UK house prices expected to rise 3 per cent in 2017 – RICS

UK Investor Magazine
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UK house prices expected to rise 3 per cent in 2017 – RICS

The Royal Institute of Chartered Surveyors has announced the most bullish forecast for the housing market in saying it expects house price growth to be 3 per cent in 2017 indicating a further cooling in the rate of growth however the legacy of insufficient building in years gone by ensures demand outstrips supply.

“Following on from the 2016 forecast, the supply pipeline or lack of it is at the forefront of the analysis and dominates the residential market,” it said. “While there is an improvement, the legacy of building on an insufficient scale has left the average inventory on estate agents’ books close to a historic low.”

The slowdown in activity in the housing market has been widely reported since the Brexit referendum in June of this year, with a reduction in the number of properties coming on to the market whilst buyers have continues to register interest.

RICS expects the highest growth rates to be in East Anglia, the north-west of England, and the West Midlands where they anticipate outperformance of the national average. The troublesome London market is predicted to stabilise and eek out a slim increase of 1 per cent partly as the collapse in the value of the pound entices international buyers back into the market.

“Although recent announcements by the government on housing are very welcome, the ongoing shortfall of stock across much of the sales and lettings markets is set to continue to underpin prices and rents,” said Simon Rubinsohn, chief economist of Rics.

“As a result, the affordability challenge will remain very much to the fore for many. Meanwhile the lack of existing inventory in the market is impacting the ability of households to move and will contribute toward transaction activity over the whole of 2017 being a little lower that in the year just ending.”

Lloyds bets big on credit cards buying MBNA for £1.9bn

UK Investor Magazine
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Lloyds bets big on credit cards buying MBNA for £1.9bn
In a week that is typically quite quiet in the markets as attentions turn to the festive period Lloyds (LON:LLOY) has announced it’s first acquisition since the 2008 financial crisis buying MBNA from Bank of America for £1.9bn. MBNA holds assets of £7bn would increase revenues by £650m a year Lloyds has confirmed, with profits of £166m last year. This will boost the bank’s share of the UK credit card market from 15% to 26% once the deal goes through. “The MBNA brand and portfolio are a good fit with our existing card business and we will focus on providing its customers with excellent service and value,” said Lloyds chief executive Antonio Horta-Osorio. Joseph Dickerson, banking analyst at Jeffereise has commented “We expect a 2016 ordinary dividend per share of 2.7p (a special distribution is now unlikely but the MBNA acquisition looks a better use of excess to us than a special).” Shares in Lloyds were trading higher by 10am up 1.45 per cent on the day at 63.46p a share.

BP inks paper on US$3.2bn of deals in 3 days

UK Investor Magazine
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BP inks paper on US$3.2bn of deals in 3 days
BP’s deal making sector has been busy putting pen to paper signing up new deals with an investment of almost US$1bn in a partnership with Kosmos Energy and a US$2.4bn agreement over the weekend confirming BP will take a 10 per cent stake in Abu Dhabi’s oilfields. The deals see BP moving on the front foot to build it’s asset base after years of belt tightening as the Deepwater Horizon disaster and low oil prices have taken their toll.

The Kosmos Deal

The Kosmos Energy deal sees BP expanding it’s presence in the Liquified Natural Gas (LNG) sector, taking a 62 per cent stake in the company’s exploration blocks of gas fields off Mauritania and a 33.5 per cent holding in those off Senegal. All in all, approximately 33,000 square kilometers are covered by the deal with talk of there being up to 50 trillion cubic feet (TCF) of gas, with more than a billion barrels of oil in deepwater reserves. To put this into perspective, at the upper end of these estimates the gas reserves would be enough to fuel the UK for two decades. Gas already accounts for about half of BP’s business, Chief Executive of BP Bob Dudley has said this will rise towards 60 per cent by the end of the decade as he bets on it playing a bigger role in the global energy mix.

The Abu Dhabi Deal

Over the weekend BP struck a deal with the Abu Dhabi government to cement access to some of the world’s largest oil reserves. Whilst BP will be taking a 10 per cent stake in one of the largest oil fields in the Middle East, it has handed over shares worth around £1.8bn to Abu Dhabi, or approximately 2 per cent of the business, putting the Abu Dhabi government down as one of the biggest shareholders in BP. The deal includes the Bab, Shah, and Bu Hasa fields containing estimated resources of 20 billion to 30 billion barrels of oil. BP currently produces around 95,000 barrels per day in Abu Dhabi, and expects the new deal to increase production levels to 260,000 barrels per day.

