PRESS TIPS:
Tempus in The Times writes that it is assured that yesterday's trading statement from Resolution is not a 'kitchen sink job imposed by the Chief Executive-designate Andy Briggs, appointed three months ago. It should have no effect on the 21p a share annual dividends that provide the shares with a stonking nine per cent yield.
But news of the cost overruns was enough to clip Resolution shares by 9.5p to 230p. They relate to the acquisition of Axa's UK life business more than two years ago, where integration will require an extra £35m of IT costs. Further integration costs will run to the "low tens of millions of pounds" over the next year. In addition, outsourcing of much of Resolution's back-office functions, costed at £250m, will come in at an extra £30m.
The third-quarter figures were a mixed bag. The company has taken the axe to its UK operation, which is, in consequence, in good shape. Provisions taken on the underperforming German business, whose future is under review, cut the embedded, or underlying, value of its policies by £50m to £100m, from £1.2bn at present. The international side will focus on more attractive markets such as Hong Kong and China and cease to write policies for Japanese customers. Likewise, the Lombard business will focus on high-net-worth individuals in China and elsewhere in Asia.
It will be a slow process. The sole purpose of holding Resolution shares, therefore, is that safe dividend yield (Last IC rating: Buy, 16 Aug).
Tempus writes that rather like another perennial takeover candidate, Smiths Group, Invensys is seen as a group of disparate businesses that could easily be unbundled. Its rail side, which provides signalling equipment, is seen as the most attractive to buyers. This is not entirely fair: some of the controls software designed by the group is useable in several divisions. But the main driver for the shares, over and above the odd profit warning, remains takeover speculation.
The dividend is generous, though, up 6 per cent to 1.75p. The shares sell on about 10.5 times earnings. The company, Tempus believes, will one day be taken over, which is why it is on Tempus' list of tips for the year. But this will probably not happen before the year end (Last IC rating: Hold, 15 Nov).
Questor in The Telegraph writes that in an upbeat statement, outsourcing group Capita confirmed this week that it expected organic growth of 3 per cent this year.
This actually implies a pick-up in activity in the second half. In 2011, like-for-like revenues fell by 7 per cent and they were flat in the first six months of the current year. So, Questor infers that organic growth in the second half will come in at about 6 per cent. Paul Pindar, Chief Executive, told Questor he is upbeat on prospects for 2013 and sees organic growth hitting 6 per cent over the course of the year.
The analyst community is split on their view of Capita's prospects. Of the 24 City scribes covering the shares, nine say buy, eight say hold and seven say sell. The average price target of the 12 analysts monitored by Bloomberg is 756p, just 5 per cent above the current share price. Questor is now reassured that growth is coming through - and is more in the bull camp than the bear. This column has had a hold rating on the shares for some time but now feels more confident about the company's prospects. Therefore, trading on a 2012 earnings multiple of 13.4 times falling to 12.8 and yielding a prospective 3.5 per cent next year, the rating is upgraded to "buy" (Last IC rating: Sell, 1 Nov).
Business press headlines:
The US Government yesterday warned BP that its troubles were far from over as it levied a record fine of $4.5 billion on the company for criminal failures arising from the Deepwater Horizon oil disaster. BP pleaded guilty to 14 criminal charges - including manslaughter, environmental violations and obstruction of Congress - in a deal that was greeted with relief by investors. However, Eric Holder, the US Attorney-General, reminded BP that a civil action was still pending in which the Administration hopes to extract yet more compensation from the company. [The Times]
The chief executive of Dixons Retail has backed warnings that UK retailers are at risk of collapse if the Government does not act to force foreign companies to pay their share of tax. Sebastian James said he agreed with the views of John Lewis boss Andy Street who warned on Wednesday that rivals such as Amazon would be able to use their tax position to "out-invest" and "out-trade" UK companies. […] Writing on Twitter, Mr James said: "I agree with Andy Street: retailers making profits in the UK should pay tax in the UK." [The Telegraph]
Megafon has launched its delayed London-Moscow initial public offering, seeking to sell shares worth up to $2.1bn in a breakthrough deal for the mobile operator's oligarch owner Alisher Usmanov. If successful, the deal will be the biggest IPO by a Russian company since early 2010 and will see the largely private metals tycoon submit to greater scrutiny by public markets. [The Financial Times]
A British car parts supplier has come the rescue of Manganese Bronze, the black cab maker that went bust after problems with a Chinese steering box forced it to recall 400 taxis. PricewaterhouseCoopers, the company's administrators, last night said the recalled fleet would be fitted with new parts "from a UK supplier" and be back on the road by December 14. [The Telegraph]
Co-op Energy, which has 60,000 customers nationwide, will cut its electricity price by 2 per cent next month, making its average annual dual-fuel bill £178 cheaper than those of its rivals. Most of the "Big Six" suppliers are about to increase average bills by about £100 a year. British Gas's 15 million customers will pay 6 per cent more from today. Npower will raise its prices by 9 per cent on 26 November, followed in early December by EDF (10.8 per cent) and ScottishPower (7 per cent). [The Independent]
France's socialist government seized on better than expected economic growth figures to reject concern that France could become the next focus of the eurozone crisis, insisting it is acting to reform the flagging economy. "France is not the sick man of Europe. France remains the world's fifth largest economic power that has all its resources but which needs to recover its competitiveness," Pierre Moscovici, the finance minister told the FT. [The Financial Times]
