Morning Round-Up: Vodafone-Sky merger, house prices down on Brexit, Flybe makes profit

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Vodafone NZ to merge with Sky

Vodafone in New Zealand will merge with the country’s biggest pay television provider Sky Network, it was announced today.

The deal, worth a $2.4 billion deal, will see UK-based Vodafone owning 51 percent of the joint company and will pave the way for Vodafone to expand its operations in Asia.

Sky is set to pay Vodafone NZ$1.25 billion in cash for the business, and issue new shares at a 21 percent premium to Wednesday’s closing price. House prices to fall on Brexit volatility UK house prices are set to fall for the first time since 2012 in the upcoming months, as Brexit worries weigh on the market. A majority of members polled by the Royal Institution of Chartered Surveyors said prices over the next three months were likely to fall, but the drop would be short-term only; most still saw an increase over the next year as a whole. George Osborne has already warned prices may fall up to 10 percent in the event of a Leave vote on the 23rd June, one of many economic warnings issued. Flybe returns to profit Troubled airline Flybe has returned to profit, after a catastrophic £35.6 million loss in 2015. The airline announced pre-tax annual profits of £2.7 million this morning, after seeing an 8.2 percent increase in revenue and 5.9 percent jump in passenger numbers. However, they warned that conditions remained “challenging”, with CEO Saad Hammad commenting: “We delivered top-line growth in a difficult revenue environment, expanding our network and carrying more passengers than last year.” Flybe shares are currently trading down 1.28 percent (0901GMT), after an initial jump at market open.
09/06/2016

WTI Oil highest since July 2015

West Texas Intermediate has breached technical resistance at the October 2015 high and now trades at the highest level since July 2015. Also known as Light Sweet Crude due to its low sulphur content, WTI has rallied from intraday lows of $26 in February as OPEC toys with the idea of a production freeze and US shale operations cease. The recent rally has come as welcome relief to oil companies, many of whom were operating very close or below their marginal cost of production. However, the recent rally may not be all good news. Many analysts predict if the price were to rise much further it would bring a large proportion of offline shale operations, back online, increasing supply and reintroducing downside pressure on the price. Oil bulls may already be concerned as there have been signs of operations restarting, the Baker Hughes rig count rose last week, the first increase of 2016.

Sainsbury’s sales fall in Q1

Sainsbury’s PLC (LON:SBRY) traded at 246.80p – 0.04% at 11:05am BST. In their first quarter trading update, the UK supermarket brand announced that it has seen a 0.8% fall in like for like sales excluding fuel (1%) beating expectations at the end of its first fiscal calendar months ending 4 June 2016. Improvement in its clothing sales saw a 5% growth with its menswear range proving popular among buyers in its EURO 2016 campaign. Total retail sales on the other hand were up 0.3% despite the company claiming it has been a “challenging environment” which has seen the food giant embark on a different sales strategy of reducing the price of everyday items in an attempt to match rival discounting brands such Lidl and Aldi. In an attempt to offer lower prices overall, the company has removed ‘multi-buy’ promotions and brand-matched guarantees. The majority of Multi-buys will be scrapped by August 2016. Mike Coupe, Chief Executive, said: “Market conditions remain challenging. Food price deflation continues to impact our sales and pressures on pricing mean the market will remain competitive for the foreseeable future. However, we are confident that our strategy to be a trusted multi-channel, multi-product and services retailer is delivering and will enable us to continue to outperform our major peers.” The company acknowledges that participation levels in promotional offers in the first quarter has reduced further to 23% following its previous standing at 30% in 2015. Everyday products such as 1.35kg whole chicken has been reduced from £3.50 to £2.95 with other products such as 12 free range woodland medium eggs reduced from £2.00 to £1.75. Dairy products such as 250g grated Cheddar cheese is down from £2.00 to £1.75. Sainsbury’s Bank had a ‘good performance’ in its first quarter with a 28% increase in travel money transactions and a 10% increase in Travel Insurance sales. Online sales were up over 8% in sales growth with almost a 13% rise in orders alongside it’s launch of its online app. Sainsbury’s second Quarter Trading Statement will be released on 28 September 2016.   08/06/2016

Opinion: The future of the UK lies with young voters – and they should vote Remain

The deadline to register to vote was last night – and as is stands, 30% of 20-24 year olds are now unable to have their say in the EU referendum, in comparison to just 5 percent of those over the age of retirement. Already, the figures are swayed against us; yet, undeniably, it is young people who will suffer the consequences of a Brexit. It is our future the country is voting on. All the key figures in the referendum debate are 50+ and all the headlines are economic, but according to the Economist’s latest poll, 61 percent of young people support staying in the EU. So, apart from a few misguided attempts, why has no one tried to appeal to 18 – 34 year olds – some of the country’s most decisive voters? Within Europe, 96 million young people have the opportunity to live and work abroad, travel and learn a new language – without visas or paperwork, and often funded by an EU body. The single aviation airfare has seen plane tickets drop over 40 percent, making travel accessible for young people for the first time; and the European Health Insurance Card allows access to the healthcare of European nations, should something go wrong. The EU allows British students access to hundreds of the world’s top universities in Europe, for a fraction of the cost of a £9000 pa British degree. Far from being irrelevant, young people in Britain have gained the most from being born into the European Union. The last 60 years since World War 2 has been the longest period of peace that Europe has ever seen. Millenials are fortunate enough not to have seen, or been born in the aftermath, of war – so perhaps the idea of war in Europe is too foreign for us to even contemplate. And yet, a United Europe is the reason that we have been lucky enough never to have experienced it. After two bloody World Wars between European nations, in 1945 we pulled our act together and – with a little help from the US – decided, for the first time in history, to work together as a continent. Since then, major European nations have never looked back. Admittedly, we were a little slow on the uptake – but by 1973 it was obvious the future of our country was better In than Out. Since then, European membership has expanded – the shared security and support, economic and political, coming from being part of a bloc of states has made the European Union the most desirable club in the world. As a major world power, there’s no denying our international influence; we are a global financial centre and a key figure in international politics, so I’ve no doubt that the UK could stand alone – at least, for a while. But in a world of increasing globalisation, countries are getting closer together – not further apart. Throughout history, isolationist policies have always been a short-term solution – to war, to financial crashes, as a punishment – and have usually turned out to be a bad idea. Every time, it has been clear that working together has been more effective than standing alone. By 2016, this is surely a lesson we should have learned. Yes, the European Union as it stands is not what we signed up for. It’s not perfect – in fact, there are parts that are downright undemocratic. And yet, looking at the history of the world, it is clear that Europe is better together. Better economically, socially, culturally. Less bigoted, more stable, more secure in the face of external threats – something worth bearing in mind, in the light of recent attacks on European capitals. A vote for Remain isn’t sanctioning the way the EU works at the moment, its a wake up call for the European Union to implement reform – which we can help to do, from the inside out. But most importantly, whichever side you choose to vote for, VOTE. Be informed, make your decision and use your chance to have a say. Enough of our decisions are influenced by middle-aged men in suits – don’t let our future be one of them.
Miranda Wadham on 08/06/2016

