Serco Shares Tumble 21% On New Profit Fears

Shares in Serco, the outsourcing group embroiled in a Government contracts scandal, tumbled more than 20% on Tuesday in the wake of its latest profit warning.

The firm updated the market after trading closed on Monday to say it could downgrade its profit expectations further and issue new shares to shore up its finances.

Serco, which agreed last December to repay the Government £68.5m for overcharging for the tagging of convicted criminals, had previously warned in January that 2014 was also likely to be tough.

Its woes were matched by those of rival G4S, which confirmed last month a repayment settlement of £108.9m in relation to the tagging scandal.

Serco, which is now set to be run by former Aggreko chief executive Rupert Soames from May 1 after its CEO quit, said in March that restructuring costs - taken to help try and win back Government trust - would drive profits lower in 2014.

The company said then its order book was worth £17.1bn - down £2bn on a year ago - though it had been granted permission to bid again for new Government business so long as its reforms remained on track.

While adjusted net debt for 2013 grew 21% to £701m due to heavy exceptional charges, the group said at the time of its annual results that it still had sufficient financing headroom.

In its latest statement on Monday night, Serco said: "It has now become evident in the light of recent performance that we may need to reassess the level of risk implicit in the assumptions underlying our forecasts.

"This may in turn require a material downward revision to expectations, and for us to review the appropriateness of our financing position.

"We will, therefore, be consulting with shareholders regarding the possibility of strengthening the balance sheet through an equity placing."

Shares in the firm, which employs over 100,000 staff in some 30 countries running services from London's Docklands Light Railway to air traffic control towers in the United States, had fallen 34% over the year prior to Tuesday's opening.

00.25 | 0 komentar | Read More

Banks To Be Tested On 35% House Price Slump

By Mark Kleinman, City Editor

Britain's biggest banks and building societies could be forced to raise billions of pounds of fresh capital unless they can demonstrate their ability to withstand a house price slump of roughly 35%.

Sky News has learnt that stress tests to be carried out by an arm of the Bank of England later this year will also assess their readiness to cope with a sudden spike in interest rates to more than 5%.

A series of commercial real estate losses will also be applied to the banks' balance sheets as part of the tests, insiders said.

Details of the stress tests, which have been drawn up by the Financial Policy Committee and the board of the PRA, will be disclosed to markets on Tuesday.

It is unclear whether the interest rate hike will be quantified as part of the tests, while the 35% figure is "in the ballpark" of the housing market scenario to be tested by the PRA, a source said.

The Prudential Regulation Authority (PRA) will unveil the UK tests of banks' resilience alongside a similar exercise being carried out by the European Banking Authority, which will include lenders from across the Continent.

The PRA is to announce the stress test of UK banks

The tests will come amid growing concerns about overheating in the housing market, particularly in London, where price rises have accelerated amid the improving economy.

Government ministers including Vince Cable, the Business Secretary, have warned that the Help to Buy scheme has contributed to the inflation of a housing bubble.

Banking sources have expressed concern about the PRA's methodology for conducting the tests, with some uncertainty about the timing and extent of the publication of the results.

In a statement last month, the FPC said the stress test "was not intended to be the FPC's expectation of what would happen, but a coherent tail risk event against which banks' resilience could be tested".

"A key part of the scenario would examine the resilience of the banks to a housing market shock and to a snap back in interest rates," it added.

The Government wants to avoid a 'too big to fail' scenario

Lenders including Nationwide and Santander UK, which have a substantial proportion of their business skewed towards the UK mortgage market, are said to be concerned about the possible outcome of the tests.

Banks such as HSBC, meanwhile, are also being tested for the impact of a severe slowdown in the Chinese economy.

The stress tests are designed to ensure that British banks have sufficient capital to withstand another economic slump, obviating the need for taxpayers to bail them out, as happened during the crash which began in 2007.

"The philosophy is that banks' bondholders and shareholders, rather than UK citizens, should pick up the tab," said a source familiar with the PRA's plans.

Banks would be given a substantial period of time to raise any capital that the PRA deems necessary as a consequence of the stress tests, insiders said.

The PRA declined to comment on Monday on the details of the stress tests ahead of Tuesday's announcement.

00.25 | 0 komentar | Read More

Singapore Fund Was 'Core' Royal Mail Investor

By Mark Kleinman, City Editor

State-backed funds from Kuwait and Singapore were among 16 investors given large allocations of Royal Mail shares as part of the company's contentious £3.3bn privatisation.

