Join our community of smart investors

Seven days: 5 January 2018

Our take on the most important business stories of the past week
January 4, 2018

UK recycling up a creek

Given the enormous amount of waste produced by the UK during the festive season, it’s unsurprising the Chinese government’s decision to tighten restrictions on 24 types of waste imports has caused pile-ups at some UK recycling plants. From 1 January, China has banned the import of certain solid waste, including all mixed paper and polyethylene terephthalate (Pet) drinks bottles. It has also lowered the contamination level for material imports to 0.5 per cent, from 1.5 per cent. As much as half of UK plastic waste exports may not meet China’s new criteria, according to details of an exchange between the Department for Environment, Food and Rural Affairs and industry leaders, obtained via a freedom of information request by Greenpeace.   

 

BP's tax boon

Estimates long-term gains

BP (BP.) followed the lead of industry rival Royal Dutch Shell (RDSB) and Barclays (BARC), by publishing estimates of the revaluation of its US deferred tax assets and liabilities following the passing of President Trump’s tax reforms. BP will take a one-off, non-cash charge of around $1.5bn in its fourth-quarter results. But with major oil and gas production assets in the Gulf of Mexico, the tax cuts promise to be favourable for earnings over the long haul.

 

IAG bulks up

Air Berlin purchase

International Airlines (IAG) has agreed to purchase the assets of former Air Berlin subsidiary Niki for €20m (£17.7m), along with providing up to €16.5m in liquidity for the Austrian low-cost carrier. The transaction, which is pending approval under EU competition laws, includes several slots at airports such as Vienna, Dusseldorf, Munich and Zurich. The move comes less than a week after no-frills rival Wizz Air (WIZZ) announced that it had agreed to buy 146 Airbus A320neo jetliners to replace existing fleet and to facilitate expansion plans – all this at a time when analysts are worried about over-capacity in the industry.

 

 

Compass's Cousins

Air tragedy

Richard Cousins, chief executive of FTSE 100 caterer Compass (CPG), died in a seaplane crash in New South Wales on New Year’s Eve. The seaplane crashed into the Hawkesbury River north of Sydney, killing everyone on board, including four members of his extended family. Mr Cousins had already made plans to retire at the end of March, but following the tragedy his successor, Dominic Blakemore, will take over as chief executive three months earlier than expected.

 

Regulatory roll-back

Despite oil spill risks

Good news for energy companies operating across the pond. The Trump administration has proposed either rewriting or repealing regulations on offshore oil and gas drilling that were imposed following the 2010 Deepwater Horizon explosion and oil spill in the Gulf of Mexico. The administration said the rules, put in place under Barack Obama, place an unnecessary burden on industry and a change was needed to provide an incentive for companies to produce more energy. The Bureau of Safety and Environmental Enforcement has estimated that regulatory reform would save the energy industry at least $228m over 10 years.

 

Risers and fallers (%)

IWG27.32
VECTURA GROUP14.04
SOCO INTERNATIONAL9.79
KAZ MINERALS9.55
PETRA DIAMONDS8.94
  
AVON RUBBER-4.45
RPC GROUP-3.48
NEWRIVER REIT (REG S)-3.45
XAAR-3.41
CAIRN ENERGY-3.31

Week to 2 January 2018

 

Carillion under cosh

FCA investigation begins

The new year hasn’t brought good news for support services group Carillion (CLLN). The outsourcer kicked off 2018 with the news that the Financial Conduct Authority (FCA) is investigating it “in connection with the timeliness and content of announcements” between 7 December 2016 and 10 July 2017. This covers the period from the first warning of a slowdown in orders to the trading update for the first half of 2017, in which it warned that operating profit had missed expectations and revised down full-year revenue expectations. Carillion is cooperating fully with the FCA, but needless to say we’re sticking with a sell.

 

RBS faces new pressure

Push for representation

Fresh from the controversy over the decision to close 259 branches – a move characterised by the Unite union as "morally bankrupt" – the board of the Royal Bank of Scotland (RBS) faces further shareholder rebellion. With the backing of advocacy groups ShareSoc and the UK Shareholders’ Association, over 100 shareholders in RBS have requisitioned a resolution to install a shareholder committee at the banking group, in a bid to improve corporate governance and shareholder engagement. This is effectively the second attempt to force the state-backed bank to set up a shareholder committee after an initial bid was rejected on legal grounds last year.