Almost 2,000 jobs to be cut at BAE Systems
UK-based aerospace company BAE Systems (LON:BA) is set to cut almost 2,000 jobs at its UK locations, across all sectors including military and intelligence.
Up to 1,400 jobs are to be cut at the military aerospace business over the next three years, with the aerospace bases at Warton and Samlesbury in Lancashire to take the brunt of the losses. A further 375 jobs will be lost in maritime services and 150 at its cyber-intelligence business.
The job losses are the first stage of CEO Charles Woodburn’s cost-cutting plan, after an order gap for the Typhoon caused the company to slow down production. The cuts are due to be implemented by 1st January 2018, through voluntary redundancies where possible.
Overall the company, who make the Eurofighter Typhoon jet and Britain’s nuclear submarines, employs 83,100 people worldwide, including 34,600 in the UK.
The decision will come as a blow to the industry in the wake of Brexit, as the British government aims to promote the UK manufacturing industry as “strong and stable” as negotiations with the EU begin.
BAE Systems (LON:BA) share are currently trading down 0.49 percent on the news, after recovering from a significant plunge at market open.
Sterling has worst week in a year as May crumbles
Sterling has been pummelled this week as a disastrous speech by Prime Minister May raised fears of further disruption in UK politics.
The weak performance by Theresa May at the conservative conference has further cemented in the view that she is unfit to lead the UK.
It was revealed on Friday Conservative MP Grant Shapps was rounding up signatures from conservative MP who wish her to leave.
Early on Friday, it was reported Schapps had 30 signatures of the 48 required to trigger a leadership vote.
Theresa May brushed off the news, however, saying she had the full support of her cabinet.
The leadership debate – or even a general election – would come just as the UK enters critical stages of Brexit negotiations.
Dollar Strength
The weakness in Sterling has been enhanced by a stronger dollar helped higher by expectations of a rate hike this year and a technical rebound after a month of steady declines.
The first reduction in US job failed to halt the dollar’s rally on Friday as investors look through the figures to a potential rebound in the labour market following storms across Texas and Florida.
On Friday afternoon, GBP/USD traded below 1.3030, the lowest since early September and down over 600 points from recent highs.
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Shares in Merlin Entertainments rise on reports of Seaworld acquisition
Shares in Legoland operator Merlin Entertainments (LON:MERL) rose over 2 percent on Thursday, after reports that it may be interested in buying parts of Seaworld.
According to a person familiar with the matter, Merlin has approached Seaworld with an offer for several parts of the business. However, it is thought that Seaworld is looking to sell its entire business in one deal.
The news was first reported by Bloomberg on Wednesday, but there has been no official comment so far from either party.
“We do not comment on speculation or rumours”, SeaWorld said in reaction to the news.
Merlin Entertainment has suffered a challenging couple of years, after a crash at its Alton Towers resort led to two young girls needing to undergo leg amputations. Its rumoured plans to buy parts of Seaworld will push the company, who also own Madame Tussauds and several other theme parks in the UK, further into international territory. In 2017, it opened a Legoland theme park in Japan as well as one in both Melbourne and Philadelphia.
Terrorist attacks in the UK have also negatively impacted on the group’s performance, with the group saying in August that both profits and revenues had fallen at its city centre “Midway” venues in the wake of attacks in both Manchester and and London Bridge.
Shares in Merlin Entertainments are currently trading up 2.48 percent at 459.50 (1137GMT).
DFS shares plunge as profits fall by a fifth
Shares in furnishing company DFS (LON:DFS) dropped over 5 percent in early trading on Thursday, after profits sunk by 22 percent.
Pre-tax profts for the year to July fell from £64.5 million to £50.1 million, with sales pushing up just 0.9 percent to £762.7 million.
The company blamed the results on a “very challenging” market, with uncertainty in the economy leading to a “significant deterioration in the consumer market”. The weakness of the pound against the dollar also hit profits.
The results come just a few months after the company closed a deal to buy boutique rival Sofology for £25 million. Analysts and investors were positive about the deal, which lifted shares by 4 percent after it was announced. On Thursday, the company remained positive in the face of its disappointing results, saying it had “excellent” long-term prospects. Chief executive officer Ian Filby said: “Although group sales will inevitably be affected by the market environment, we have identified opportunities to drive operating efficiencies and reduce financing costs that are expected to deliver near-term benefits, particularly in the second half of the financial year. “Based on these plans and the current market environment, we would expect to achieve modest, second-half weighted profit growth and good cash generation in the current financial year and we continue to have excellent prospects for the longer term.” Shares in DFS are currently trading down 4.11 percent at 215.75 (1109GMT).Top Takeover Targets this Autumn
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Amazon and Apple hit by EU tax crackdown
Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) hit by tougher tax enforcement put in place by the EU.
