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Seven Days: 1 December 2017

Our take on the most important business stories of the past week
November 30, 2017

Xavier out

The proposed smooth transition between chief executives at the London Stock Exchange (LSE) has not played out as investors may have hoped. Rather than retire from the top job at the end of 2018, as originally planned, Xavier Rolet has announced he is stepping down immediately. The decision comes after activist investment group The Children’s Investment Fund (TCI) claimed that Mr Rolet was being unfairly dismissed and instead tried to oust the group’s chairman Donald Brydon. To resolve the brewing governance dispute, the board asked Mr Rolet to step aside, while Mr Brydon will not seek re-election as chairman in 2019.

FTSE shuffle
Just Eat in

The quarterly rebalance of the FTSE 100 has seen food delivery group Just Eat (JE.) promoted into the UK’s premier market. Optimism for future growth – largely thanks to its merger with peer Hungry House – drove the share price to a record high of 827p in mid-November, giving the group a bigger market capitalisation than retail stalwart Marks and Spencer (MKS). Just Eat will be joined in the FTSE 100 by DS Smith (SMDS) and Halma (HLMA), at the expense of Merlin (MERL), Convatec (CTEC) and Babcock (BAB).

Bank buffer
No stress

The UK’s banks are prepared for even the messiest potential Brexit, according to the Bank of England (BoE). It’s the first time since the financial crisis that all the country’s lenders have passed the stress test. But concerns clearly remain. The BoE has upped its counter-cyclical buffer – the extra capital banks must hold in case of an economic downturn – from 0.5 per cent to 1 per cent. This equates to an extra £6bn. But investors in banks such as Lloyds (LLY) needn’t fear for their dividends: the proposals do not require more capital, but ask for banks to move their extra cash into regulatory buffers.

 

BlueZest bond
Retail offering

Specialist mortgage lender BlueZest Mortgages and Loans has launched a new retail bond that comes with a 5.25 per cent yield over a five-year term. This bond is sure to catch the eye of retail investors during a period of low interest rates. The net proceeds of the bonds will be used to originate mortgage loans to customers secured against UK residential property. Retail investors have until 12 December to take up the offer.

 

WPP rises
Ford advertising

Car giant Ford is planning a big advertising push in 2018, for which it could turn to WPP (WPP). The marketing company announced that it is in talks to extend its contract with Ford, one of its largest customers. Investors were cheered by the glimmer of good news after a difficult year, sending the share price up by as much as 2.6 per cent on the day of the announcement. The group has been hit by a slowdown in spending from some clients and a new wave of competition.

 

William Hill merger
Oz talks

Shares in William Hill have recovered nearly all their summer losses after a run of good news, including strong US growth and optimism about demand during the 2018 Football World Cup. The latest boost came after the bookmaker confirmed it was “in very preliminary discussions with CrownBet”, an online gaming company majority owned by Australian billionaire James Packer’s gambling empire. The gambling industry has been hit by a flurry of consolidation in recent months. William Hill had previously been tipped as a potential target for GVC.

 

FCA warning
Pricing under spotlight

The Financial Conduct Authority (FCA) has issued a “statement of objection” to four asset management groups. The watchdog said it believed that Artemis Investment Management, Hargreave Hale, Newton Investment Management and River & Mercantile Asset Management may have broken competition law by colluding on the prices they paid for initial public offerings and a share placing. The allegations relate to transactions that took place in 2014 and 2015 and mark the first time the FCA has enforced its competition powers which were granted in 2013. The FCA will consider representations from the asset managers before deciding whether the law has been broken. 

Given the column inches devoted to the stratospheric rise of crypto-currency bitcoin during the past year by the media (the IC included), it is unsurprising that public interest reached fresh heights in November. Google searches for the word ‘bitcoin’ peaked over the US Thanksgiving weekend. Likewise, online searches for information on market reform MiFID II also surged ahead of its introduction in January 2018.