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Business - Need to Know

Morning Edition

Good morning. The final polls may point to a hung parliament, but the markets appear relatively sanguine about that prospect (at least for now). Having traded as low as $1.46 against the dollar last month the pound is trading this morning at around $1.52 - albeit helped by a weakening dollar. Against the euro sterling is a fraction lower at around €1.34. Hardly the apocalypse many have predicted.

For the latest on the markets as we head to the polls, log on to our Business Now live blog. And if you are planning to stay up all night to watch the results as they happen, The Times' Hugo Rifkind has devised an election-night drinking game that will ensure it all passes in a flash.

It's been a hectic start to the year for BT and its laconic chief executive Gavin Patterson with its £12.5 billion acquisition of EE, a new bid for football rights and the launch of its new ultrafast broadband network all landing in the first three months of 2015. The telecoms giant has announced a 12 per cent rise in pre-tax profits this morning to £3.1 billion - in line with City expectations. We'll have a full story shortly on www.thetimes.co.uk/business.

Alongside a 2.9 per cent fall in like-for-like sales David Potts, the new chief executive of troubled Wm Morrison, has promised shareholders a detailed update in September. “My initial impressions from my first seven weeks are of a business eager to listen to customers and improve,” says the former Tesco executive.

Elsewhere, Ladbrokes has announced that Peter Erskine, chairman, is to stand down. We have also got trading updates this morning from RSA, Aviva, Esure, Trinity Mirror and Millennium & Copthorne Hotels.

On the economics front we get Halifax House Price data shortly. According to a Reuters poll economists expect to see a 0.4 per cent month-on-month increase.

In the US the focus will be on Alibaba, the ecommerce company, that will report results for the fourth quarter and fiscal year before the markets open.

Finally, don’t forget you can follow me on Twitter for updates throughout the day - @fletcherr.

Have a good day.

Richard Fletcher
Business Editor
The Times
richard.fletcher@thetimes.co.uk

It wasn’t quite a case, perhaps, of the empire striking back, but 21st Century Fox nonetheless managed to beat analysts’ expectations in a mixed set of results released late last night. The success of hit spy movie Kingsman: The Secret Service, helped to offset the absence of advertising revenue from the Super Bowl and profits totalled $975 million, down from $1.05 billion a year earlier.

Sir Andrew Witty set out plans yesterday to reshape GlaxoSmithKline in the last throw of the dice for the chief executive of Britain’s biggest pharmaceuticals company.

Glaxo will switch its focus from selling blockbuster drugs to developed countries to high-volume, low-value medicines; it will scrap plans to float ViiV Healthcare, its HIV treatment operation; and it will slash its cash return to shareholders.

“‘No one can set the price of oil,’ Ali al-Naimi, the Saudi oil minister, said this week: ‘It’s up to Allah.’ That’s about as good as commodity price forecasts get.” Ignore the doomsayers and their warnings of a resources catastrophe argues Oliver Kamm.

“There are many explanations for the euro crisis. Some blame poor fiscal management, others blame loose banking regulation, others say that the problem lay in lost competitiveness as cheap money during the boom pushed up wages and house prices. But one major contributor to Europe’s problems before the crisis that continues to hold back economies today is a lack of innovation.” The appliance of science is the only way Europe can deliver innovation, says Simon Nixon.

The Nikkei 225 has closed up 1.23 per cent this morning at 19,291.99. The FTSE 100 is expected to open 11 points lower when trading begins shortly.

There were few signs of election jitters during London’s mid-week trading session yesterday. With new figures showing Britain’s services sector grew faster than expected in April, and strong numbers from Sage, the software company, the FTSE 100 inched 6.2 points or 0.1 per cent higher to 6,933.7. The broader FTSE 250 failed to match the positive mood with a fall of 0.2 per cent or 39.9 points to close at 17,412.01. Read Alex Ralph’s market report here.