Technology giants Amazon and Apple have been ordered by Brussels to pay back a series of owed money to the union, after it deemed it had received unfair tax breaks.
Specifically, Amazon has been ordered to pay around €250 million for back taxes in Luxembourg after benefiting from illegal state aid.
In addition, the commission’s competition watchdog has ordered Ireland to collect €13 billion in taxes owed by Apple, which it has since failed to collect.
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon’s profits were not taxed,” said Ms Margarethe Vestager, the European competition commissioner.
She added: “In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others.”
Amazon rebutted the claims, stating: “We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law. We will study the commission’s ruling and consider our legal options, including an appeal.”.
The deliberation on Amazon follows a three-year long investigation by the European Commission amid concerns that the company had violated EU regulations.
Back in 2003, Amazon struck a deal with Luxembourg, after it issued a “comfort letter” to the company, which introduced a cap on profits which could be taxed in Luxembourg.
Ultimately, this was concluded as giving the company an unfair advantage over competitors, motivating its decision to push back on unpaid tax.
It is currently estimated that Amazon is still yet to pay $1.5 billion to US tax authorities.
Shares in both companies are down marginally in pre-market trading.
Topps Tiles shares sink as profit warning hits investor confidence
Shares in Topps Tiles (LON:TPT) fell over 4 percent on Wednesday morning, after the company warned on profits ahead of full year results.
A slowdown in the housing led to a tougher time for the company, who detailed “challenging market conditions” as the reason for the drop in profits. They are now expected to be at the lower end of expectations, after the range was lowered to between £18.5 million and £19.5 million, down from an earlier estimate of £21.65 million.
Revenues for the year are expected to be in the region of £211.6 million, down on £215 million a year earlier.
Matthew Williams, Topps Tiles’s chief executive, said “significant strategic progress has been made”, and that the company remains “excited by the growth opportunities open to us.”
“Despite this, the tougher market conditions we first highlighted in Q2 continued into the final quarter and, as a result, we are taking a prudent view on market conditions for the year ahead.
“We remain focused on our strategy of ‘Out Specialising the Specialists’ and are beginning to gain traction with a number of new initiatives.”
Shares in Topps Tiles are currently trading down 1.80 percent at 73.40 (1035GMT).
Tesco shares fall despite surge in first half profits
Tesco reported rising sales for the seventh quarter in a row on Wednesday, with like-for-like sales up just over 2 percent.
Pre-tax profit rose to £562 million for the first half of the year, an impressive boost from the £71 million recorded in the same period last year.
However analysts and investors were disappointed with the 2.1 percent rise in like-for-like sales, which was down 0.2 percent from the figure recorded over the previous period. Shares in Tesco opened higher when the results were first announced, but have since fallen into the red.
The supermarket’s CEO Dave Lewis said the results showed Tesco was “very firmly back on track”, adding that “Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago”.
Shares are currently trading down 1.32 percent at 187.55 (0953GMT).
GBP/USD dumps after weak UK GDP figures
The pound fell on Friday following the release of UK GDP figures pointing to a weaker expansion in the second quarter than initially thought.
In the three months to June of this year the UK economy grew at just 1.5%, the weakest growth rate since 2013.
What will be of concern to market participants is the slowdown was particularly pronounced in the services sector, a huge part of the UK economy.
Head of Gross Domestic Product at the ONS, Darren Morgan said of the reading:
“There was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter, mainly due to increases in computer programming and retail.
“Household spending growth continued to slow in the second quarter. However, revised figures show business investment grew more strongly than previously estimated. Meanwhile, the UK’s deficit with the rest of the world was little changed in the second quarter.
“Today’s figures include several improvements to the way we measure the UK economy, including better estimates of self-employed income and interest received from corporate bonds. These improvements have the impact of increasing the saving ratio and current account deficit over a number of years.”
GBP/USD fell over 40 points in the immediate reaction to the announcement and continued to trade lower throughout Friday morning. GBP/USD is down over 250 points since touching intraday highs of 1.3659 20th September.
Despite the recent drop, Sterling is over 10% stronger against the dollar since post-brexit lows helped largely by hawkish suggestions from the Bank of England that the MPC will soon vote for a rate hike.
Price of Bitcoin rebounds after comments from Morgan Stanley CEO
Bitcoin has rebounded from the lows hit in the wake of Jamie Dimon comments, surging after Morgan Stanley’s CEO said the currency was “more than just a fad”.
James Gorman, CEO of the Wall Street bank, said the cryptocurrency has “compelling” privacy features. He continued:
“The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that.”
His comments contrast with those of JP Morgan CEO Jamie Dimon, who said the currency was only good for thieves and drug dealers. Bitcoin took a hit in the wake of his comments, which hit the news at the beginning of this month, but has since rebounded.
The currency is now up on the day to above $4,200.