Goldmans View

“The position provides BP with additional resource and volume growth in a low-cost region that it knows well,” noted Goldman Sachs, which gave the deal a lukewarm reception. “The terms of the deal remain unclear from an economic perspective and, whilst volumes are large, the concession is likely to have relatively low unit profitability in our view.”

Cenkos Securities

Analysts at Cenkos Securities said the Kosmos and Abu Dhabi deals were “a good way for BP to materially beef up its production and resource base — and help the key reserve replacement ratio — and add near-term exploration upside”. The Abu Dhabi agreement would also improve the group’s cash flow, Cenkos said, because it involved an oilfield which is already producing and brought in the Abu Dhabi government as a stable long-term shareholder, with the all-paper deal accounting for about 2 per cent of BP’s stock. As of 13:55 BP shares were trading 0.67% higher in London at 493p a share.

Robo-advisor Moneyfarm offers simple, cost-efficient alternative to investing

Miranda Wadham
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Robo-advisor Moneyfarm offers simple, cost-efficient alternative to investing
Until recently, receiving real investment advice has seemed impossible for younger or lower net worth individuals – many Financial Advisors have minimum asset requirements of £500,000 or above, and charge 1-2 percent for their services. According to the FCA, the new wave of online robo-advisors offer “online automated advice models that have the ability to deliver advice in a more cost-efficient way”, widening access to financial advice to those that may previously have felt excluded. Robo-advisors offer online advice and guidance for investments and, depending on the platform, execute it as well. They typically charge less than half the fees of traditional brokerages and their low-cost, simple approach to investing has earned them a real name for themselves. One such robo-advisor is Moneyfarm, which launched in the UK in February after gaining traction in its home market of Italy. It was founded by Paolo Galvani and Giovanni Daprà in 2011 with a simple mission: to make low-cost, low-stress wealth management a reality for everyone. Moneyfarm allows customers to build an investment portfolio online after answering a simple questionnaire to find out goals and risk tolerance. The site has six portfolios made up of ETFs, which offer full transparency of the assets that make up a fund and have low management fees and low minimum investment levels. All products are fee and commission free for the first £10,000 invested and for savings over £1 million, making it a simpler and more cost efficient answer to investing than traditional investment managers.

Dixons Carphone profits rise 19%

Nicole Jeary
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Dixons Carphone profits rise 19%

Dixons Carphone (LON:DC) reported a 19 percent rise in profits across their phone and electrical homeware appliances.

In the six months to 29 October, pre-tax profits rose to £144 million with sales increasing by 4 percent to £4.9 billion.

With respect to the Brexit vote, the company said that they had yet to feel any impact upon consumer demand for their products, but stated that it was bracing itself for “more uncertain times” as negotiations continue.

Despite the promising figures, Dixons Carphone shares have lost a third of their value across the year, due to concerns of higher costs as Brexit negotiations begin.

After a series of closures of retail branches across the country, the company has looked to reduce cost output by continuing to streamline its business.

“In particular, we have been focusing on reducing our fixed cost base,” said group chief executive Seb James.

In addition, sales were buoyant across in core markets in both the UK and Ireland, where the company operates under the Currys, PC World and Carphone Warehouse brands.

That was partly driven by higher sales of mobiles and consumer electronics, as well as a plan to reduce store numbers.

Mr James welcomed the “strong start” to 2016, but did note that the company was bracing itself for “all eventualities” as the new year approaches.

“In particular, we have been focusing on… identifying areas of potential market share growth if the world becomes a tougher place for our competitors,” he said.

“We are also planning our offer so that potential currency impacts are minimized for the customer.”

The electronics retailer has announced its intention to close 134 outlets, as it develops larger stores to accommodate its recent merger.

Dixons Carphone originated from a merger worth £5 billion between Dixons and Carphone Warehouse in 2014. They currently employ 42,000 personnel in the UK and overseas.

Despite the reported growth in revenue, shares in the company fell 4.99 percent as of 10.24 AM (GMT).

