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Newspaper Briefing, including 'Spain injects €9 billion into ailing lender Bankia' - Daily Telegraph
The Times
Markets beat a retreat as Europe plans for Greek exit: Global investors dumped shares and sold the Euro as officials stepped up preparations for a single currency without Greece and as Europe’s economic prospects darkened. The FTSE 100 suffered its steepest one-day drop since November, tumbling 2.5% to 5,266.41 and wiping the equivalent of £35.5 billion off its value. The Euro hit a 21-month low against the dollar, touching $1.2563.
Saudi Arabia rides to the rescue of BAE Systems aircraft workers: The Government of Saudi Arabia has saved a BAE Systems factory on Humberside by placing a £1.6 billion order for dozens of Hawk jets to train its pilots. The deal represents a reprieve for the 248 staff and 30 apprentices who were due to be among 865 people made redundant after BAE Systems decided to shut its Brough site in the East Riding of Yorkshire in September.
Lynch joins casualties of HP jobs cull: Britain’s most successful technology entrepreneur is among 27,000 staff to lose their jobs at Hewlett-Packard as it struggles to compete with the increasing popularity of smartphones and tablet devices. Mike Lynch, who joined HP last year as head of its software division after selling Autonomy to the computer maker for £7.1 billion, will leave after a transition period.
Buffett’s ‘top secret’ deal that reached Rajaratnam: Warren Buffett’s $5 billion investment in Goldman Sachs was “as top secret as you could get”, a leading banker told the insider-trading trial of Rajat Gupta. Byron Trott, a former Goldman banker and long-time confidant of Mr Buffett, told a court in New York that it was policy within a tightly knit group of executives who negotiated such deals “never to talk about confidential information in public, or elevators.
Opening up cash supply for small businesses: One of the most tightly controlled cartels in Britain — the provision of banking services to small firms — is being challenged by Nationwide Building Society. Britain’s biggest mutual said that it planned to push into the new area of business lending next year after some initial success with an experiment taking deposits from small and medium-sized enterprises.
Prospects for House of Fraser sale are put on ice: An auction of the Icelandic stake in House of Fraser appeared more distant after the department store group reported a fall in annual profits. The company, which is one third-owned by the resolution committee overseeing the assets of the stricken Landsbanki investment bank, said that earnings had been weighed down by the opening of a second distribution centre, in Northamptonshire.
The Independent
Bank of England hints at more monetary stimulus: The Bank of England gave a strong indication that it is preparing to inject more money into the ailing British economy. The minutes from this month’s meeting of the Bank’s rate-setting Monetary Policy Committee showed that eight members voted to keep the Bank’s quantitative easing (QE) programme on hold, while just one, David Miles, backed more stimulus.
Ford regains its credit rating and famous logo: Ford has reclaimed control over its famous blue oval, six years after it mortgaged the logo and a host of other assets in a desperate attempt to avert bankruptcy. The restoration marks the symbolic return to health of the Detroit car maker and comes after the company turned in its highest quarterly profit from its North American division since 2000.
Paragon’s buy-to-let loan book grows for first time since 2008: Figures from Paragon show there is still an active market in buy-to-let properties. In the half year to March, Paragon made £87 million of new buy-to-let loans, the first period of growth in its loan book since 2008. It completed its first securitisation of buy-to-let loans since 2007.
Serco to sell nuclear unit: Serco, the outsourcer than operates the Boris Bike cycle hire scheme in London, is talking to the engineer Amec about selling off its nuclear consultation business. The FTSE 100 firm’s Technical Consulting Services business works on the U.K.’s civil and defence nuclear markets and brings in annual revenues of £70 million.
James Bond is back to help loss-making Pinewood Shepperton: Pinewood Shepperton tumbled to a loss after a year that saw the film studios taken over, but it still has James Bond for company. The next Bond film, Skyfall, in the last stage of production at Pinewood, is due to be launched in October, and is already winning rave reviews for its trailer. Pinewood has hosted 21 of the 23 Bond films.
Financial Times
Investors lose faith in banks’ RWA models: Institutional investors no longer trust banks to measure the riskiness of their assets and want regulators to take a much more prescriptive approach to setting capital requirements, a new report by analysts at Barclays has found. Global rules put forward by the Basel Committee on Banking Supervision require banks to hold top quality capital equal to 7% of their risk-weighted assets.
