Eyes on interest rates
Yet more weight was given to the argument for raising UK interest rates after the economy recorded higher-than-expected growth during the third quarter. Gross domestic product increased 0.4 per cent during the three months to the end of September, compared with 0.3 per cent during each of the prior two quarters, according to figures from the Office for National Statistics. Although growth was modest, the yield on two-year gilts – the most sensitive to potential interest rate increases – had risen to 0.51 per cent at the time this magazine went to press. The monetary policy committee will next meet on 2 November.
Banking on branches
Costly growth
Metro Bank (MTRO) grew its pre-tax profit to £4.7m during the three months to September, compared with a loss for the same period last year, but operating expenses are still rising faster than some analysts expected. The challenger bank reported a 34 per cent jump in costs year on year, as it pursued its branch-led expansion programme. In better news customer loans were up 11 per cent to £8.6bn. Yet with operating expenses of £70m outstripping net interest income, we remain sceptical about the long-term viability of the challenger bank’s costly growth strategy.
GSK gasps
Respiratory disappointment
A disappointing performance from new respiratory drugs in the third quarter has concerned GlaxoSmithKline’s (GSK) shareholders. The Breo and Anoro asthma products increased sales by 43 per cent and 57 per cent, respectively, but this was below broker guidance and not enough to offset declines from older products. Total respiratory sales were therefore flat. But by trimming general admin and research and development costs, GSK has expanded its margins again. Adjusted EPS of 84.6p, up 2 per cent at constant currencies, was therefore ahead of expectations.
Testing the waters
EN+ IPO
In what will be a test for UK investor appetite for Russia-based companies since the Ukraine crisis, aluminium and hydropower group EN+ has announced pricing for its IPO in London and Moscow. The group – majority-owned by metals tycoon Oleg Deripaska – will seek to raise $1.5bn, which includes the $500m in stock Chinese energy group CECF has already agreed to purchase. Its shares and global repository receipts are priced at between $14 and $17. This will value the company at between £7bn and £8.5bn, before issuing new stock. The London float will be the first by a Russian company since 2014 and is expected to take place in November.
Agreement for Acacia?
Framework proposed
Acacia Mining (ACA) may be about to receive some good news, in the midst of its ongoing dispute with the Tanzanian government. Majority shareholder Barrick Gold (US:ABX) announced it had reached a “proposed framework for a new partnership” between Acacia and the government of Tanzania. While the London-listed miner said it had received no formal proposal, Barrick suggested the “economic benefits generated by Acacia’s operations would be shared with Tanzania on a 50:50 basis going forward”, and that Acacia would pony up a goodwill payment of $300m toward settling $190bn of outstanding tax claims.
Smoke and mirros
Vaping inquiry launched
The UK government is set to launch an inquiry into the health and economic impact of vaping. The Science and Technology Committee is accepting written submissions on matters including the effectiveness of regulation on the advertising and marketing of e-cigarettes and the product’s benefits and risks as a stop-smoking tool. The news came on the same day British American Tobacco (BATS) outlined a target of doubling sales of ‘next generation’ products – which include e-cigarettes – to £1bn next year.
Bulls rear heads
Oil fundraisings
Is investor sentiment towards oil explorers becoming more bullish? Victoria Oil & Gas (VOG) became the latest Aim-traded hydrocarbon explorer to announce a fundraising following the rise in Brent crude above $55 a barrel. It plans to raise between $20m and $26m, and a further $3m in an open offer, at a minimum price of 57p. The Cameroon-focused driller said the funds would be used to accelerate growth plans in Douala. Victoria’s deal followed two fundraisings announced the prior week for President Energy (PPC) and Jersey Oil & Gas (JOG).