A word from Janet Yellen, chairwoman of the US Federal Reserve, that current high stock market valuations of companies present ‘potential dangers’ was enough to send Wall Street sharply lower at one point yesterday. With investors already nervous about when the central bank might start to raise rates, the Dow Jones Industrial Average tumbled 186 points but later on erased some of those losses to close down by 0.5 per cent or 86.2 points at 17,841.9. The S&P 500 also finished 0.5 per cent or 9.3 points lower at 2,080.2. Around 6.7 billion shares changed hands compared with a recent daily average of 7.1 billion.

Oil hit fresh highs yesterday after new figures showed the first drop in US stockpiles since January, However, late on in New York, traders took profits after the recent multi-week rally and Brent crude for June settlement settled just 60 cents higher at $68.12 a barrel.

Sterling hit a three-month low against the single currency yesterday - down 1 per cent at 74.47p per euro - ahead of the most closely-fought UK election in a generation. Against the US dollar, the pound strengthened by 0.5 per cent to $1.524.

The market has been waiting for some months to see which direction chief executive Stephen Kelly wants to take Sage Group. Halfway figures give some indication, though, with acquisitions more likely than share buybacks, suggests Tempus. DS Smith is among the most reliable deliverers of solid growth on the stock market, and investors have done well as a consequence. Direct Line is awaiting completion of the sale of its international side, and a resulting special payment to shareholders. Read on for more on the Tempus tips.

The Times
Sir Andrew Witty set out plans yesterday to reshape GlaxoSmithKline in the last throw of the dice for the chief executive of Britain’s biggest pharmaceuticals company. Glaxo will switch its focus from selling blockbuster drugs to developed countries to high-volume, low-value medicines; it will scrap plans to float ViiV Healthcare, its HIV treatment operation; and it will slash its cash return to shareholders.
read full update
The Daily Telegraph
Raising taxes to plug Britain’s deficit will not work, two founder members of the Bank of England’s panel that sets interest rates have warned. As Britons head to the polls on Thursday to vote in the general election, Dame DeAnne Julius, who served on the Monetary Policy Committee between 1997 and 2001, said Britain was already close to “hitting the ceiling” on the amount of revenue the government could raise through higher taxes.
read full update
Financial Times
Oil prices jumped to their highest level this year, nearing $70 a barrel and accelerating a sell-off in global debt markets. Crude is now at its highest level since Opec’s historic decision in November to let prices fall in a bid to protect their share of the market by squeezing higher-cost producers.
read full update
City AM
Senior Conservative and Labour party figures insist that they can win an outright majority in today’s General Election, but a flurry of last-minute snapshots reveal a race that is too close to call. An ICM poll published last night found Labour and the Tories tied, with each party having 35 per cent of the vote. The Liberal Democrats polled at nine per cent, while Ukip and the Greens came in with 11 and three per cent, respectively.
read full update
Economics

UK services: Fears that Britain’s recovery was hitting the buffers were allayed with strong services activity in April. The purchasing managers’ index for the dominant services sector last month beat forecasts, signalling that the economy is growing at a robust quarterly rate of 0.8 per cent.

Inflation: A surge in the price of crude oil to its highest in five months has reawakened concerns about inflation and sent bond values tumbling again. Brent crude soared to as high as $69.15 a barrel at one point, more than 50 per cent above its January low of $45, snuffing out residual worries about deflation and putting inflation and interest rate rises back on the agenda.

US payrolls: American companies hired the smallest number of staff for more than a year in April. Private sector payrolls rose by 169,000 in April, a national employment survey from ADP, the payroll processor, indicated. Analysts had forecast 200,000 new jobs.

Banking & Finance

+0.52%

Standard Chartered: The bank is “listening carefully” to its shareholders over whether it should leave Britain, but the bank has not followed HSBC, its larger rival, in starting a formal review of its home base. Sir John Peace, its chairman, told investors at its annual meeting in London that he expected the bank levy — a tax on its balance sheet introduced by the coalition government in 2010 — to rise again and that the bank would be monitoring the “impact on group costs”.

