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Business - Need to Know

Morning Edition

Good morning. Property write-offs have pushed J Sainsbury into the red. The supermarket retailer has announced a £72 million loss for the 52 weeks to March 14 2015 - the first in more than a decade - after taking a £682 million hit writing down the value of its property portfolio. Underlying profits were ahead of analyst expectations at £681 million, despite a 1.9 per cent fall in like-for-like sales over the year. As expected the dividend has been cut.

David Tyler, Sainsbury's chairman, is putting on a brave face: “Sainsbury’s is a business built on strong foundations. With our grocery business at the core, we are confident that we can grow shareholder value.” Although his chief executive, Mike Coupe, warns “the UK marketplace is changing faster than at any time in the past 30 years”. We'll have a full story on Sainsbury's shortly on www.thetimes.co.uk/business.

It is a big day for GlaxoSmithKline and Andrew Witty, its embattled chief executive. Britain’s biggest pharmaceuticals company will outline its strategy at an “investors day” following the publication of first quarter results at midday. Insiders describe the event as an attempt to “reset” the long-term outlook for Glaxo. Log on to our Business Now live blog for full analysis of the Glaxo announcement and the market reaction.

Elsewhere this morning there is good news for competition lawyers with Poundland confirming that it is pushing ahead with the acquisition of rival 99p stores, despite the threat of a full-blown investigation by the competition regulators.

Game Digital has announced the appointment of Mark Gifford as finance director. We also have updates this morning from Serco, the outsourcing group, National Express and Legal & General.

Alleged “Flash Crash” trader, Navinder Sarao, will appear in court this morning for the third time since his arrest last month. Mr Sarao is facing extradition to the US where he could be handed up to 380 years in jail. He agreed two weeks ago to pay £5 million in bail, but has yet to come up with the money needed to secure his release. Harry Wilson, our city editor, will be in court. Follow him on twitter - @harrynwilson.

On the economics front we get UK services PMI data for April at 9.30 this morning. Reuters is forecasting a reading of 58.50, down from 58.9 in March, its highest level since August 2014. In the US, 21st Century Fox reports third-quarter results after the closing bell.

Ahead of Friday's closely watched US jobs numbers ADP, the private payrolls processor, is expected to report that private firms added 200,000 jobs last month, a rise from the 189,000 jobs added in March. The report, which often gives an early indication of Friday's official jobs numbers, is published at 1.15 pm UK time.

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

Electronic Arts, the video game publisher known for titles such as FIFA, posted better-than-expected quarterly earnings and revenue, helped by strong digital sales and the release of Battlefield Hardline. EA, whose shares rose as much as 6.5 per cent to $62.98 in after hours trading, also announced a buyback program of up to $1 billion and forecast full-year earnings above analyst estimates.

Hewlett-Packard has accused Mike Lynch, the co-founder and former chief executive of Autonomy, of firing a key US employee who had raised concerns about the Cambridge company’s accounts prior to its acquisition by the American computing giant. The claim emerged in a court filing by HP which is suing Dr Lynch and Sushovan Hussain, the former finance director of Autonomy, for $5 billion damages.

“This isn’t merely a tale of greedy bankers. It is a story about regulatory overreach and political interference creating perverse incentives.” It is not just Royal Bank of Scotland that is to blame for the closure of small businesses, argues Philip Aldrick.

It is not only the Labour Party that is being given a headache by the Scots. Greene King, one of the country’s biggest pub operators, reported subdued like-for-like sales growth yesterday of 0.4 per cent over the past 12 months, but claimed that like-for-like growth would have been double that level “excluding the impact of the new drink-driving legislation in Scotland”.

The Nikkei 225 is closed. The FTSE 100 is expected to open 28 points higher when trading begins shortly.

London returned from the holiday weekend in a negative mood. A strong set of first quarter numbers from HSBC was overshadowed by a warning that the bank levy was preventing it from raising dividend payouts and a new survey showed Britain’s construction industry slowed sharply in April. The FTSE 100 shed 0.8 per cent or 58.4 points to close at 6,927.6. The broader FTSE 250 also closed lower but only by a modest 16 points or 0.1 per cent at 17,452.1. Read Alex Ralph’s market report here.

Wall Street finished lower yesterday but it could have been far worse after the US reported a surprisingly wide trade deficit for the first quarter. In the end, the Dow Jones Industrial Average fell by 0.8 per cent or 142.2 points to 17,928.2 and the S&P 500 dropped by 1.1 per cent or 25 points to 2,089.5 with a higher than usual daily average of 7.3 billion shares changing hands.

Oil prices made solid gains yesterday assisted by a disruption to Libyan exports and higher selling prices for Saudi production. In New York, Brent crude for June settlement climbed 1.7 per cent to $67.57 a barrel.

Sterling hit a ten-day low against the US dollar early yesterday after the new data on the UK’s slowing construction sector. However, it rallied later on to trade up 0.2 per cent on the day at $1.516. Against the single currency, the pound was 0.4 per cent higher at 73.415p per euro.

