandal. John Hourican, head of the RBS investment bank, and Peter Nielsen, head of markets, may leave even though neither of them had personal knowledge of the attempts to manipulate interest rates that have already led to four staff being fired and others being suspended.
The chief executive of RBS, Stephen Hester, has been preparing the ground for a substantial Libor fine since the summer when Barclays was hit with a £290m penalty that forced out chief executive Bob Diamond. Hester was parachuted in to turn around RBS after £45bn taxpayer bailout, and while the manipulation of the benchmark rate carried on while he was at the helm, he is not thought to be under pressure. [The Guardian]
Japanese prime minister, Shinzo Abe, unveiled a Y10.3tn ($116bn) economic stimulus package that the government expects will lift the country's gross domestic product by 2 per cent and create 600,000 jobs. "We are making a bold shift . . . towards an economic policy that will create wealth through economic growth," Mr Abe said on Friday. The stimulus package will exacerbate Japan's deteriorating fiscal health as government debt is already at 220 per cent of GDP. The newly-elected Mr Abe, however, is under significant pressure to lift the economy out of its fifth recession in 15 years before Upper House elections in July. [Financial Times]
The Financial Ombudsman Service plans to take on 1,000 staff this year to deal with a surge of complaints relating to mis-sold payment protection insurance (PPI). The expansion comes on top of the 1,000 it hired last year, when it increased its number of case workers to 2,500. Deputy chief ombudsman Tony Boorman said: "While we see some businesses using complaints positively, many continue to frustrate their customers with delays and inconvenience. This has a marked impact on our workload." [The Scotsman]
One of the most senior bankers in London should be kicked out of the City, the Parliamentary Commission on Banking Standards suggested yesterday. Alex Wilmot-Sitwell, who heads Bank of America Merrill Lynch in London, was one of four former UBS chiefs accused by the commission of being "ignorant and grossly incompetent" over the Libor interest rate rigging scandal. Andrew Tyrie, the chairman of the commission, lamented the fact that some of the four were still holding senior jobs in the City and had not been struck off the Financial Services Authority's approved persons register. [The Times]
Google will be forced to change the way it presents search results in Europe or face sanctions from Brussels for unfairly manipulating its position as the world's biggest internet search engine. The European Union's competition chief, Joaquin Almunia, told a newspaper that it is his "conviction" that Google is unfairly promoting links to its own services above those of third party companies, and that he fears it is abusing its dominant position. [The Telegraph]
Chinese inflation accelerated in December as a bout of cold weather led to a spike in vegetable prices. Consumer prices posted their biggest increase in seven months, rising 2.5 per cent in December from a year earlier, up from a 2.0 per cent pace in November. The main contributor to inflation was the cost of food, which the statistics bureau said accounted for nearly two-thirds of the month-on-month increase. Large swaths of China have experienced their coldest winter in three decades, raising energy prices as well as the production and distribution costs of agricultural products. [Financial Times]
Channel 4 has ended a dispute with its biggest advertiser, WPP, that was costing the state-owned broadcaster up to £5m a week. The sides agreed a new deal today, meaning that WPP's clients will start advertising again on C4's portfolio of channels. WPP's media-buying arm, Group M, which spends upwards of £250m a year with C4, pulled all its ads from 1 January, after a previous two-year deal ran out. [The Independent]