BP to invest $400 million to end pollution case: BP has agreed to invest $400 million in air pollution reduction equipment at its Whiting refinery in Indiana in a precedent-setting deal to resolve a legal case brought by the U.S. government and environmental groups. The U.S. Environmental Protection Agency and the Department of Justice had been threatening to take away permits needed for BP’s multibillion-dollar modernisation of the refinery because of alleged violations of the Clean Air Act during construction and operation.
Report warns of office space ‘mismatch’: The U.K.’s fast-growing towns, such as Reading and Aldershot, are suffering from a shortage of office space that could stunt the country’s future growth, a report has warned. At the same time, weaker economies such as Bolton and Blackburn have seen the most growth in floorspace despite having feebler demand.
U.K. water groups set to defend investment: United Utilities will on Thursday kick off a mini-season of annual results at the U.K.’s remaining listed water companies, with Severn Trent and Pennon following suit with annual figures that are likely to reassure investors but anger customers.
WorldSpreads’ high-rollers to be pursued: WorldSpreads’ administrators are set to pursue several high-stakes clients of the defunct spread betting group for £2.5 million of losses incurred through losing bets. The company went into administration last month after informing regulators that it had only £16.6 million of cash to repay £29.7 million of client funds.
Cable enterprise measures hit criticism: Vince Cable on Wednesday published a bill to help make Britain “one of the most enterprise-friendly countries in the world”, against a hail of criticism that the coalition is failing to grasp the scale of the country’s growth problem. The business secretary’s enterprise bill was published alongside the launch of a £200 million government-backed “growth accelerator” programme, intended to coach companies with high potential on how to achieve rapid growth.
Step towards solution of £5 billion ACT case: Multinationals came a step closer to securing up to £5 billion in tax refunds after the Supreme Court ruled the government breached EU law in a protracted dispute. The judges ruled that the Treasury breached EU law in the 2007 Finance Act by retrospectively blocking tax refund claims.
Lex:
Dell: control alt delete: Dell is not as much a computer maker as an odd sort of venture capital fund. It is big, though, and the hope is that Dell can, over time, use profits, distribution and wherewithal from the PC franchise to cultivate related businesses with better growth and more defensible margins (data centre hardware, software and services). The U.S. Company’s first quarter results, released late on Tuesday, showed that the hand-off is not going smoothly. The decline in PCs is happening faster than expected: sales of desktops and laptops were off 6% from the year before, a sharp deceleration from the last quarter. Margins at the company as a whole also fell sharply, to less than 6%. Investors pressed control+alt+delete on the stock, sending it down almost a fifth. Dell attributed the bad quarter to a number of factors: poor salesforce execution, weak demand, diversion of consumer spending to smartphones and tablets, and tougher competition in the low-end and emerging markets. What is more, sales prices for PCs have fallen an average of 5% annually over the past five years, according to data from IDC, but these numbers exclude mobile devices. Consider Lenovo, which reported quarterly annual growth of more than 50% on Wednesday. The Chinese maker gets by on 2% margins.
SAP / Ariba: German software group SAP used the heavenly creature moniker as code name for Ariba during acquisition discussions – and Executives appeared suitably chuffed at pulling off an agreed $45-a-share offer for the U.S. business-to-business ecommerce network late on Tuesday. SAP is one of a clutch of big technology companies scrambling to develop cloud-based services, which deliver software packages to customers that run over the internet. In this case, combining Ariba’s position in procurement and supplier management with SAP’s applications and supply chain-related technologies makes ample sense. The former operates the largest web-based B2B trading community, used by multinationals from Disney to Deutsche Bank, to handle transactions with thousands of suppliers. The offer, a 20% premium to Ariba’s undisturbed share price, puts an enterprise value of $4.3 billion on the U.S. Company. That is eight times consensus expectations for Ariba’s 2011-12 sales and 35 times earnings before interest, depreciation, tax and amortisation. While not top of the range – SAP itself paid nine times forward sales when it bought SuccessFactors for $3.4 billion this year – it is hardly cheap.
