Flybe shares rise amid Virgin Atlantic takeover talks
Flybe shares (LON:FLYB) rose on Wednesday after Virgin Atlantic confirmed it was continuing talks with the airline regarding a potential takeover.
Last month, Flybe announced it was considering its options, including placing itself for sale following the issue of several profit warnings for the year.
The low-cost airline has come under pressure in recent years amid rising fuel prices and pound sterling volatility all impacting profits.
News of the potential takeover by Virgin first hit the headlines back in November, when a Virgin spokesperson confirmed the speculation.
A Virgin spokesperson said at the time: “Virgin Atlantic notes the recent media speculation related to Flybe. Virgin Atlantic has a trading and codeshare relationship and confirms that it is reviewing its options in respect of Flybe, which range from enhanced commercial arrangements to a possible offer for Flybe.
“Virgin Atlantic emphasises that there can be no certainty that an offer will be made nor as to the terms of any offer.”
Virgin Atlantic was founded by British billionaire Richard Branson, who is currently focusing his attention on his Virgin Galactic spaceflight venture.
It currently codeshares with Flybe as well as US airline, Delta Airlines. Delta currently owns a 49% stake in Virgin Atlantic.
Last July, Virgin Atlantic announced it had agreed to sell a 31% stake to Air France-KLM, as part of a £220 million deal.
Shares in Flybe are currently +6.91% as of 11:16AM (GMT).
GlaxoSmithKline and Pfizer to merge healthcare arm in £10bn deal
GlaxoSmithKline has agreed to break-up its healthcare business in a £10 billion merger with Pfizer.
GlaxoSmithKline (GSK) is set to hold a majority interest in the venture with 68%, whilst US rival Pfizer will have the remaining 32%.
News of the joint venture between the two pharmaceutical firms sent shares up during Wednesday morning trading.
GSK, whose brands include Panadol and Sensodyne, said that within three years of the merger, it plans to split into two distinct businesses of consumer alongside pharmaceuticals and vaccines.
Pfizer’s consumer products include the well-known Chapstick and Anadin. The merger is expected to bring in around £9.8 billion in annual sales.
“With our future intention to separate, the transaction also presents a clear pathway forward for GSK to create a new global pharmaceuticals/vaccines company, with an R&D [research and development] approach focused on science related to the immune system, use of genetics and advanced technologies, and a new world-leading consumer healthcare company.”
Emma Walmsley, chief executive of GlaxoSmithKline, said:“Ultimately, our goal is to create two exceptional, UK-based global companies, with appropriate capital structures, that are each well positioned to deliver improving returns to shareholders and significant benefits to patients and consumers.”
Shares in Pfizer (NYSE:PFE) are currently down marginally -1.65%.
Meanwhile, shares in GlaxoSmithKline (LON:GSK) +6.63% as of 10:44AM (GMT).
Softbank shares slump on IPO debut
After its debut on the Tokyo stock market, shares in Softbank sank 14.5% from the price set for the initial public offering.
It was Japan’s biggest ever IPO, where the group raised 2.6 trillion yen ($23 billion; £18 billion) after pricing the offering at 1,500 yen a share.
David Kuo, a market-expert based in Singapore, said: “Softbank wasn’t as popular an [initial public offering] as the market had expected. It was oversubscribed, but not as much as hoped.”
Softbank was founded by Masayoshi Son, the richest person in Japan. Although it was founded as a telecoms company, the group has expanded into robotics and has also invested in ride-sharing firms and satellite start-ups.
Professor at the school of management and information at the University of Shizuoka, Sejiro Takeshita, said the slump in shares was due to the group’s growth strategy.
“One big worry among investors is the musical chair game that Soft Bank has been playing on, growth after growth, expansion after expansion – they are all worried when the music will stop,” he said.
“It hasn’t. But if you look at the external environment of the telecommunications side, in Japan … growth is definitely winding down,” he said. “And you’ve got pressure from the competition and you’ve got the government trying to lower prices – so you’ve got a lot of pressure surrounding this industry as a whole.”
Shares in Softbank (TYO: 9984) are currently trading -0.91% at 8.184 (0942GMT).
FCA to abolish excessive fees for overdrafts
The Financial Conduct Authority (FCA) has revealed plans to ban banks from charging high overdraft fees.
In the last year alone, banks have earned more than £2.4 billion from such fees.
The watchdog said it plans to ensure a more simple approach to borrowing, where the cost will be simple with a single interest rate. Prices will be advertised in a standard way and more will be done to help those financially struggling.