Micro Focus shares lead FTSE100 higher up 4 percent

UK Investor Magazine
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Micro Focus shares lead FTSE100 higher up 4 percent
Micro Focus International (LON:MCRO) leads the FTSE100 higher this morning trading up over 4% north of £22 a share as it announced a 22 percent rise in first-half underlying earnings. Micro Focus is in the process of paying US$8.8bn for Hewlett Packard Enterprise’s software business and has said that while it had made a good start to the deal, it was maintaining full-year guidance for revenue growth of between minus 2 percent and zero. Numis is advising on the deal and has commented this morning “Micro Focus has outperformed on nearly all levels in the first half, giving a net 9% EPS beat and 3% full year upgrade. 1.0% underlying revenue growth is well ahead of our -2% forecast, although management reiterate full year guidance of -2% to 0%, and we note that timing of deal closures can impact individual periods, thus 1% growth should not be automatically extrapolated into the second half. However, it clearly provides strong support for the achievability of management’s “modest growth” goal.” Whilst Julian Yates of Investec was slightly more cautious “Full-year guidance was not raised, implying a softer second half, but we feel this is partly due to conservatism and also to reduce the reliance on [Linux specialist] SUSE having to sustain this growth level. We expect the stock to move up today, but continue to struggle to justify prices above 2400p given the extent of the HPE task and time horizon to deliver required synergies.” Chief Executive Kevin Loosemoore commented “The board is delighted with our progress. “Our focus on delivering to our customers by making detailed product by product decisions and investments has resulted in the business achieving modest like-for-like revenue growth. “Our investments have resulted in strong growth in SUSE and a reduced rate of decline in the Micro Focus portfolio. “Mergers and acquisitions continue to be a key component of our strategy. “The key strategic announcement in the period was the HPE Software transaction which is on target to complete in the third quarter of calendar year 2017. “The acquisition of Serena completed at the beginning of the period together with a number of small acquisitions across the business comprising GWAVA, openATTIC on 1 November and the OpenStack IaaS and Cloud Foundry Paas talent and technology assets from HPE which was announced on 30 November and is currently expected to close in the first quarter of calendar year 2017. “We are delighted to announce that our interim dividend is increasing to 29.73 cents from 16.94 cents in line with our twice covered dividend policy.”

Carpetright shares slump 7% amid competition from founders son

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Carpetright shares slump 7% amid competition from founders son
Carpetright shares slumped to a fresh 52 week low of 180 before recovering slightly to 186 by mid afternoon, down 7% on the day. The company saw a 2.9% fall in UK same-store sales in the six months to October 29th, total sales down almost 4% to £222mln. First half profits dived 42% to £4.1mln amid a “challenging” first half. Carpetright’s house broker, Peel Hunt, put much of the struggle down to new entrant to the market Tapi, which was setup by the founder of Carpetright’s son last year. To try and protect market share Carpetright has been offering free fittings and large discounts in an attempt to fend off competition.   Chief executive Wilf Walsh said: “We have had a challenging first half – the full impact of the UK decision to leave the EU remains unclear; consumer demand remains uneven; the market is extremely competitive and the impact of currency movements have combined to give us substantial trading headwinds. “To address these challenges and revitalise the business, we have a programme of activities underway, but these will take time to deliver their full effect. The positive impact at the initial 49 refurbished stores has given us the confidence to accelerate this part of the programme. “We are now scheduling investment to 150 stores by the year end – 50% more than the original target and representing over one third of our UK estate. ” “We have made an encouraging start to the second half with a return to like-for-like sales growth in both businesses. As we enter the important January trading period, we remain comfortable with the range of market expectations.” “Looking longer term, we are confident that our plan to build on Carpetright’s strong foundations, to modernise the business and to ensure we capitalise as market leader to the full is still on track.” Whilst management tries to pain a rosy picture being positive of the outlook less can be said by investors who have seen shares fall from highs of 505 a year ago to new 52 week lows of 180 in early trade.

Camera hire company Focus24 targets profit growth through crowdfunding

Miranda Wadham
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Camera hire company Focus24 targets profit growth through crowdfunding

Specialist camera hire company Focus24 are seeking a £100,000 investment on Crowd2Fund, with an estimated APR of 8 percent, to invest in RID technology and assist their working capital as they grow the business.

