Woodford ripple effects
The financial headlines were dominated by the fallout from Woodford Investment Management’s decision to suspend the LF Woodford Equity Income Fund (EIF). Chair of the Treasury Select Committee Nicky Morgan has written to the Financial Conduct Authority to clarify what supervisory work the regulator has conducted with the fund. FCA chief Andrew Bailey is set to appear before the committee on 25 June. Short bets against Woodford Patient Capital Trust, in which EIF owns shares, have also risen, with the shares trading at a 33 per cent discount to their net asset value at the end of April, at the time of writing.
De La Rue's identity change
Debt reduction planned
De La Rue’s (DLAR) journey towards “an asset-light and more technology-led business” continues – the group has announced the sale of its international identity solutions business to HID Global for £42m. Focusing instead on identity-related security features (where market opportunities are perceived to be more accessible), the group is hoping to capture technology and customer synergies across its operations and generate better returns on investment. With net debt having more than doubled in 2019 to £108m, sale proceeds will be used to strengthen the balance sheet and support investment in strategic growth area such as product authentication and traceability.
Baker warns
Margins squeezed
Ted Baker (TED) lost a quarter of its market value on the day the group warned that “extremely difficult trading” meant pre-tax profits for the year to January 2020 would be below market expectations at between £50m and £60m. Broker Liberum was forecasting £70.7m back in March. The group has seen its share price fall over the past year due to a combination of anxiety over the UK retail environment and allegations of misconduct by chief executive Ray Kelvin. Chief executive Lindsay Page said management was focusing on efficiency and product initiatives to help kick the group back into gear.
Aerospace giants join arms
Trump concerned
US aerospace titans United Technologies and Raytheon have agreed to an all-share merger, combining revenues of around $74bn (£58bn) in 2019 pro-forma sales and creating a force that has raised competition fears from President Donald Trump. United Technologies' shareholders will own around 57 per cent of the company, with Raytheon shareholders owning the remaining 43 per cent. The combined company aims to return $18bn-$20bn of capital to shareholders in the first 36 months that follow the merger, which is expected to complete in the first half of 2020.
Reckitt unveils CEO
Pepsi commercial head
Reckitt Benckiser (RB.) poached PepsiCo chief commercial officer Laxman Narasimhan to succeed chief executive Rakesh Kapoor. Mr Narasimhan – who currently leads the drinks and snacks manufacturer’s strategy, global category groups and global R&D – was one of 60 candidates being considered for the role. Mr Narasimhan was chosen for his demonstrated ability in “transformations and M&A”, said Reckitt’s chairman Chris Sinclair. He will also lead the health business unit upon joining the consumer goods giant in July, before taking over as chief executive in September.
Risers and fallers (%)
| MILLENNIUM & CPTH.HTLS. | +37.1 |
| FINDEL | +21.24 |
| THOMAS COOK GROUP | +20.33 |
| DIALIGHT | +14.46 |
| MITIE GROUP | +13.64 |
| TED BAKER | -29.26 |
| CAPITAL & REGIONAL | -21.36 |
| CARPETRIGHT | -21.22 |
| AO WORLD | -15.8 |
| PHOENIX SPREE DTL. | -14.96 |
Week to 11 June 2019
Wage growth beats
Unemployment low
UK wages grew at a faster rate than expected during the three months to April, up 3.4 per cent on the same time last year, according to data from the Office for National Statistics. That was above the 3.3 per cent increase during the three months to March. After adjusting for inflation, earnings were 1.5 per cent higher. Employment figures also beat expectations, with those in work rising by 32,000, compared with estimates of a 10,000 increase. That was driven by growth in the number of women in employment and helped keep unemployment levels at a historic low.
Fosun circles Thomas Cook
Losses mount
Thomas Cook (TCG) investors were thrown some relief after the travel group confirmed media reports that it was in discussions with Chinese investment company Fosun International over a takeover approach for its tour operator business. The deal would not include the group’s profitable airline business, which it is trying to sell separately. The group unveiled a record £1.5bn pre-tax loss for the six months to March, citing lack of demand for traditional holiday packages, while net debt had also more than trebled on the prior six months to £1.25bn.
