Out of gas
Rising competition within the European motor market has become too much for Vauxhall to bear. The brand and its European parent Opel will cancel the contracts of all its 1,600 European dealers – of which 326 are in the UK – and re-franchise a lower number of existing sites over a two-year period. Vauxhall will reduce its UK dealerships to around 200, which could reduce its overall outlets by around a third. UK sales declined by a fifth last year and, although that business is profitable, Vauxhall and Opel are hoping to save €1bn (£863m) by 2022 after being taken over by Peugeot-owner PSA last year.
Pulling in punters
Marketing budget boosted
Investors in Majestic Wine (WINE) will be hoping it has learned its lesson from its unsuccessful direct mail campaign of 2017 that meant Naked Wines made a full-year loss. Buoyed by solid sales growth, management plans to reinvest some of its earnings back into the business. Around £12m a year will be spent on new customer acquisition, but bosses believe this has an approximate payback of £48m – four times the original investment.
A buyers’ market
M&A off to a flier
The first-quarter trend report from Mergermarket shows that M&A activity in global industrials and chemicals markets hit its highest quarterly value since September 2016. The deal value stood at $124bn (£87) in the first quarter, representing an increase of 42 per cent from the final quarter of 2017 and 24.6 per cent in advance of the average quarterly value across 2017. The rousing start to the year places the sector top in market share terms by deal count, accounting for a fifth of the global total. Deals included the Carlyle Group/GIC buyout of Akzo Nobel, and the successful Melrose approach for GKN.
The state's bank
Pension hole plugged
Royal Bank of Scotland (RBS) has taken another step towards becoming fit for full private ownership. The banking giant, which is three-quarters-owned by the government, plans to pay up to £3.5bn into its main defined-benefit pension scheme, alongside aligning its pension schemes with banking ring-fencing rules. Together with the accelerated £4.2bn in contributions made in 2016, management reckons no further payments will be required. Under the terms of the arrangement a £2bn payment will be made before the end of 2019, which will have an impact of around 80 basis points on its 15.9 per cent common tier one capital ratio.
Not-so fiery dragon
Concedes investment rules
China may be more willing to compromise than some expected. Following threats to whack retaliatory tariffs on around $50bn of US imports, the People’s Republic has lifted rules that limit foreign ownership of Chinese carmakers. That will include investment caps on electric vehicles, shipping and aircraft manufacturing by the end of the year. At present, the ownership restrictions require foreign companies to set up 50/50 joint ventures with a Chinese partner to manufacture cars domestically. Restrictions on commercial vehicles will be removed by 2020.
Risers/Fallers
| AA | 36.47 |
| LUCECO | 25 |
| GREENE KING | 22.38 |
| OXFORD INSTRUMENTS | 20.13 |
| FIRST GROUP | 17.83 |
| TELECOM PLUS | -11.15 |
| RENOLD | -9.72 |
| SAGE GROUP | -9.01 |
| CARPETRIGHT | -8.98 |
| SOCO INTERNATIONAL | -8.52 |
Week to 17 April 2018
Back-down
Legal challenge dropped
De La Rue (DLAR) has abandoned plans to take the government to court over its loss of the contract to make UK passports after Brexit. The company had intended to mount a legal challenge to the government’s decision to award the contract to Paris-based Gemalto – which had sparked criticism from MPs and some newspapers – arguing that its Franco-Dutch rival had merely undercut it rather than offering superior quality. Management also said it was cautious about the outlook for the full year, despite 16 per cent growth in its order book.
London calling
High housing demand
The shortage of London housing has continued to buoy Telford Homes (TEF). The housebuilder and IC buy tip expects to deliver record turnover and profits for the year to 31 March 2018, with pre-tax profits likely to be up by more than 30 per cent from the previous year. It also reported a three percentage point improvement in its operating margins and said it sold more than 100 homes at the January launch of its New Garden Quarter development in Stratford. It has more than 2,900 homes under construction, with scope to considerable increase that figure in the coming years, it said.
