Austerity over?
Chancellor Philip Hammond was unusually excitable when delivering this week’s Spring Statement, a more low-key replacement for the spring Budget of previous years. Mr Hammond described himself as “positively tigger-like” as he said there was “light at the end of the tunnel” when it came to opening up the government’s spending after years of austerity. Borrowing is trending below expectations and this could enable the government to increase spending in the Autumn Budget. But Mr Hammond's excitement was tempered somewhat by analysis that showed UK growth forecasts trending below fellow G7 members, with GDP expansion expected to come in at 2 per cent or below in each of the next five years.
Help to Buy sale
Loan book worth £7.4bn
The UK government has successfully bolstered the property market throughout the past five years with its Help to Buy scheme and is now looking to cash out its £7.4bn investment. The scheme offers new house-buyers equity loans towards the purchase of newly built homes, to the tune of 20 per cent of the value outside London and 40 per cent in the capital, and has been used for 145,000 transactions. The loans are interest free for the first five years, with the first payments, of 1.75 per cent of loan value, due to begin this April. Now the government is talking with investors over the sale of its loan book – a feat carried out previously with Student Loans Company.
Broadcom Trumped
Deal blocked
Protectionism is clearly something that chimes with US President Donald Trump. Following his introduction of tariffs on imported products such as steel, this week he waded into a cross-border takeover situation by blocking Singapore-based Broadcom’s $140bn bid for US microchip maker Qualcomm citing “the national security of the US”. The proposed deal would have been the biggest technology takeover ever and the combination of the businesses would have created the world’s number three microchip manufacturer after Intel and Samsung.
Bell tolls
Stockbroker to float
AJ Bell, which offers a fund supermarket and online broking services to private investors, has announced plans to float on the London Stock Exchange some time later this year or in early 2019. The business has more than 170,000 customers and says it plans to allow them preferential access to any offer when it is launched before other market participants. AJ Bell has grown in recent years with the trend towards self-directed investments and at the last count had £42bn of assets under administration on its platform. During 2017 the business grew revenues by 17 per cent and published profits of £21.7m.
Melrose ups the ante
GKN rejects again
Hostile takeover offers normally have to go through several iterations before shareholders of the target are willing to blink. Nonetheless the management of Melrose attached the term ‘full and final’ to its latest bid for GKN despite it being only its second tilt at its engineering target. A mix of cash and shares was deemed by Melrose to value GKN at £8.1bn, or 467p a share, up from its 405p opening gambit in January. GKN’s board preferred to put a value of 445.5p a share on the offer, which it said would “fundamentally undervalue” its business. Meanwhile, GKN has been pushing its alternative scheme, which would see it merge its automotive business with Dana of the US and funnel £2.5bn back to investors. With the boards of both companies increasingly unlikely to agree a deal, the onus is on shareholders to make a decision for them.
Risers/Fallers
| INTERSERVE | 38.81 |
| SPIRENT COMMUNICATIONS | 19.67 |
| GALLIFORD TRY | 15.84 |
| HUNTSWORTH | 14.81 |
| OPHIR ENERGY | 14.23 |
| GREENCORE GROUP | -28.41 |
| RENOLD | -27.62 |
| ALFA FINANCIAL SOFTWARE HOLDINGS(WI) | -21.91 |
| INMARSAT | -19.64 |
| BIFFA | -17.98 |
Week to 13 March 2018
US Connection
Offer rejected
Retailer French Connection has been casting around for a winning formula for some years now and this week’s results suggested it has not found it yet as it posted a sixth consecutive year of losses. But someone sees value in the business as management came clean on a takeover offer they received from an un-named US suitor last year. Talks came to nothing in the end, although the provenance of the bidder raised eyebrows given that rumours had previously fingered Mike Ashley’s Sports Direct, a 27 per cent shareholder, as a more likely suitor. Management is confident it is on the brink of returning the business to profit with further underperforming stores closed down.
Eurostall
Industrial slowdown
Is the eurozone economy as buoyant as some economists think? Industrial production data for January showed a sharper than expected slowdown as production contracted by 1 per cent, far sharper than the forecast 0.4 per cent reduction. On an annualised basis this put industrial production output growth at 2.7 per cent, which is 2 per cent below what many watchers had forecast. Meanwhile European Central Bank (ECB) head Mario Draghi has signalled that any interest rate rises will not happen for some time and will be “measured” when they do happen. The ECB is not expected to hike rates until after it calls a halt to its bond-buying programme, which itself is unlikely to happen until this autumn.
