Deutsche Bank wields axe
Deutsche Bank began a restructuring programme on Monday that will see 18,000 jobs cut, as the bank seeks to drastically reduce costs and risk exposure by the end of 2022. Deutsche aims to cut its adjusted costs to €17bn (£15bn) by 2022. It will exit its equities sales and trading business and reshape its fixed-income activities, targeting its operating rates and hastening the winding down of its non-strategic portfolio. Associated risk-weighted assets will drop by 40 per cent, and a ‘bad bank’ will be created to help manage the exit and reduction of these assets.
Analysts earmark Cineworld
Merlin link drawn
Analysts at RBC Capital Markets placed a target on the back of Cineworld (CINE), citing strong cash flows, first-half weakness and an investor’s analysis of the recent takeover of Merlin Entertainments in its case for acquiring the world’s second-largest cinema chain. The broker highlighted Cineworld’s annual $500m (£394m) free cash flow generated after interest and capital expenditure, suggesting that this could support raising its debt-to-cash-profits multiple to at least six. “ValueAct's arguments that short-term focus on trading resulted in Merlin being undervalued are equally pertinent for Cineworld,” RBC also observed, arguing that an investor with a longer-term horizon could capitalise on the chain’s current earnings weakness. Cineworld experienced a weaker-than-expect first half, with US domestic sales down 9.5 per cent.
BA negotiates on pilot pay
Rise rejected
British Airways held talks with the British Airline Pilots' Association (BALPA) on Monday, after pilots rejected a pay rise worth 11.5 per cent over three years. The deal had been recommended to union members by the Unite and GMB trade unions, which represent almost 90 per cent of BA staff. But BALPA has cited the airline’s financial performance, which saw operating profits before exceptional items rise nearly 12 per cent in 2018, in its argument for a better pay arrangement. Pilots have until 22 July to vote in a strike ballot, which could threaten the airline’s business in a busy season. A BA spokesperson said: “We urge BALPA to also come to an agreement to protect hard-working families planning their summer breaks.”
Flyadeal cancels Boeing order
Airbus deal agreed
Low-cost Saudi airline flyadeal has cancelled its $5.9bn (£4.65bn) order for 30 Boeing 737 Max jets. The airline, which is owned by state-operated Saudi Arabian Airlines, agreed to order 30 jets in December 2018, with an option for 20 more. The Max planes have since been grounded after two software-related disasters, and flyadeal has now agreed an identical order with Airbus for its A320 NEO aircraft, with a commitment to “an all-Airbus A320 fleet in the future”. A Boeing spokesperson said: “Our team continues to focus on safely returning the 737 MAX to service and resuming deliveries of MAX airplanes.” The Saudi airline did not respond to a request for comment.
Stobart botches accounts
Profit expectations revised
Eddie Stobart (STOB) is likely to reduce its adjusted operating profits by around £2m after its new chief financial officer Anoop Kang identified issues with its accounting. The haulage company will see an adjustment to retained earnings as at 30 November 2017 of around £11.5m, which mainly concerns lease accounting involving four legacy sites. The adjusted impact to Eddie Stobart’s 2019 Ebit is £1.6m, although the company expects full-year performance to be in line with its board’s expectations. First-half adjusted operating profits sat at the lower end of the company’s forecasts, owing to slower than expected productivity improvements and reduced operational efficiencies associated with the exiting of its transport network from a “problematic contract”.
Suspicious trades rise
Annual decline
Ten per cent of takeovers in the UK were connected with abnormal price movements ahead of a takeover announcement, according to the Financial Conduct Authority’s (FCA) latest annual report. However, the watchdog’s ‘Market Cleanliness Statistic’ identified a 12 per cent year-on-year drop in suspect trades taking place before takeovers, although it said that “it is difficult to make meaningful conclusions from year-on-year changes” owing to the measures’ limits as an indicator of broader market cleanliness. “We cannot use it to identify the reason for the abnormal price movements and so whether insider dealing has actually occurred,” the FCA added.
HL Woodford investors trapped
Rival identifies concerns
Hargreaves Lansdown (HL) customers seeking to move their holdings in the suspended Woodford Equity Income Fund are unable to jump to another investment platform, according to a letter sent to the Treasury Select Committee by rival platform Interactive Investor’s chief executive Richard Wilson. “Since the fund was suspended, several customers invested in the fund have contacted us because they want to transfer their account,” Mr Wilson wrote. “But, for reasons that are not immediately obvious,” he added, Link Fund Solutions, the authorised corporate director of the £3.5bn fund had blocked the transfers, owing to differences in share classes between Hargreaves Lansdown and other platforms.
The UK’s gross domestic product (GDP) edged upwards by 0.3 per cent over May according to theOffice for National Statistics (ONS).
The stricken manufacturing and construction sectors returned to growth levels of 1.4 per cent and 0.6 per cent, respectively, following contractions of -4.2 per cent and -0.5 per cent in April.
While agriculture growth was flat, the sector fared better than in the previous two months, when it contracted by 0.2 per cent and 0.1 per cent, respectively.
