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Seven Days: 15 December 2017

Our take on the most important business stories of the past week
December 14, 2017

Banking returns

HSBC (HSBA) shareholders may be in store for more share buybacks. The US Department of Justice (DoJ) dropped deferred criminal charges relating to allegations of money laundering and handling transactions for countries under US transactions, including Iran and Libya. The banking giant signed the deferred prosecution agreement and paid $1.9bn (£1.4bn) in fines in 2012, to avoid criminal charges. HSBC said the DoJ would file a motion with the US District Court for the Eastern District of New York seeking a dismissal of the charges. That could allow the banking group to release around $8bn in capital it has been forced to hold in the US.

Commodity surge
Natural gas rising

UK natural gas prices rose to their highest price in four years, following an explosion at important European import hub Baumgarten. The blast at the Austrian gas plant left one person dead and 18 injured. The price of UK natural gas for delivery in January jumped by almost a quarter to 73.7p/therm on the day of the explosion. Prices were already on the rise after Ineos was forced to close its Forties pipeline – which carries around 40 per cent of North Sea oil and gas across land for treatment at Grangemouth – following its discovery of a crack. Brent Crude oil futures also rose above $65 a barrel.

Bitcoin boom
Futures trading commences  

The Bitcoin bubble grew even bigger, following the commencement of futures trading of the cryptocurrency on Chicago’s CBOE. Trading of Bitcoin futures contracts expiring in January started at $15,000, (£11,200) before rising to above $18,000. The contract price is based on the Gemini exchange, set up by early Bitcoin fans the Winklevoss twins – who have been called the cryptocurrency’s first billionaires. At the time of going to press, the futures were being trading at around $17,200.

 

Exxon's about-turn
Climate impact revealed

ExxonMobil has bowed to shareholder pressure to start publishing reports on the impact of climate policies on its business. The world’s largest listed oil and gas group said it would introduce enhancements to its financial reports, including analysis of policies designed to limit increases to global temperatures to 2C, a pledge agreed at the Paris climate talks. Investors accounting for 62 per cent of the shares in the group backed the proposal put forward by the New York state employees’ retirement fund at its annual general meeting in May.

 

BAE's reprieve

Qatar gains

Workers at BAE Systems’ (BA.) Lancashire site gained additional job security, after the defence group secured a £5bn contract with Qatar to supply 24 Typhoon aircrafts. The contract is subject to the first payment from the Qatar government, expected to be fulfilled no later than mid-2018. Delivery of the aircraft is then expected to start in 2022. The defence giant announced 2,000 job losses at its site in Brough, Hull, in October, as part of a business restructure. At the time, management said the rate of production of Typhoon and Hawk jets would slow to take into account the uncertainty of future order levels.

 

In hot water
Price limits reviewed

In an announcement that will be welcomed by UK consumers, water regulator Ofwat has said it will reduce the amount water utilities can charge customers. As part of its price review for the AMP7 regulatory period – running for five years from 2020 – Ofwat has estimated that operating costs for water companies are around 2.4 per cent. That’s down from 3.74 per cent in 2014, a saving that should be passed onto customers. It would amount to a saving of around £15 to £25 for the average customer from 2020. However, water companies can adjust bills for inflation. The final review will be published in 2019.

 

Safestyle risky 
Third profit warning

Like a broken record, Safestyle (SFE) announced continued market deterioration and poor consumer confidence had squeezed sales prices and volumes during the three months to November. In its third profit warning in the past six months, the windows and doors specialist reported a 0.3 per cent year-on-year decline in sales by value and a 6.8 per cent fall in volumes. With challenges set to continue, any 2018 earnings growth will be modest at best. The shares plummeted a fifth on the morning of the news.

London’s capital market activity recovered during 2017. Thirty-one companies listed on London’s main market, while 41 were admitted to the Alternative Investment Market. That was up from 16 and 28 in 2016 (see chart).Real estate led the way, accounting for 15 per cent of new issues this year, although financial services companies raised the most money – around a third of the total.Outside financial services, pricing has been an issue for companies wanting to list on the main market, with high-profile companies Cabot Credit Management and Arqiva pulling their IPOs.