Aberdeen Asset Management admits to being in the wrong markets, with a heavy exposure to emerging economies that are out of favour ahead of a possible US interest rate rise. Tempus takes a close look at the fund manager’s investment strategy. Spirent Communications has been an erratic investment in the past, and the timing of significant orders has taken its toll on first quarter figures. Greene King is awaiting the blessing of the regulatory authorities on its purchase of Spirit Pub Company, first announced six months ago. Read on for more on the Tempus tips.

The Times
Hewlett-Packard has accused Mike Lynch, the co-founder and former chief executive of Autonomy, of firing a key US employee who had raised concerns about the Cambridge company’s accounts prior to its acquisition by the American computing giant.
read full update
Daily Telegraph
Hewlett-Packard has alleged that Mike Lynch ordered the sacking of Autonomy’s finance chief in the United States after he raised questions about accounting practices that the Silicon Valley giant claims were part of a £3.2bn fraud.
read full update
Financial Times
David Cameron and Ed Miliband have begun planning for breakneck dealmaking in a hung parliament, as polls suggest that the Conservatives will narrowly emerge as the biggest party in Thursday’s election.
read full update
City AM
Britain enjoyed the fastest growth in the G7 last year. It is in the middle of a jobs miracle, with 1.5 million more full-time jobs and youth unemployment down by 175,000 since the coalition came to power. The best-paid one per cent is now paying more than ever to the Treasury: 27 per cent of income tax.
read full update
Economics

Eurozone/Greece: European Commission economic forecasts for the spring predict a continuing rise in growth across Europe, but sound the alarm over a deteriorating situation in Greece. Real GDP in 2015 is now expected to rise by 1.8 per cent across the European Union and by 1.5 per cent in the euro area, 0.1 percentage points and 0.2 percentage points higher respectively than projected three months ago. The commission has revised down the Greek growth forecast for this year from 2.5 per cent to 0.5 per cent, warning that “uncertainty and illiquidity” are damaging its economy.

Australia: The country’s treasurer has urged families and businesses to borrow and invest money after the Reserve Bank’s decision to slash the interest rate to a record low of 2 per cent. Joe Hockey claimed that the cut would encourage “green shoots” in the economy and said that, while it was at a new low, Australia still had some of the highest rates in the world relative to other countries.

Banking & Finance

-2.23%

HSBC: The global bank’s chief executive has given his clearest sign yet that it will leave the UK. Stuart Gulliver laid out a list of negative aspects of keeping its headquarters in Britain, compared with the potential boost of moving to its historic home of Hong Kong. Britain has “rejected the concept of universal banking” — a core value for HSBC — and its incoming rules to ring-fence low-risk retail and commercial banking operations could be “very, very difficult” for HSBC, he said. It reported a 4 per cent rise in pre-tax profit to $7 billion in the first three months of the year, compared with the same period last year.

Aberdeen Asset Management: The fund manager announced its eighth consecutive quarter of net cash outflows, as investors withdrew funds because of concerns over the effect of a rise in US interest rates on emerging markets, though favourable market and foreign exchange movements more than cancelled out the deficit.

Construction & Property

+0.35%

Construction output: Activity in the sector has slowed to a near-two-year low as the general election put “grit on the wheels” of decision-making last month. Adding to the mounting evidence that the UK’s economic recovery could be faltering days before the election, the Markit/CIPS construction purchasing managers’ index slowed to 54.2 from 57.8 in March. This was the slowest pace of growth since June 2013.

Consumer Goods

-0.97%

D.E Master Blenders 1753: The European Commission has granted conditional approval for the merger of D.E Master Blenders 1753 and the coffee business of Mondelez International, the American company best known for owning the Cadbury brand. The merger is expected to create the world’s largest “pure-play” coffee company, with annual revenues of more than €5 billion that will be called Jacobs Douwe Egberts. The approval comes after a commitment from the enlarged group to sell its Carte Noire brand across the European economic area and the Merrild brand in Denmark and the Baltics, and to license the Senseo brand to a third party in Austria.

Estée Lauder: Reporting its third-quarter results up to the end of March, the cosmetics group said that net sales had risen by 1 per cent on the same time last year to $2.6 billion. Excluding the impact of the US dollar, sales in the period would have risen by 8 per cent, the group said. Estée Lauder, which owns Michael Kors, Jo Malone London and Tom Ford, said all three luxury brands had recorded strong double-digit sales gains.

Engineering

+0.21%

Volkswagen: Still stung by the shock resignation of its chairman in a boardroom bust-up, the German carmaker said that it had returned to “calmer waters” with a plan to revive its fortunes in the United States. Sales were forecast to grow and a new chairman would be found, Martin Winterkorn, the chief executive, told a shareholders’ meeting in Hanover.