“Today we are proposing to make the biggest intervention in the overdraft market for a generation,” said Andrew Baily, the FCA’s chief executive.
“These changes would provide greater protection for the millions of people who use an overdraft, particularly the most vulnerable. It is clear to us that the way banks manage and charge for overdrafts needed fundamental reform.”
“We are proposing a series of radical changes to simplify the way banks charge for overdrafts and tackle high charging for unarranged overdrafts. These changes would make overdrafts simpler, fairer, and easier to manage,” he added.
Campaigners have said that the changes are not going far enough to help those that are “overdraft prisoners”.
However, Martin Lewis, founder of moneysavingexpert.com, said the move was a step in the right direction and that abolishing the overdraft fees was “a step in the right direction”.
“Many demonise credit cards, but debit cards are debit cards too when someone is overdrawn, and often they’re far costlier,” he said.
“Now even the regulator, thankfully, is starting to feel that it’s unfair to make society’s poorest pay for others’ banking – via hideous charges designed to entrap people in debt.”
“The FCA’s consultation is on the right track – though our main disappointment is it fails to impose the total cost cap, which it’s applying to other high-cost credit sectors like payday loans and rent-to-own.”
A survey by Which? revealed that the worst fees for unarranged overdrafts come from TSB, Royal Bank of Scotland and NatWest.
John Lewis sales recover as Christmas approaches
John Lewis sales recovered last week as promotional discounting ahead of Christmas brought back customers.
According to figures for the week ending 15 December, total sales were up 1.8% compared to the same week last year.
John Lewis said this was driven by customers Christmas shopping for both food and clothing, with price matching promotions driving up sales.
Specifically, clothing sales rose 9.3%. Meanwhile, in its Beauty, Wellbeing and Leisure departments, sales were up 15.7%. Womenswear and Menswear sales also rose 8.5% and 7.2%, respectively.
Conversely, home sales were down 1.7%. Sales of Christmas trees continued to perform well, up 10%.
At its Waitrose supermarkets, total sales excluding fuel fell 1.9% compared to a year previously. This was attributed to a ‘a planned decision to reduce promotional activity.’
As Christmas fast approaches, the supermarket saw sales of panettone rise 12%, with mince pies also up by 9%.
John Lewis endured a difficult start to 2017, reporting a 99% fall in profits for the six months to July 28.
Nevertheless, Black Friday promotions provided some relief for the group, recording record sales over the weekend.
Despite the Christmas period often being a traditionally lucrative period for retailers, it has proved a difficult November for the high street.
Bonmarché and Superdry both issued profit warnings last year, as consumer confidence continues to weigh on revenues.
However, the downturn is not limited to traditional brick and mortar store models.
Online retailers have also come into pressure in recent months, amid growing concern regarding the ethical implications of so-called ‘fast fashion’.
Shares in ASOS (LON:ASC) plunged on Monday after an unexpected profit warning.
Sales growth forecast were revised from 20 to 25% to 15% as the retailer warned on “economic uncertainty” challenging profitability.
Angling Direct reveals bumper Black Friday sales
Record sales over the Black Friday weekend have led to a strong trading update from Angling Direct.
The fishing retailer has revealed a 31.5% increase in sales to £14.6 million. Black Friday sales alone led to a 24% boost in sales.
Darren Bailey, the chief executive of the group, said: “The company has taken great encouragement from the recent performance against the backdrop of a difficult retail trading environment.”
“As the business launches its new international websites and continues to invest in its stores and overall customer experience, we believe that Angling Direct remains well placed to build on its market-leading position.”
The group hopes to expand, with plans to open 20 new stores by 2020.
Pre-Christmas trading across the retail board has not been so promising. This week saw shares in Asos (LON: ASC) tumble after the group issued a profit warning.
Shares in Boohoo (LON: BOO) and H&M (STO: HM-B) also tumbled on Monday.
Shares in the group (LON: ANG) are trading +1.83% (1319GMT).
Oil prices plunge amid U.S oversupply fears
Oil prices fell more than 4% on Tuesday amid output concerns in U.S and Russia.
Prices fell despite output cut agreements from the Organisation of Petroleum Exporting Countries (OPEC).
Traders attributed the fall to an increase US inventories as well as rising shale output forecasts.
In addition, residual fears regarding future demand and doubts over the OPEC output cuts enduring only added to pressure on oil prices.
OPEC member countries and other oil producers agreed this month to cut production by 1.2 million barrels per day (bpd), in a bid to push up prices.
The world’s major oil producers agreed upon the cuts in Vienna, despite opposition from U.S President Donald Trump.