Sky News can reveal that the Kuwait Investment Office and the Government Investment Corporation of Singapore (GIC) were among the funds labelled by the National Audit Office (NAO) as 'priority investors' in a report which criticised ministers' handling of the postal operator's sell-off.

Both sovereign wealth funds remain shareholders in Royal Mail nearly seven months after the flotation, and at least one of them is understood to have added to its shareholding since the initial public offering (IPO).

The fact that two overseas state-backed funds were seen to have been afforded a form of preferential treatment may fuel the controversy over the sale.

The group of 16 investors was chosen by the Government's advisers as part of an attempt to establish a long-term investor base for Royal Mail when it sold shares in the company last autumn.

However, the NAO said that three-quarters of those funds had subsequently sold part or all of their holdings in order to cash in on the instant surge in Royal Mail's share price.

The precise size of the allocations given to the Kuwaiti and Singaporean funds is unclear, and the Government has so far declined to identify the full list of 16 names, citing commercial confidentiality.

Their status as shareholders was revealed by Sky News last year, but their membership of that core group of 16 had not been previously disclosed.

Vince Cable, the Business Secretary, and Michael Fallon, the Minister who oversaw the Royal Mail privatisation, will face questions from the Business, Innovation and Skills Select Committee on Tuesday, when they are expected to be asked about the allocation of shares.

Insiders said the ministers may choose to dispute the accuracy of the term 'priority investors' if questioned on the subject by MPs.

Discussions were held with more than 60 institutions regarded as long-term investors during the 18 months preceding the privatisation, with 21 of those still interested at the time the IPO took place.

Sixteen of those funds then placed firm orders for stock, having exerted significant influence over the pricing of the shares.

Among the others included in this list are understood to have been BlackRock, the world's biggest asset manager,  Lansdowne Partners, a top hedge fund which is understood not to have sold a single Royal Mail share since the IPO, and Standard Life Investments.

On Monday, the chief executive of the City watchdog said that the 38% rise in Royal Mail's share price on its first day of trading did not warrant an investigation.

A BIS spokeswoman said the majority of the 16 core investors were still shareholders in Royal Mail.

"There was no agreement – gentleman's or otherwise – on the holding of Royal Mail shares by priority investors.

"As is standard practice for any flotation, we did not seek to lock any investors in as they would have paid less for a stock they could not trade."

00.25 | 0 komentar | Read More

Pfizer Confirms Bid Interest For AstraZeneca

AstraZeneca: The Key Statistics

Updated: 10:51am UK, Monday 28 April 2014

American pharmaceutical giant Pfizer, which makes Viagra, has until May 26 to confirm its intentions in what could be Britain's biggest ever takeover. Here are some key statistics and history about AstraZeneca:

:: Pfizer's original bid earlier this year for AstraZeneca valued the company at just under £60bn.

:: AstraZeneca operates in more than 100 countries and employs 51,500 people worldwide.

:: Around 9,000 of its staff work in research and development (R&D).

:: It attracted £15.6bn of annual sales in year ending December 31, 2013, however this was down 24% in two years - from £20.4bn in 2011.

:: Reported operating profits have fallen from £7.8bn to £2.2bn, a fall of 71% over the same period.

:: Key to these falling sales and profits is the loss of exclusivity on some of its blockbuster drugs including Arimidex, Atacand, Crestor, Nexium and Seroquel IR. In 2013, the loss of exclusivity directly reduced revenues by £1.3bn.

:: The group forecast that, with new drugs coming online and its extensive acquisition activity, revenues will be back in line with its 2013 figures by 2017.

:: In the three years to 2013, it has completed more than 150 acquisitions including Pearl Therapeutics and Omthera Pharmaceuticals.

:: In 2013, it bought Amplimmune for £700m to help the group secure future products.

:: Analysts see the group battling to sustain itself in a more competitive industry, where cheaper generics eat into the profits on successful drugs post exclusivity.

:: The R&D cost and difficulty of developing new equivalent blockbuster drugs keeps growing.

:: Pfizer's previous proposal on January 5 included a combination of cash and shares which represented an indicative value of £46.61 per AstraZeneca share.

:: The bid included a substantial premium of approximately 30% to AstraZeneca's closing share price of £35.86 on January 3.

