Accident-prone Wolfson has stumbled again. Fourth-quarter trading was encouraging in terms of revenues, but disappointing, for understandable reasons, on margins. The story at Wolfson has been of a recovery from the annus horribilis of 2008, when Apple scrapped its contract to supply relatively unsophisticated audio chips. Yesterday the company reported only the second quarterly profit since then. Furthermore, gross margins, down year-on-year from almost 50 per cent to 43.9 per cent are set to fall further, to about 41 per cent this quarter. Nevertheless, margins can only improve to more normal levels from here.
As well, the last quarter was a record for the adoption of its range in new models, which will feed through to earnings as these hit the shops. Much was made this week of the doubled share price since May of ARM, a larger chipmaker. Wolfson shares were up by almost 60 per cent since the start of last year, albeit with the odd downward lurch, before they fell 12.75p to 185.75p yesterday. The earnings multiple for this year still looks a silly one, but things are moving in the right direction and the shares offer value in the long term, The Times' Tempus says on Thursday morning (Last IC rating: Hold, 6 Feb).
Since the start of 2012, GlaxoSmithKline has submitted six drugs for approval by the US Federal Drug administration and European regulators, including treatments for chronic obstructive pulmonary disease, various cancers, HIV and diabetes. Also, Phase III data is expected on 14 assets in 2013 and 2014, including on nine new drugs and vaccines. In Phase II trials, the treatment is given to thousands of people to confirm its effectiveness, monitor side effects and compare it with commonly used treatments. Unlike peer AstraZeneca, Glaxo has a large consumer healthcare division which produces branded consumer products such as Sensodyne, Boost, Horlicks, and Gaviscon.
Not only that, the company is increasingly taking its products into emerging markets to play the consumer boom that is under way in these fledgling economies. This has been keeping sales buoyant while the group travelled over the patent cliff. The dividend yield, at 5.4 per cent, is attractive and safer than AstraZeneca's. Because of this income and the movement in its pipeline of new drugs, The Telegraph's Questor team keeps a buy (Last IC rating: Hold, 6 Feb).
A total of five profit warnings in six months must be some sort of record. Shares in Lamprell plunged from 366.5p in May last year to a low of 63p in November. The oil rig maker's woes ranged from slippage on important contracts to late deliveries of vessels. The news flow since has been entirely positive. Talks with lenders were going well and a trading statement indicated plenty of work coming through on rig refurbishments.
Yesterday the company announced the award of a contract, worth in the range of $150m to $170m, to produce a new rig, the second for the same Singapore client. There is an option to build a third, so at least one big customer has confidence in the company. Lamprell will still produce horrendous losses of well over $100m for 2012, while this year will offer little better than a flat result. "The rules of the game are that I am not allowed to shuffle my portfolio mid-year but, if I were a real investor, I would be tempted to take some profits at this stage," Tempus in The Times writes (Last IC rating: Sell, 29 Aug).
Business press headlines:
HSBC's biggest ever restructuring had been necessary to simplify the bank's complex structure which had made it attractive to money-laundering criminals, its chief executive said. Stuart Gulliver said HSBC's structure "was not fit for purpose for a modern world", adding that the restructure he launched on taking the helm two years ago had been the biggest since 1865 - the year the bank was founded. [The Telegraph]
An attempt by Ireland to ease its debt burden was thrown into disarray early on Thursday as the government scrambled to introduce emergency legislation to liquidate Anglo Irish Bank, the failed lender, without having secured a key debt swap deal with the European Central Bank. The government had intended to announce the liquidation of the bank alongside a deal with the ECB on replacing €28bn in costly promissory notes, used to bail out Anglo Irish in 2009. But leaked reports of its plans on Wednesday afternoon forced the government to go ahead with the liquidation - which was agreed by the lower house of parliament in the early hours of Thursday morning - before reaching agreement in Frankfurt on replacing the notes. [Financial Times]
Britain will have borrowed £64bn more than expected by the time of the next general election after weak growth played havoc with George Osborne's deficit reduction plan, the Institute for Fiscal Studies has warned. The UK's leading tax and spending experts said on Wednesday the public finances would be in a worse state in 2015 than permitted under plans made by the previous Labour government to tackle the deficit. In its "green budget" annual healthcheck on the public finances, the IFS said the chancellor was allowing extra borrowing to take the strain during the current parliament at the expense of another bout of austerity after the 2015 election. [The Guardian]
The online scrapbooking start-up behind one of the internet's fastest-growing websites is seeking new funding that would value the company at up to $2.5 billion - despite not yet having worked out how to make money. The astronomical valuation of Pinterest is based on the belief held by the two-year-old company and its investors that it can transform its millions of users into a working business model. Pinterest is a photo-sharing social network that allows people to create a virtual pinboard of things they have spotted on the web. The new funding is designed to help the company to work out a way of making revenues, with Pinterest believed to be ready to test ways to turn its huge traffic into sales. [The Times]
Rupert Murdoch's News Corp paid out another $56m (£36m) in the final three months of 2012 to meet the costs of the ongoing phone hacking scandal that forced it to close The News of the World. Its publishing division, which includes HarperCollins as well as newspaper titles ranging from The Wall Street Journal to The Sun, still managed to post a $16m rise in operating profits to $234m in the quarter, thanks in part to the launch of the Sunday edition of The Sun newspaper a year ago. [The Independent]
Sir Richard Branson is set to top up his bank account with another $316m (£201.7m) following the agreed takeover of Virgin Media by John Malone's Liberty Global for $16bn. The billionaire, pictured, who has an estimated £3.4bn fortune, owns 6.6 million shares in Virgin Media as the inheritance to the 2006 deal which saw him inject his Virgin Mobile into cable company NTL Telewest. Liberty is offering a mixture of cash and shares valuing each Virgin Media share at $47.87 which makes Sir Richard's stake worth $316m. The agreed bid is at a 24 per cent premium to Virgin Media's closing price on Monday before the deal became public. [The Independent]
Energy giant SSE is selling off a portfolio of wind farms to a UK government-backed infrastructure fund that will offer shares with an inflation-linked dividend. Greencoat UK Wind aims to raise £205 million in an initial public offering (IPO) at the end of March, with the cash brought in from investors being used to buy four wind farms from SSE for £140m and a further two from RWE. In turn, SSE will invest up to £43m in the stock market flotation of Greencoat, as well as signing up to a deal to buy the energy produced by the wind farms through a long-term power purchase agreement. The Department for Business, Innovation & Skills (BIS) will take a £50m stake. [The Scotsman]