Health

-0.95%

Smith & Nephew: America’s healthcare watchdog has warned the British medical technology group over regulatory failures involving the sale of a gynaecology device. In a letter, the US Food and Drug Administration said that Smith & Nephew had “violated” regulations on documenting design changes to its Truclear Ultra Reciprocating Morcellator 4.0.

Fitbug Holdings: The AIM-listed penny stock behind a wrist device that tracks activity has entered into a partnership with Towers Watson, the United States-listed professional services firm, and HealthLogix, an Australia-based “wellness” services company, to provide data to employers on the health of their workforce. The data collected on Fitbug’s Orb, which recently struck a deal to stock the devices in Sainsbury’s and Target, the American retailer, will plug into an online platform called HealthVantage, which will help employers to monitor sleep, nutrition and exercise.

Leisure

-1.16%

Greene King: The pub operator, which is about to complete the purchase of Spirit Pub Company after an expected clearance by the competition authorities, said that trading in the 51 weeks to April 26 had been mainly favourable, although the new drink-driving legislation in Scotland had affected sales.

McDonald’s: The list of American multinationals in the crosshairs of Europe’s regulators grew yesterday to include the fast-food giant, even as Margrethe Vestager, the competition commissioner, said that governments were obstructing her investigations into the tax affairs of Apple, Amazon and Starbucks.

Media

-1.59%

News Corporation: The publishing group, parent company of The Times, reported a marginal 1 per cent fall in third-quarter revenue last night to $2.06  billion, from $2.08 billion the previous year.

Natural Resources

+0.44%

Africa Oil Corporation: Helios Investment Partners, the Africa-focused investment fund manager, has agreed to invest $100 million for a 12.4 per cent stake in the Canadian-listed oil and gas company, which has assets in Kenya and Ethiopia as well as Puntland in Somalia through its equity interest in Africa Energy Corporation. Helios said that its investment would help to fund the company’s appraisal and development work programme in eastern Africa. Helios will nominate one non-executive to the board of Africa Oil.

Glencore: A silver lining eased the embarrassment for the FTSE 100 miner and commodities trader last night after it revealed a sharp drop in its production of copper. Glencore, which is far more dependent on the red metal than its peers, revealed a 9 per cent fall in production in the first quarter. City analysts expressed their alarm at the figures, but Glencore shares rose 2½p to 315p.

Retailing

-0.11%

Just Eat: The online takeaway delivery group defied the sceptics again yesterday, reporting a 47 per cent jump in comparable orders in the first three months of the year. Shares of Just Eat rose by 17½p to 473½p after it reported total orders up 51 per cent, including recent acquisitions. The share price increase pushed it close to its record high of 489¼p and not far short of double the 260p at which it was floated in April last year.

New Look: A queue of potential bidders lining up to prepare offers for the high street retailer have raised the prospect of it being sold instead of floated.

Technology

-0.11%

Autonomy: Hewlett-Packard has accused Mike Lynch, the co-founder and former chief executive of the Cambridge company, of dismissing a key American employee who had raised concerns about its accounts prior to its acquisition by the US computing giant. The claim emerged in a court filing by HP, which is suing Dr Lynch and Sushovan Hussain, the former finance director of Autonomy, for $5 billion in damages. Dr Lynch said that the HP filing was “specious” and without basis and that he would unmask the “falsity and hypocrisy” of the allegations in court.

Spirent Communications: The provider of testing equipment to the telecoms industry, which came out with a profit warning last October, said as expected that activity levels at the start of this year had been muted, made worse by the timing of a large order that would fall into the second half of the year.

Kano: The London-based start-up has secured $15 million from leading investors to fund its plan to create “the Lego of the 21st century”. Kano, which makes low-cost, build-it-yourself computer kits, has attracted investment from backers including Breyer Capital, the Silicon Valley venture capitalist, and Jim O’Neill, the former chairman of Goldman Sachs Asset Management.

Apple: Angela Ahrendts, the former Burberry boss who is Apple’s senior vice-president of retail and online stores, was the highest-paid woman executive in the United States last year, with a pay package estimated by Bloomberg at $82.6 million.

Telecoms

-0.70%

WHP Group: Palatine Private Equity, the private equity group, has completed a £38 million secondary buyout of the provider of support services to the mobile telecoms infrastructure sector. After the deal, Key Capital Partners, which originally backed a buyout of the business in 2013, will exit. WHP helps to plan, design, upgrade and maintain mobile network masts, antennae and base stations for all the main UK mobile operators.

Transport

-0.02%

Ryanair: The Irish budget airline’s charm offensive appears to be paying off. Ryanair has reported that the amount of traffic travelling on its Boeing 737s is up by a fifth this spring. Europe’s busiest carrier, handling more than 90 million passengers a year, reported that it flew nine million passengers in April, up 16 per cent year-on-year. Taking March and April together, the number of passengers flying with the airline is up by 20 per cent, compared with 2014 at 15.6 million.

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