OPEC’S member nations include Saudi Arabia, the leading oil producing country globally.
The organisation is comprised of 15 countries, and was found back in 1960. According to September figures, OPEC countries accounted for 44% of global oil production.
During early morning trading on Tuesday, Brent crude was down -2.53% at 58.10 and WTI crude oil down -1.45% as of 7:30AM (GMT).
Twitter shares fall on hacking concerns
Twitter shares (NASDAQ:TWTR) fell more than 6% on Tuesday on concerns of hacking activity.
The social media platform warned of “unusual activity” from China and Saudi Arabia relating to a help form bug in a statement published on Monday.
Twitter said it had identified suspicious traffic to a support forum, which left users’ phone country codes and details vulnerable.
The company said the issue was discovered on November 15th and resolved the follow day.
The company statement said:
“Importantly, this issue did not expose full phone numbers or any other personal data. We have directly informed the people we identified as being affected. We are providing this broader notice as it is possible that other account holders we cannot identify were potentially impacted.
Since we became aware of the issue, we have been investigating the origins and background in order to provide you with as much information as possible. During our investigation, we noticed some unusual activity involving the affected customer support form API. Specifically, we observed a large number of inquiries coming from individual IP addresses located in China and Saudi Arabia. While we cannot confirm intent or attribution for certain, it is possible that some of these IP addresses may have ties to state-sponsored actors.”
Back in October the social network posted a profit for q3, sending Twitter shares upwards.
Twitter’s earnings beat market expectations for the quarter, increasing by 29% to $758 million during the period.
Shares in the social media platform are currently -6.80% as of 11:49AM (GMT).
Big four UK accountancy firms facing shake-up
The UK’s top accountancy firms are set to face a major shake-up amid a series of proposals put forward by the competition watchdog.
The Competitions and Markets Authority (CMA) introduced a series of radical reforms to tackle various issues it had flagged in the accountancy industry.
The proposals are set to challenge the dominance of the ‘big four’ accountancy firms within the UK industry, namely, KPMG, PwC, EY and Deloitte.
Specifically, the CMA recommended dividing audit and advisory businesses to ensure separate management and accounts.
In addition, the proposals recommended oversight for those who appoint auditors in a bid to maintain independence.
Lastly, the watchdog proposed the introduction of a “joint audit” system, with both a ‘big four’ auditors and a ‘non-Big Four’ company working in collaboration on an audit.
Andrew Tyrie, CMA chair, commented: “Addressing the deep-seated problems in the audit market is now long overdue. Most people will never read an auditor’s opinion on a company’s accounts. But tens of millions of people depend on robust and high-quality audits. If a company’s books aren’t properly examined, people’s jobs, pensions or savings can be at risk.
“The CMA will now consult on a number of proposals for robust reform. These intractable problems may take some years to sort out. If it turns out that the proposals are not far-reaching enough, the CMA will persist until the problems are addressed.”
House prices: What to expect for 2019
A new report from the Royal Institution of Chartered Surveyors (RICS) has revealed that house prices will continue to stagnate in 2019.
The surveyors and valuers have warned that the market will enter the third year of decline as sales volumes are expected to fall around 5% and the house price growth will reach a standstill.
RICS economist, Tarrant Parsons, said that the uncertainty surrounding Brexit has caused “greater hesitancy” in the property market.
“That said, the current political environment is far from the only obstacle hindering activity with a shortage of stock continuing to present buyers with limited choice, while stretched affordability is pricing many people out.”
“For the year ahead, this mixture of headwinds is unlikely to dissipate, meaning sales volumes may edge a little lower.”
“On the back of this, house price growth at a UK level seems set to lose further momentum, although the lack of supply and a still solid labour market backdrop will likely prevent negative trends,” he said.
Following the Bank of England’s suggestion that a disorderly Brexit could lead to house prices plummeting 30%, Rics has said this forecast is unrealistic.
“Some of the assumptions behind the disorderly Brexit scenario seem implausible to us. Mainly, we would expect the Bank to cut interest rates and potentially restart quantitative easing in the wake of no-deal,” said the group.
JLL is more optimistic than Rics amid the Brexit uncertainty, saying that they expect an initial slump at the start of the new year will lead to a 1% growth in the first six months, followed by a 1.5% growth in the second half of the year. This growth will soar to 11% over the next five years.
“With UK earnings growth set to return to a more normal rate of 4% per annum by 2021, real wage growth and more modest property price increases will unlock transactions that have been hampered by a lack of affordability,” said Adam Challis, who is the head of UK Residential Research.