Cove Energy: East African gas: The board of Cove Energy was urging shareholders to accept a 220p-a-share takeover offer from Shell, on the not unreasonable grounds that the oil major was the only firm bidder. On Wednesday, the board tore up that script, extolling Thailand’s PTT Exploration and Production after it returned to the table with a 240p-a-share rival offer. With Cove’s share price jumping 10% above even that level on Wednesday, this takeover battle still has a way to go. Cove owns 8.5% of the huge Rovuma gasfield off Mozambique, which happens to be on the right side of Africa to appeal to Asian national oil companies on the hunt for resources. Shell can probably afford to return to the fray: Investec estimates that it has the flexibility to pay up to 300p a share. The issue for PTT is whether, having replaced Shell in Cove’s affections, it can do the same with Maputo, which will play a decisive role in this takeover battle. The battle for Cove must be essential viewing for Anadarko Petroleum, which owns 36.5% of Rovuma, and its other partners: Mitsui, with a 20% stake, and Bharat Petroleum and Videocon, two Indian companies with 10% each (Mozambique’s NOC owns 15%). A straight read-across values the field at $22 billion; Anadarko’s stake is worth $8 billion, a quarter of its market capitalisation.
Lombard:
Tax fairness gives government duties: In such set-tos as Theseus v The Minotaur or Optimus Prime v Megatron it is obvious who to root for. Tougher to pick a side when the combatants are British American Tobacco and HM Revenue & Customs. The coffin nail maker has just given the taxman a drubbing in the Supreme Court. That brings closer the day when the Exchequer may disburse billions from overstretched public funds to a group of cash-rich multinationals with reclaims stretching back to 1973. Sometimes we must eat bitterness, as they say in China. The companies – from among which BAT was chosen as a test case – are attempting to claim back tax that should never have been levied in the first place. In the past, the U.K. required businesses to pay a chunk of tax on dividends to shareholders. The result was a double taxation penalty on overseas investment. In the 90s, the Tories largely swept the issue under the carpet. Labour abolished upfront charges later that decade but rushed through self-serving legislation to limit claims in 2004 and 2007. The Supreme Court, with some qualification, has now ruled those restrictions unlawful.
Ticket to slide: When downturns begin, businesses are quick to explain why they are insulated from impending pain. Back in 2009, bus operators hoped the low price of a ticket to ride would protect them. People would leave the car at home and hop on the Number 30. The failure of that rationalisation is implicit in the weak performance of the U.K. bus operations of FirstGroup. In particular, it has been grim up north, where recession has descended on the land like Siberian permafrost and where the transport company has the bulk of its U.K. bus operations. The division’s full year margins accordingly shrank 150 basis points to 11.6%. The setback – well-flagged in an earlier profit warning – contributed to slippage in the transport group’s underlying profits to £271 million. FirstGroup expects trading to remain hideous for the division, as Lowryesque customers get on their bikes – but not the bus – to find work. Management has “a comprehensive plan” for growth. But this involves selling some underperforming operations into a buyers’ market.
The Daily Telegraph
Spain injects €9 billion into ailing lender Bankia: Spain’s Finance Minister said the government would inject “at least €9 billion” (£7.2 billion) into ailing lender Bankia while insisting it was an isolated problem which would not spread to the rest of the country’s banking system.
Facebook sued by investors over flotation: The Californian company and banks, including Morgan Stanley and Goldman Sachs, are accused of failing to let all potential investors know that the banks had cut their revenue estimates for Facebook in advance of the shares launch.
Robert Tchenguiz had Kaupthing execs ‘resident’ in his home: Robert Tchenguiz, the entrepreneur under investigation for his dealings with Icelandic bank Kaupthing, had senior executives of the bank resident in his London home prior to its collapse, a court heard.
FSA warns banks of action over interest rate scandal: The Financial Services Authority has warned banks it will “take action” over the alleged mis-selling of interest rate swaps to small businesses if it finds “widespread evidence of breaches of our rules”.
The Questor Column:
Informa undervalued despite mixed update: The events and professional information company has a mixture of defensive operations and business that is geared to an upturn. The shares have outperformed the wider market but have moved off highs on resurgent Eurozone debt fears. Informa operates in three divisions – academic, commercial information and conference management. The defensive parts of its operations are its subscription publishing operations which service businesses and academia. The events business, which organises about 9,000 conferences a year, is the one with the most cyclical upside. The market was spooked by weakness in its professional and commercial information unit. Two of the larger sectors – pharmaceuticals and financial services – saw “longer renewal cycles and reduced subscriptions”, causing organic revenue to fall 4.1%, but the group still sees organic growth in the full year. Academic publishing saw a 2.5% increase in like-for-like revenues and the events business saw organic growth of 3.6%. Informa at 370.5p +0.9p. Questor Says “Buy”.
