High street turmoil
Mothercare (MOTC) has announced plans to appoint administrators to its UK subsidiary, claiming the business is “not capable of returning to a level of structural profitability”, and that “the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK”. The early-years retailer’s international business will continue to trade, but its 79 stores in the UK will close. The group’s management has been working to restore the UK business to growth for some time now. In July last year, it completed a comprehensive restructuring and refinancing programme, raising £32.5m through a share placing and closing stores equivalent to 30 per cent of its space in the UK.
Wage rise ‘stretching’
Government warned
The Low Pay Commission cautioned that the government’s plan to lift the national living wage (NLW) to an hourly rate of £10.50 within five years would prove “very stretching” for businesses in low-paying sectors, adding that a higher base wage “by itself will not end low pay under the most common measures, and will need to be accompanied by a broad slate of supporting policies”. The Treasury will also lower the qualifying age threshold for the NLW from 25 to 21, a move that was recommended to the government by the Low Pay Commission.
Inmarsat challenged
Date unchanged
Inmarsat has rebuffed calls from activist investor Oaktree Capital to postpone the court hearing to approve its sale to a private equity consortium. The hedge fund, which owns a 2.85 per cent stake in the satellite group, said the $6bn (£4.66bn) bid did not take into account the potential value of spectrum assets used by Ligado, Inmarsat’s US partner. However, Inmarsat said in a statement: “The board and its financial advisers have continued to properly assess... the timing and prospect of revenue or other value to be received by Inmarsat pursuant to the cooperation agreement (between Inmarsat and Ligado) and... these remain uncertain."
Aramco goes public
London shunned
The Saudi Arabian government has formally announced its intention to list part of its oil and gas colossus Saudi Aramco on the local bourse, the Tadawul. The offer price and proportion of the shares to be listed will be determined during the bookbuilding process. The intention to list document said Aramco made free cash flow of $59bn (£46bn) from revenue of $244bn last year. It’s been widely reported that the Saudi government has been looking for a valuation of $2 trillion and banker Goldman Sachs has quoted between $1.6tn and $2.3tn, according to a Financial Times report. The gap between Goldman’s high and low estimates would almost fit the combined market capitalisation of Royal Dutch Shell ($236bn) and BP ($134bn) twice over.
Fracking fightback
Shares down
UK onshore oil and gas explorers IGas Energy (AIM:IGAS) and Egdon Resources (AIM:EDR) have said they will try to convince the government their unconventional assets are safe following the government’s fracking ban. The new policy will see Cuadrilla’s Preston New Road project suspended over “disturbance caused to residents” living nearby, the government said, although left the door open if the company could provide “compelling” evidence the operation is safe. IGas’s shares fell 42 per cent to 22p following news of the ban, but have since recovered to over 30p, while Egdon fell over a quarter to 3.1p.
Spending to rocket
Bigger state
Government spending will return to levels last seen in the 1970s over the coming years, regardless of which party is victorious at the December general election, according to the Resolution Foundation. The think-tank recognised an “unprecedented pause in spending growth” resulting from the government’s period of austerity, with subsequent budgets set to be shaped by an ageing UK population. With spending on an older population and on health accounting for an increasing share of total government expenditure, the Resolution Foundation called for “an expansion in revenues” and “a new fiscal framework” to meet the challenges of the future.
Virgin ditches BT
Signs with Vodafone
Virgin Media announced that it had agreed a five-year deal with Vodafone (VOD) to switch its 3m mobile customers from BT’s (BT) network to Vodafone UK from 2021. Virgin will also launch its 5G offering via Vodafone before the transition takes place. Its current tie-up with BT, which has been in place since January 2017, is set to expire in late 2021 – its Vodafone UK agreement will run until 2026. Lutz Schüler, Virgin chief executive officer, said that relations with its existing partner would continue: “We’ve worked with BT to provide mobile services for many years and will continue to work together in a number of areas.”
Global manufacturing contracted for the sixth consecutive month, according toJPMorgan’s Global Manufacturing PMI. The index registered a score of 49.8 inOctober, which is below the measure’s neutral level of 50, although it represented a third successive rise in the figure.
“The latest deterioration in operating conditions was centred on the intermediate goods sector,” the survey said. Inflows of new work stabilised following a five-month sequence of contractions, although global trade flows continued to weigh on manufacturing, and new export business declined for the 14th month in a row.