:: AstraZeneca was formed in 1999 when Sweden's Astra - which was formed in 1913 - merged with the UK's Zeneca.

:: Zeneca was created in 1993 following a de-merger from ICI.

:: Pfizer's revenues were $51.6bn (£30.7bn) in 2013.

:: Pfizer employs 78,000 people worldwide including 900 in Britain.

:: It makes Viagra and Chap Stick.

00.25 | 0 komentar | Read More

Samsung Suffers Mobile Phone Sales Decline

Samsung Electronics has reported another quarterly decline in operating profits after sales of its mobile phones slowed.

The South Korean firm made $8bn (£4.7bn) in its first quarter - down more than 3% on the same January to March period last year.

It comes after operating profits fell 6% in the fourth quarter of 2013.

The latest performance was largely blamed on smartphone sales easing back by 2.5% in the period, amid stiff competition from the likes of Apple, which enjoyed a sales resurgence over the same months after its handsets became more widely available in China.

Samsung, which is the world's largest smartphone maker, has a diverse product line ranging from memory chips to home appliances but more than half its profits are generated by mobile devices.

This month saw the global roll-out of the latest version of its flagship Galaxy series smartphone, the S5, the performance of which will be closely watched over the coming months.

While reviews have rated the S5 a top-class product, they note it offers little in the way of real innovation that would set it apart from previous versions and models offered by competitors such as Apple.

Samsung made margin concessions with the S5, launching it at a slightly lower price than its predecessor, the S4, and throwing in a premium software bundle.

The company has admitted it faces a tough road ahead, with mobile demand expected to remain sluggish in the second quarter.

However, it still expects sales of the Galaxy S5 to beat those of the S4.

The company's bottom line was boosted by a 22.8% surge in memory chip sales from the first quarter of 2013.

It helped overall net profits top market estimates at $7.5bn (£4.4bn).

Its Seoul-listed shares were down 1.6% in late trading.

00.25 | 0 komentar | Read More

Costa Sales Help Drive Whitbread Profits Up

Solid sales growth at Whitbread's Premier Inn and Costa Coffee brands has helped the company's annual pre-tax profit rise 1.1% to £347m.

The performance over the year to February 27 prompted the company to confirm a 19.9% increase in its dividend to 68.8p per share.

The results highlighted a 20% rise in total sales at Costa - with like-for-like sales at its own stores in the UK going up 5.7% in the period.

This contrasts with figures posted last week by rival Starbucks, which confirmed its first decline in UK sales for 16 years.

Total sales at Premier Inn rose 13.4%.

Whitbread, which is Britain's biggest hotel and coffee shop operator, said it had created 3,000 net new jobs over the period while underlying pre-tax profits rose 16.5%.

Chief executive Andy Harrison said: "We continue to invest in improving our customer propositions and international expansion.

"This includes the roll-out of our 'best ever bed' in Premier Inn, the launch of 'hub by Premier Inn' and rejuvenating our restaurant brands.

"In Costa we are focussed on international growth in China and France and our rebranding in Poland, together with the continuing growth of Costa Express.

"We had a strong finish to last year, with all our brands performing well, boosted by good Christmas and New Year campaigns and helpful weather comparatives.

"The first two months of the new financial year have started positively, with good trading again helped by relatively soft comparatives which will become tougher as we move into the second half of this year."

00.25 | 0 komentar | Read More

BP Profits Rise 15% But Take Russia Hit

BP has reported a 14.8% increase in quarterly profits that were hit by a falling contribution from its stake in Russia's Rosneft amid the crisis in Ukraine.

The British oil firm posted underlying replacement cost profit of $3.2bn (£1.9bn) in the first quarter - up from $2.8bn (£1.67bn) in the previous quarter but down from the $4.2bn (£2.5bn) in the same period a year ago.

The company said it was raising its quarterly dividend by 8.3% to 9.75 cents (6pm) on the back of the performance, which came in ahead of expectations despite a number of headwinds.

A weaker refining environment and lower production - a result of the company's asset sale to raise funds to cover the cost of the Gulf of Mexico disaster - all hit earnings.

The Deepwater Horizon disaster in 2010 seriously damaged BP

But it was the company's 20% stake in Russia's majority state-owned Rosneft which was firmly in the spotlight as western sanctions hit Russian firms in response to the crisis in Ukraine.

BP has repeatedly said it will stand by its investments in Russia. 