Flash crash trader: Navinder Sarao, the trader who has been accused by the US Justice Department of helping to wipe billions off the value of Wall Street shares, protested his innocence after he was told in Westminster magistrates’ court that his £5 million bail would not be waived despite an American order freezing his worldwide assets.

Panmure Gordon: The stockbroker has agreed terms over the acquisition of Charles Stanley, which is expected to be concluded by the end of the month. Charles Stanley, the broker that began as a banking partnership in Sheffield in 1792, had been in exclusive talks with Stifel Financial, an American brokerage, but Panmure Gordon upped its interest as Stifel navigated UK securities laws.

JP Morgan Chase: The American investment bank has been placed under formal investigation in France as part of a probe into alleged tax evasion by up to 14 senior managers at investment firm Wendel. In a regulatory filing this week, JP Morgan said that in April it had been “notified that the authorities were formally investigating its role” in transactions financed by the bank on behalf of a number of Wendel managers.

Direct Line Insurance Group: The insurer, which is about to pay out an estimated 27p a share from the proceeds of the sale of its international division, said that it expected this year to repeat last year’s combined operating ratio of 95 per cent, the key measure of profitability.

Consumer goods

-0.30%

Imperial Tobacco: Alison Cooper, the chief executive, said that she expected its proposed $7.1 billion purchase of several cigarette brands from Reynolds American and Lorillard to receive regulatory approval from the US Federal Trade Commission shortly with “no material changes”. The Davidoff and JPS maker reported a 4 per cent fall in half-year revenues to £12.1 billion, a rise of 3 per cent at constant currency, while adjusted pre-tax profits rose by 5 per cent to £1.15 billion.

Anheuser-Busch InBev: The Budweiser and Stella Artois brewer lifted underlying first-quarter revenues by 6.2 per cent to almost $10.5 billion, above expectations, as a 1.2 per cent fall in volumes was more than offset by higher pricing. In the UK it suffered a 7 per cent fall in volumes amid “a difficult market share comparable”.

MillerCoors: David Colletti, a former vice-president of SABMiller’s US joint venture with Molson Coors, has been charged with seeking to defraud the company of at least $7 million. He was among eight people indicted in Chicago over an alleged scheme that resulted in the company being falsely invoiced for promotional and marketing services.

Engineering

+0.14%

Rolls-Royce: Twelve months ago, the BMW-owned luxury carmaker was basking in the glow of the newly launched sporty Wraith. A year on, BMW has reported a 13 per cent slump in first-quarter sales, from 897 to 781.

Health

+0.14%

GlaxoSmithKline: Sir Andrew Witty has set out plans for a fundmamental reshaping of Britain’s biggest drugs maker in the last throw of the dice for the chief executive. Glaxo has dumped a previous focus on selling blockbuster drugs to developed countries in favour of high volume, low value medicines; scrapped plans to float ViiV Healthcare, its HIV treatment operation; and slashed its cash return to shareholders.

Industrials

+1.34%

DS Smith: The packaging group is confident at the end to its financial year, with strong underlying growth more than offsetting the strength of sterling, while second half volume growth has been running ahead of the 2.3 per cent seen in the first half.

Leisure

+0.23%

Pret A Manger: The sandwich chain is to expand into the Middle East after signing a franchise deal with Emirates Leisure Retail. The first outlet under the deal will open at Dubai international airport’s Terminal One.

Union Hanover Securities: Planning consent has been granted to the hotel developer and operator for a 249-room boutique hotel in Stratford, East London, as part of a £126 million scheme. The Penny Brook Hotel will be next door to a 137-room Adagio hotel.

Hotel deals: European hotel investment volumes reached €3.74 billion in the first quarter, more than double the €1.73 billion achieved in the first three months of last year, with Britain up 38 per cent, according to figures from CBRE, the property advisor.

Rank Group: Chris Bell, the former chief executive of Ladbrokes, has been appointed a non-executive director of the casino and bingo club operator.