Started in 2009 by industry specialist Ben Mitchell, Focus24 is a London-based camera hire facility offering services for all budgets in feature film, drama, commercial, music, fashion and documentary. Whilst working in post-production on both films and commercials, he noticed how important it was to keep up with technology and stay ahead of the game; thus, Focus24 was born. His aim from day one was for the company to be technology focussed, and creating a vision of how he thought camera services should service the marketplace. The company have an innovative approach, focussing on enlightening and empowering the end customer through technology. Focus24 is supported by a number of ancillary services other than camera and equipment hire such as technical support, training and repair work.

Focus24 has already attracted several high profile clients, including Vice Magazine and Dazed Digital. They work with a number of mainstream brands and content producers such as BBC and ITV and have grown their revenues and brand by 20 percent year on year since their inception. Mitchell said:

“[We plan to] consolidate some of our existing HP and lease base which will give Focus24 a leaner overhead.”Additionally, they are seeking to use some of the funds from the revenue loan to invest in Radio Frequency Identification (RFID) technology to implement leaner operational efficiencies around their hire business.
“We will invest in RFID technology to bring the tracking and checking of our assets into a new age. It involves setting up quadrants with scanners within our facility and vehicles. From here it allows us to “swab” a flight case to determine exactly what’s inside it on a line by line basis. We will do this when assembling goods and upon return.”
Focus24 Founder Ben Mitchell
Focus24 Founder Ben Mitchell

Focus24 is seeking investment to transform itself into a 360 degree production offering, whereby customers can service their entire production under the Focus24 brand.The company’s decision to seek a revenue loan on Crowd2Fund was partly influenced by a bad experience with a more traditional lender for a loan prior to trying crowdfunding. Unlike The process was more protracted and resulted in his focus being taken away from the core business and customers. On Crowd2Fund Mitchell commented:

“There is a keen effort on their part to promote the opportunities it undertakes through research, social media and even making a film for some campaigns.”

21st Century Fox in £18.5bln bid for Sky

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21st Century Fox in £18.5bln bid for Sky
On a calm Friday afternoon in the City media stocks were rallying as confirmation came through of us media giant 21st Century Fox making a takeover approach for UK listed satellite broadcaster Sky. The proposed offer is worth £10.75 per share prior to the announcement shares were trading at £8.37, already up 6% from yesterdays close. On the announcement the shares spiked to intra-day highs of £10.40 a share. Rupert Murdoch controls 21st Century Fox, which already owns a 39.1% stake in Sky. The announcement confirmed the independent directors of both companies had “reached agreement on an offer price” of £10.75 a share, but added that “certain material offer terms remain under discussion”. The collapse in the value of the pound makes UK listed companies significantly cheaper than earlier on this year for international buyers. Shares closed at Friday £10.39.

Low interest rates and the impact on your savings

UK Investor Magazine
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Low interest rates and the impact on your savings
The Bank of England hasn’t increased interest rates since July 2007 when rates were increased to 5.75% from 5.5%. Since then rates have plummeted to record lows and there is no sign of a rate hike anytime soon given the backdrop of Brexit uncertainty.

During the period of record low rates, borrowers have able to secure capital at low a cost and pump it back into the wider economy. This has been central in helping the UK recover from one of the worst recessions in history.

Record low rates have undoubtedly been great for the economy as UK GDP growth has outperformed many developed economies. The lower rates have supported borrowing in the housing market and retail sales have remained resilient, even in the face of Brexit.

However, market theory dictates that where there are winners, there will always be losers. The winners of low interest rates have clearly been borrowers. The losers have been savers.

At the time of writing the Cash ISA interest for major UK banks are as follows; HSBC Advance Standard Rate 0.5%, Lloyds 0.35% and Barclays 18 month flexible 0.8%. Pitiful to say the least.

This is why many investors are turning to companies such as Moneyfarm who operate low-cost and fully-managed Stocks & Shares ISAs.

Moneyfarm allows investors to invest up to £10,000 free of a management charge and choose between a general investment account or an ISA. Clients of Moneyfarm benefit from easy set-up, low fees and full transparency from their funds.

Moneyfarm portfolios are managed around the clock by their investment committee who are striving to provide returns in excess of the pathetic offerings of Cash ISAs currently.

If you invest with Moneyfarm, like with any investing, your capital is at risk and you may get back more or less than your original investment.

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