Russian production was responsible for about a third of BP's output in the first quarter.

The company said on Monday it was considering what sanctions against the head of the Russian energy company, Igor Sechin, would mean for its business.

Bob Dudley reported a "solid start to 2014" in the results statement

The share of profits BP generated from Rosneft, which last quarter accounted for about a quarter of its total, shrunk significantly due to the weakening rouble, as Russia's economy comes under pressure from the tense stand-off with the West.

BP reported an estimated underlying pre-tax replacement cost profit for Rosneft of $271m (£161m) for the same quarter.

Chief executive Bob Dudley said the company was delivering on its targets and that the focus was on returning cash, with $7.6bn (£4.51bn) of its $8bn (£4.76bn) share repurchasing operation now completed.

"As well as progressive growth in the dividend per share, we expect to use surplus cash to support further distributions through share buy-backs or other mechanisms," Mr Dudley said.

The company said its legal battles in the US linked to the massive oil spill of 2010 were continuing and provisions to cover the clean-up, fines, compensation and legal costs had not risen in the quarter, remaining at $42.7bn (£25.4bn).

Its ban on exploring for oil in the Gulf of Mexico and winning US government contracts was lifted last month, nearly four years after the Deepwater Horizon disaster.

00.25 | 0 komentar | Read More

HS2: Govt Wins Vote But Cameron A No Show

David Cameron has been criticised for missing the vote on the HS2 rail line bill as the Government suffered a 33-strong Tory rebellion.

Shadow transport secretary Mary Creagh, who supports the scheme, said the Prime Minister's no-show was "extraordinary". 

Some 33 Conservative MPs rebelled against the blueprint for the high-speed line but the Government enjoyed a comfortable victory as the bill for the £50bn scheme passed with a 411 majority.

A wrecking amendment to the legislation for the project put forward by former Cabinet minister and rebel ringleader Cheryl Gillan was defeated by 451 votes to 50, with a total of 32 Tory MPs backing the amendment.

Some 47 Conservative MPs missed the vote, including Europe minister David Lidington, Attorney General Dominic Grieve and the newly-promoted Treasury minister Andrea Leadsom, whose constituencies are all affected by the line.

Ms Leadsom was called to a meeting in Brussels, while Mr Grieve had ministerial engagements in Newcastle.

Mr Lidington, who is in Estonia, has threatened to resign if there is not sufficient mitigation for his Aylesbury constituency and if a tunnel under the Chilterns is not extended.

Any serious threat to the bill's progress disappeared when Labour indicated it would support the legislation.

Ms Creagh said: "It's extraordinary that David Cameron couldn't be bothered to turn up to vote.

"Once again, the Prime Minister has shown he is the weak leader of a divided party.

The line will run from London to Birmingham, Manchester and Leeds

"He is unable to stand up to rebel ministers opposed to HS2 and unwilling to vote in favour of his own Government's biggest infrastructure project."

Mrs Gillan added: "This is a large number of MPs unconvinced that HS2 is the solution to our country's infrastructure problems.

"(The) Government should realise this project will be closely scrutinised every step of the way."

The line has also split opinion among environmental and business groups.

However, Transport Secretary Patrick McLoughlin said: "HS2 is a once in a generation opportunity to create jobs and develop skills, provide the extra space we need on our rail network for commuters and freight and better connect our biggest cities.

"I'm aware of the concerns some who live very close to the HS2 route have.

"I'm confident, however, that by working together, we can ensure this vital new north-south railway is designed in the right way and we will have spades in the ground in 2017 as planned."

The bill will now be examined by a special select committee of MPs which will hear petitions from people who will be directly affected.

If the political hurdles and opposition are surmounted, construction of the 250mph London-West Midlands stage of the line could begin around 2017 and be opened by 2026.

The second phase to Manchester and Leeds may be completed by 2032.

00.25 | 0 komentar | Read More

Tube Strike Leads To Long Queues Across London

Commuters have faced long delays after a Tube strike over ticket office closures took effect in London.

Members of the Rail, Maritime and Transport (RMT) union mounted picket lines outside stations after walking out at 9pm on Monday.

The action is planned to last for 48 hours and will be followed by a three-day stoppage next week.

Large queues built up as early rush-hour passengers waited until 7am for the first Tube trains to run.

Passengers outside Stratford Underground, DLR and Overground station

London Underground (LU) said it was running services on nine lines despite the "pointless" strike, although there were no trains on the Waterloo and City or Circle lines.

