Dim outlook
It was a bad news week for General Electric, after newly installed chief John Flannery announced the manufacturer would be cutting its dividend for only the second time since 1938 and divesting itself of its two longest-held divisions. The shares declined 13 per cent during the two days following the announcement. Mr Flannery said he was seeking to simplify the group’s structure and restore earnings and cash generation. GE plans to sell around a dozen businesses, with total assets of at least $20bn, including its locomotive division and the remainder of its lighting business.
Trading revived
Dispute continues
Shares in STM (STM) plummeted on the day they resumed trading, following their suspension from Aim. In 2015 STM chief executive Alan Kentish filed two suspicious activity reports with the group’s money laundering reporting officer (MLRO), about the beneficial owner of a client. Mr Kentish was later arrested by police in Gibraltar “on the allegation of failure to disclose under the Proceeds of Crime Act 2015”, despite the group’s MRLO having received no response from the Gibraltar Financial Intelligence Unit. While Mr Kentish has been released from arrest and police bail without charge, some of STM’s Gibraltar subsidiaries have received notice from the Gibraltar Financial Services Commission of the appointment of inspectors.
Sabre on the scene
IPO planned
Sabre Insurance added itself to the list of companies choosing to launch an IPO in London this year. The UK motor insurer is aiming to raise gross proceeds of around £213m, most which will be used to buy out its majority shareholders, which include BC Partners. Sabre wrote gross premiums of £197m in 2016, with an average of 325,000 in-force policies. It also had the lowest average combined ratio in the UK private motor insurance market over the 10 years to 2015. Retail investors will be able to participate in the offer via intermediaries, with admission expected to take place in December.
Tesco's step forward
Merger clearance
Tesco (TSCO) was given the provisional thumbs-up from the Competition and Markets Authority (CMA) for its takeover of wholesaler Booker (BOK). Shares in Tesco and Booker both closed the day 6 per cent up on the back of the news. Investors were concerned that the CMA might block the £3.7bn deal or demand rigorous amendments to its terms. But the regulator said it did not see how the tie-up would lead to higher prices or a poorer service for customers. The deal was first referred in January for a deeper investigation into competition concerns.
Not grim up north
Price momentum continues
The gap in house prices between the north and south of England tightened further during September. The average house price in the north west grew by 7.3 per cent year on year to £160,951, or by 2.1 per cent on the prior month, according to the Office for National Statistics. Meanwhile, London prices were up 2.5 per cent annually, making September the tenth consecutive month the region has reported growth below the national average. Overall UK house prices increased 5.4 per cent.
BP bullish
Buyback commenced
BP (BP.) announced plans to commence a share buyback, the first major European energy group to resume buybacks since the 2014 commodity slump. Management said the buyback would take place between 15 November and the date of its 2018 annual general meeting, with the maximum number of shares purchased not exceeding 1.96bn. At the end of October chief financial officer Brian Gilvary said the oil major would buy back $1.6bn-worth of shares a year to offset the dilutive effect of its scrip dividend programme, which allows investors to receive dividend payments in shares rather than cash.
Japan rising
Abenomics victory?
Japan achieved its longest growth streak in more than a decade this year, after four years of controversial economic stimulus by prime minister Shinzo Abe. Gross domestic product in the country grew by 1.4 per cent during the third quarter, representing its seventh consecutive quarter of expansion. That’s the longest since 2001. Exports and stronger global demand for Japanese products drove the expansion, helping offset a decline in domestic consumer spending.
There was a small sell-off in mining shares this week, as Chinese premier Xi Jinping’s comments prioritising ‘quality’ economic growth rattled commodities markets expecting continued strong demand.
China’s slowing rate of industrial output – still high at 6.2 per cent in October – was also taken as a negative, alongside slower fixed-asset investment growth and weaker Chinese home sales.
Shares in iron ore giants Rio Tinto (RIO) and BHP Billiton (BLT) both fell 2 per cent on 15 November, with steeper declines for more leveraged players Glencore (GLEN), Anglo American (AAL) and Vedanta Resources (VED).
