LCF oversight probed
The Financial Conduct Authority (FCA) has been ordered by the Treasury to appoint an independent reviewer to investigate the regulatory shortcomings revealed by the collapse of London Capital and Finance (LCF). The company enabled customers to invest in high-risk investments called mini-bonds, but has been accused of misleading marketing. The FCA launched an investigation into the company’s advertising practices in December, but LCF went bust a month later. Around 11,605 people invested an aggregate £236m with the company, but only around 20 per cent of that money may be recovered.
Confidence weak
But held steady
UK consumers may be pessimistic over the country’s prospects, but confidence levels somehow evaded the political chaos that ran throughout March. According to a consumer confidence index produced by market research institute GfK, confidence in March held at the February level of -13, and above the January level of -14. “Things might change when people feel the current crisis has passed but what sort of resolution can consumers reasonably contemplate just now?” asked Joe Staton, client strategy director at GfK. “Or are consumers rightly sensing a bumpier economic climate for post-Brexit Britain?”
On track
UK rail beat
Stagecoach (SGC) raised its expectations for adjusted earnings for the year to April after “strong trading and positive progress” in UK rail. Like-for-like revenue growth for the division, excluding Virgin Trains East Coast, is up 1.4 per cent so far this year and ahead of expectations. Management stated that it had made progress in “achieving favourable outcomes” from concluding industry charges and contractual matters associated with the expired South West Trains franchise, and so additional profit will be recognised in the current financial year.
Big four break-up
CMA pressure
The Competition and Markets Authority (CMA) should aspire to break the ‘Big Four’ audit firms up into audit and non-audit businesses, according to the House of Commons’ Business, Energy and Industrial Strategy (BEIS) committee. The audit market, which is dominated by KPMG, Deloitte, Ernst & Young and PwC, has attracted ire from politicians during inquiries into the collapses of Carillion and BHS. While the CMA has so far proposed an "operational split" between audit and non-audit, the BEIS committee has suggested going further, in a bid to tackle concerns over potential conflicts of interest and auditor competence.
Cyclone disruption
Production suspension
BHP (BHP) placed its full-year iron ore guidance under review, after Tropical Cyclone Veronica caused a part suspension of its operations in Western Australia. Initial inspections show no major damage, although isolated flooding has limited train movements to and from the group’s port and rail operations in Port Hedland, and will not return to full capacity until later this month. Final production impacts and unit cost guidance are yet to be determined, although the miner expects production to drop by “approximately 6m to 8m tonnes”. Yesterday, iron ore rival Rio Tinto said the cyclone’s damage to its Cape Lambert A port facility would impact full-year iron ore production.
Risers and fallers (%)
| AMIGO HOLDINGS | +21.31 |
| REDEFINE INTERNATIONAL REIT | +18.14 |
| MCCOLL'S RETAIL GP. | +15.55 |
| LAMPRELL | +15.19 |
| GVC HOLDINGS | +13.7 |
| LOW & BONAR | -18.92 |
| XAAR | -14.23 |
| THOMAS COOK GROUP | -9.31 |
| JUST GROUP | -9.19 |
| APTITUDE SOFTWARE GROUP | -8.13 |
Week to 2 April 2019
Bidding battle
Provvy under pressure
Non-Standard Finance (NSF) announced that it had received acceptances for its hostile takeover of Provident Financial (PFG) representing 50.7 per cent of the latter’s issued share capital. Supporters include Woodford Investment Management and Marathon, shareholders in both groups. NSF chief executive John Van Kuffeler said it was “clear validation” of NSF’s management team. In response, Provident reiterated its concerns about the bid, including the legality of NSF’s historic dividend payments and the ability of the merger to receive clearance by the Competition and Markets Authority.
Saudi Aramco lifts curtain
Bumper profits
Investors tempted by the much-hyped idea of a Saudi Aramco IPO were given a glimpse of the secretive group’s finances this week, as the world’s biggest oil producer published a prospectus for its debut international bond sale. Among the more startling disclosures are a reported net income of $111bn (£84.3bn) for 2018 (easily covering a $58bn dividend payment to the Saudi government), average daily production of 13.6m barrels of oil equivalent (roughly equal to the combined output of Exxon, Shell, BP and Chevron), and a 60 per cent operating profit margin. The group also claims Saudi Arabia’s proved hydrocarbon reserves, which it manages, now stand at 336.2bn barrels of oil equivalent.