There were almost 8,000 buses on the roads - the most ever operated in London - after an extra 266 were put into service.

LU managing director Mike Brown said: "Thousands of staff and volunteers are working hard this morning to keep London working and our customers informed in the face of this pointless strike.

"More London Underground staff have come to work this morning than during the strike back in February and a record number of London buses are operating."

At Euston station in north London, customers crowded around the entrance to the Underground, waiting for the clock to tick round to 7am.

On the busy Victoria line, where trains normally run approximately every two minutes, there was just one service every 10 minutes.

At Victoria station in central London, passengers pouring off mainline trains were confronted with a wall of people waiting for Tube services.

There were large crowds at Clapham Junction in the southwest of the capital, with many passengers choosing to take Overground services and some platforms restricted.

Commuters wait to board a busy Underground train on the Northern Line

Heathrow Express trains between Paddington and Heathrow were running as scheduled due to staff reserves.

The RMT union is embroiled in a fresh row over the ticket office closure plans, which officials warn threaten safety as well as almost 1,000 jobs.

LU denied there would be any impact on safety and said ticket office staff would provide a better service if they were moved to other parts of stations.

The RMT said its members were solidly supporting the industrial action, as the union again attacked the Mayor of London, Boris Johnson, over the future of ticket offices.

Bus and train services were also much busier than normal

Mick Cash, the union's acting general secretary, said: "London Underground have dug themselves into an entrenched position and have refused to move one inch from their stance of closing every ticket office.

"It is scandalous that Transport for London are blowing what we estimate to be hundreds of thousands of pounds on politically-motivated adverts and propaganda designed to deflect attention from Mr Johnson's broken promises."

However, Mr Brown said: "The RMT leadership appears to remain implacably opposed to the modernisation of the Tube that will radically improve customer service and help us keep fares down."

Business groups warned the strikes will cost the capital's economy millions of pounds.

00.25 | 0 komentar | Read More

UK Economy Grows 0.8% In First Quarter

The UK's economic recovery continued in the first quarter of 2014, with the first estimate of GDP growth coming in at 0.8%.

The figure, while weaker than the 0.9% most economists had expected, meant that output was 3.1% higher than on the same period the previous year, marking the fastest annual growth since the last quarter of 2007.

However, the economy remains 0.6% smaller than at its peak in the first quarter of 2008, after the recession wiped 7.2% off total output.

News of the economy's latest performance, released by the Office for National Statistics (ONS), showed growth across each major sector of the economy, though construction output was damaged by the impact of the winter storms.

The ONS said while widespread flooding appeared to have no overall effect on output it said bad weather in January and February did hit efforts to meet demand for new homes, with construction recording just 0.3% growth.

Mr Osborne says the figures show Britain is "coming back"

Output in the service sector - which makes up more than three quarters of UK GDP - rose by 0.9% and continued to be driven by consumer spending.

Manufacturing grew by 1.3%, its strongest quarter for nearly four years, bolstering hopes for a rebalancing in the recovery away from its reliance on consumers.

Industrial production rose 0.8% though mining and quarrying, electricity and gas production and agriculture shrank over the quarter.

The GDP figures were seized upon by the union organisation the TUC as evidence the recovery was not gaining enough momentum to sustain a raise in interest rates, which is widely expected next year.

The figures were released at the same time as statistics showing a 2.5% rise in the number of people being declared insolvent in England and Wales over the same period.

There were 24,931 individual insolvencies recorded during the three months - a period when wage increases finally caught up with inflation for the first time since the recession.

Chancellor George Osborne said: "Today's figures show that Britain is coming back - but we can't take that for granted. We have to carry on working through our long-term economic plan.

"For the first time in a decade all three main sectors of the economy - manufacturing, services and construction - have grown by at least 3% over the last year.

"The impact of the great recession is still being felt, but the foundations for a broad-based recovery are now in place.

"The biggest risk to economic security would be abandoning the plan that is laying those foundations".

Shadow chancellor Ed Balls said: "Now that growth has finally returned, the question is whether ordinary working people will properly feel the benefit and we have a balanced recovery that's built to last."

He told Sky News: "Most people are experiencing a cost of living crisis, which David Cameron and George Osborne try to deny. Its a reality for most people in our country".

00.25 | 0 komentar | Read More