Vodafone will benefit as more people get smart: Europe is Vodafone’s largest market. As the world’s largest mobile operator, Vodafone’s geographic diversity is strength in difficult times. This helped total group revenues rise 1.2% to £46.4 billion – a 2.2% increase on an organic basis. Pretax profits rose £51 million to £9.549 billion. Vodafone has returned £25.9 billion to shareholders over the past four years and it is in the process of a £6.8 billion share buy-back following the sale of its stakes in China Mobile and France’s SFR. The current yield is a stunning 8.5%, rising to 9% next year, as the group has confirmed its commitment to raise the dividend by 7% this year. Free cash flow (FCF) was £6.1 billion after capital expenditure of £6.4 billion. The company is guiding for lower FCF this year of £5.3 billion to £5.8 billion. The main area of growth for Vodafone is data services, as more people get smart phones. Across the business, data usage rose 22.2% year-on-year and now represents 14.5% of Vodafone’s service revenue. Smartphone penetration in Europe is now 44.9% of contract customers, or 26.9% of the total European base. Vodafone at 172p +7p. Questor Says “Buy”.
The Guardian
Barclay brothers’ battle over Claridge’s offers rare glimpse into their lives: A rare glimpse into the business lives of the billionaire Barclay brothers, Owners of the Ritz hotel and the Telegraph newspaper titles, paints a picture of septuagenarian twins with fading memories and loose control over their family interests, who are happy to sign paperwork they do not read or do not understand.
Russian tycoon sues ‘King of Diamonds’ for $1 billion: The head of Angola’s secret service made “fraudulent representations” to induce a settlement between two oligarchs warring over their African diamond interests, the high court in London has heard, as a controversial Russian tycoon launched a $1 billion claim against a rival known as the King of Diamonds.
Retail figures plunge as frugal Britons postpone summer shopping trips: The precarious state of the high street was underlined when official figures showed that last month saw the biggest plunge in spending for two years – and experts predicted that many more shops will go bust this year. Wet weather throughout April contributed to a worse-than-expected 2.3% fall in sales volumes.
Nationwide grabs bigger share of mortgage market: Nationwide Building Society has written a third of all the new mortgages taken out this year as traditional lenders scaled back in the moribund housing market.
FirstGroup to sell off U.K. bus operations: FirstGroup is to sell off more of its struggling U.K. bus operations as public spending cuts and rising fuel costs hit profits. The Scotland-based transport group recorded pretax operating profits of £271.4 million in the year to 31 March, a fall of 1% on the previous 12 months, boosted mainly by strong performances in the U.S. from its school bus division.
Daily Mail
Small suppliers furious at moves by Mothercare to slash their payments in an attempt to cut costs: Small suppliers are furious at moves by Mothercare to slash their payments in a desperate attempt by the baby-wares group to cut costs. The Mail has learned that the group is forcing suppliers to take a 7.5% cut on their sales to Mothercare at a time when many small firms are themselves struggling to stay afloat.
Barclays Boss Bob Diamond plans to restore trust and burnish his bank’s dented image: Bob Diamond, Chief Executive of Barclays, has launched a new ‘Citizenship Plan’ as part of a drive to restore trust and burnish his bank’s dented image – but offered no blueprint for reforming pay. The three-year plan, unveiled at the bank’s Canary Wharf headquarters, aims to support local communities, contribute to economic growth and improve integrity and service to customers.
Daily Express
Burberry checks in a £200 million expansion plan: Luxury goods group Burberry said it was ramping up expansion plans as male shoppers snapping up bags and scarves helped it boost annual sales and profits. Burberry said it would spend £200 million on opening 15 new stores in 2012/13 including ten new sites in Brazil and Mexico and enlarging existing stores in flagship major cities such as London and Shanghai.
Film reprieve for Sky: The success of Amazon-backed Lovefilm and Netflix means BSkyB no longer dominates Britain’s pay-TV movie market, forcing the competition watchdog into a rare U-turn. The Competition Commission’s Laura Carstensen said the arrival of well-funded rivals to Sky Movies over the past nine months meant the broadcaster no longer enjoyed a “material advantage” in the market.