JD Wetherspoon: Like-for-like sales growth slowed from 4.5 per cent in the first half to 1.7 per cent in the third quarter amid growing competition from high street restaurant chains and supermarkets including Aldi and Lidl.

PPHE Group: Shares of the Park Plaza and Art’otel operator fell by almost 3 per cent after it cautioned over the potential impact of the strength of sterling on bookings from the Continent, while refurbishments would have a “temporary negative effect”.

Wasps: The English Aviva Premiership rugby union club has reached its £35 million target with the sale of its seven-year bond. The bond will pay a fixed gross rate of interest of 6.50 per cent a year until 2022. Trading in the bonds is earmarked to start on 14 May.

Media

-0.46%

21st Century Fox: Profits totalled $975 million, down from $1.05  billion a year earlier. Revenue for the three months to March 31 fell to $6.84 billion, from $8.22 billion, reflecting the sale of the Direct Broadcast Satellite Television businesses Sky Italia and Sky Deutschland. Take these out of the equation and revenue rose by 1 per cent to $84 million.

Natural Resources

-0.84%

Glencore: The mining and commodities group has been accused of hindering inquiries into claims that it evaded tax in Zambia. It is said to have dodged taxes via its Mopani copper mining division between 2006 and 2008. It has denied the allegation.

Retailing

+0.08%

Sports Direct: The Derbyshire offices of the retail chain founded by Mike Ashley have been visited by Scottish police as part of an investigation into the former owners of Rangers Football Club. Sports Direct said in a statement that the police investigation was not directed at the company or at Mr Ashley.

J Sainsbury: The supermarket chain has slumped to its first full-year loss for a decade as it was hit by £753 million of one-off items, including a £628 million provision to cover onerous property leases. The retailer revealed a £72 million loss for the year to March, compared with an £898 million profit for the previous 12 months. Its underlying profits were down 15 per cent to £681 million. Like-for-like sales fell 1.9 per cent.

Supergroup: The clothes company is looking to the Rugby World Cup in the autumn as a promising commercial opportunity. It said in a trading statement that like-for-like sales rose by 11.6 per cent over the 15 weeks to April 25. Its revenue for the full year to April 25 was up by 4.5 per cent to £152 million.

Technology

+0.47%

Sage Group: Stephen Kelly, a former Cabinet Office minister, who was poached to be the group’s chief executive last year, will unveil his plan for growth at one of Britain’s oldest technology companies at its capital markets day next month.

Digital services: A single market for digital services will contribute €415 billion a year to Europe’s economy and create hundreds of thousands of jobs, the European Commission said as it set out plans to create a “digital single market” for the continent, merging the 28 national digital markets into one.

Autonomy: The British software company was allegedly involved in a fictitious contract with the Financial Services Authority, the former City watchdog, to boost its revenue, according to court filings lodged by Hewlett-Packard as part of a $5.1 billion claim against Autonomy’s co-founder and finance chief. The American company claims it overpaid for Autonomy when it acquired what was then Britain’s largest technology company for $11.1 billion in 2011 after allegedly being misled over the company’s accounts.

Zynga: Mark Pincus, the chief executive of the games company best known for FarmVille and Words With Friends, is to cut 18 per cent of its staff, or 364 jobs, less than a month after retaking the post. The cuts are part of a plan to save $100 million a year as the company focuses on mobile games, which account for 63 per cent of total business.

Telecoms

+1.45%

Inmarsat: The satellite communications company said that its high-capacity Global Xpress satellites were being used to help aid workers after the earthquake in Nepal and its Australian division helped to search for the missing Malaysian Airlines flight last year, but that cut no ice with investors who again rebelled over executive pay.

Transport

+0.23%

National Express: Britain’s biggest coach operator indicated that its future on buses and in trains lies overseas. Two thirds of National Express’s revenues come from abroad — on coaches in Spain and school buses in the United States — but shareholders at the annual meeting heard that the proportion could rise.

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