The Scottish Herald
Scottish buses are ‘core’ to FirstGroup: FirstGroup Chief Executive Tim O’Toole insisted its Scottish bus business remained core to the transport group after it said “deteriorating economic conditions” north of the Border were hitting earnings and announced a “repositioning” that would see it sell some of its operations.
Investors miss bigger picture at ‘resilient’ RBS: Analysts at finance house Investec said many would-be investors perceive Royal Bank of Scotland as a “zombie bank” but believe the Edinburgh-based institution has become far more resilient, albeit not very profitable. Investec said the turn-around of key businesses, such as its U.K. retail bank, could go unnoticed due to the complexity of the institution.
Faroe faces rebellion over bonus scheme: Aberdeen-based Faroe Petroleum is facing a shareholder rebellion on a new bonus scheme, corporate governance adviser Manifest has warned.
Funding for online furniture retailer: A Scottish online furniture and interiors portal has secured ongoing funding support from the investment group which backed successful e-commerce retail sites ASOS and The Hut.
House of Fraser sales rise as chain survives weather impact: House of Fraser, the department store chain with Glasgow roots, has defied cut-throat competition on the high street and a wet spring to post a 2.6% rise in like-for-like sales for the 13 weeks to 28 April.
Renfrewshire dock undergoes £1.3 million overhaul: A dock is undergoing a £1.3 million overhaul to help make it a hub for renewable energy equipment manufacturing. The project in Renfrewshire, which lies in the Westway business park, is being partly funded through a £500,000 grant from Scotland’s National Renewable Infrastructure Fund.
The Scotsman
Eurozone fallout could force Bank of England to print more money: Further fallout from the Euro-zone crisis is likely to prompt a fresh bout of money printing by Britain’s central bank, economists said, while business leaders questioned the effectiveness of such quantitative easing (QE).
Nationwide aims to fill lending gap with move for small firms: Nationwide Building Society laid out plans to fill the gap in small business lending and challenge its bigger rivals by expanding its personal banking business through more loans and credit cards. It said it would offer loans to small and medium businesses (SMEs) in the second half of next year, and is recruiting a team with expertise in the sector.
Emec’s second overseas deal: A Scottish test centre for wave and tidal power devices has signed its second international contract in just three months. The European Marine Energy Centre (Emec) on Orkney has sealed a deal with Oregon Wave Energy Trust and the Northwest National Marine Renewable Energy Centre to offer advice on the building of a Pacific Marine Energy Centre.
Cove backs new £1.33 billion Thai offer: A bid battle was looming for Cove Energy after Thailand’s PTT Exploration and Production (PTTEP) trumped Shell’s £1.22 billion offer for the Mozambique-focused explorer. Cove said it now backed PTTEP’s 240p per share bid, after earlier supporting Shell’s 220p offer.
City A.M.
Tetley tea Owner sees income fall: Tata Global Beverages suffered a 36% drop in net income in the latest quarter, as the Owner of Tetley tea was hit by one-off costs, it announced. Sales rose 11% to 17.24 billion rupees (£198 million) but restructuring expenses knocked net income for the three months to March down to Rs542.1 million.
Hogg Robinson upbeat for 2012: Hogg Robinson, the corporate travel services group, reported a 18% rise in annual pretax profit to £34.1 million while revenues grew from £358 million to £374.2 million.
Dell shares hit by weak outlook: Shares of Dell plunged 17% after a disappointing revenue forecast spurred fears that global tech spending is weakening faster than anticipated and raised doubts about the PC maker’s strategy.
Ocado points to fresh growth as revenues surge: Online supermarket Ocado announced an acceleration in sales growth for the second quarter, raising hopes that the firm has overcome last year’s distribution problems that damaged consumer confidence. Shares in the company, whose range includes products supplied by upmarket grocer Waitrose, rose 6.8% after it said sales in the quarter to 13 May were likely to be 13% higher than the same period last year.
Fresh blow to London as Tungsten delays its float: Tungsten, the British bid vehicle founded by Edmund and Danny Truell, announced a raincheck on its IPO. Citing adverse market conditions, the financial services investment fund said it was postponing its flotation, set to raise £200 million.
Shares in LSE group fall after major Italian banks cash out: Shares in the London Stock Exchange sank 7%, after two Italian banks sold their stakes at the bottom end of the price range offered. UniCredit and Intesa Sanpaolo sold a combined 11.5% stake at 960p a share, just days after they were downgraded by a credit ratings agency.