Morning Round-Up: Strong Japan growth, Sainsbury’s falls, UK hiring slows

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Strong growth for Japan; disappointing figures from China Japan’s economic growth was revised higher on Wednesday, expanding to an annual rate of 1.9 percent in the first quarter of this year. The figure had been revised up from an initial estimate of 1.7 percent, below analysts’ expectations. Japan has struggled to grow its economy over the last few years, with stimulus measures put in place by Prime Minister Shinzo Abe having little effect. After an initial fall, the Nikkei 225 bounced 0.9 percent on the news. Elsewhere in China, however, markets were mixed after Chinese exports fell 4.1 percent in May. Imports also dropped 0.4 percent, sending both the Shanghai Composite and the Hang Seng down. Sainsbury’s sales figures fall Sainsbury’s has been hit again by disappointing growth in the supermarket sector, reporting a 0.8 percent drop in quarterly sales on Wednesday. The figure came as a step down from the 0.1 percent growth seen in the fourth quarter of last year, with many hoping the tough supermarket sector was beginning to show improvement. However, alongside their most recent results, Sainsbury’s warned that it did not expect market conditions to improve any time soon. “Market conditions remain challenging. Food price deflation continues to impact our sales and pressures on pricing mean the market will remain competitive for the foreseeable future,” said CEO Mike Coupe. UK hiring slows as referendum worries weigh The upcoming referendum vote impacted upon UK hiring in May, according to the latest figures from the Recruitment and Employment Confederation. Worries over the 23rd June EU referendum are influencing businesses when deciding whether to hire and expand in case of a negative impact from Brexit. Starting salaries for permanent staff rose at the weakest rate since October 2013, and expenditure on hiring for temporary staff also fell. British firms created 44,000 jobs in the first quarter of this year, a big step down from the 195,000 in the last three months of 2015.
08/06/2016

Tullet Prebon ‘s take over of ICAP to face scrutiny from CMA

Today the Competition and Markets Authority (CMA) announced that as a result of ‘potential concerns’ over the voice/hybrid broking of oil products, the latest move made by Tullet Prebon plc (LON: TLPR) to take over ICAP plc (LON: IAP) will undergo a phase 2 ‘in-depth’ investigation by a group of independent CMA panel members. Tullet’s move would see the company become of the world’s largest Inter-Dealer Broking firm where it would act as an intermediary between major dealers to forward inter-dealer trades. The move would see Tullet open to the movement of assets such as foreign exchange markets and crude oil. The CMA are understood to believe that takeover would create a “substantial lessening of competition” meaning that competition for voice/hybrid oil products will be more limited. The CMA further states that it has received a number of third party complaints. “Given the potential for this merger to adversely affect customers for voice/hybrid broking of oil products, we think the acquisition warrants an in-depth investigation unless Tullett and ICAP can offer suitable undertakings to address the CMA’s concerns” – Said Andrea Coscelli CMA Executive Director of Markets and Mergers. Described as a “strong market position” The CMA also noted of its concerns relating to the phase 1 review in accordance to the ‘overlap in voice/hybrid’ sales of oil products, where an estimated revenue of £228 million is thought to be acquired in Europe, the Middle East and Africa. In Response to the release ICAP said: “ICAP is confident that clearance from the CMA will be obtained and, together with Tullett Prebon, is in the process of obtaining the necessary remaining regulatory and competition approvals from relevant authorities. The proposed Transaction remains on track to complete later this year” Tullett and ICAP have until 14 June 2016 to offer undertakings to the CMA.     07/06/2016

BHP Billiton sells coal stake for $120 milllion

BHP Billiton (LON:BLT) is to divest a 75% stake in its Indonesian coal unit IndoMet Coal to PT Alam Tri Abadi for $120 million. The deal comes at a time when mining companies have started to slow spinning off units considered to be non-core. A slowdown in China exposed the years of rash spending by mining companies in the boom years leading to major overcapacity when demand from China began to weaken. BHP Billiton’s recent sale follows the divestment of assets into South 32 last year. News of the sale came as the port authority in Port Headland, Australia, released data showing exports of iron-ore leaving the port increased 4.5% mom in May. BHP Billiton along with Fortescue are the largest iron-ore miners in Pilbara region of north-west region of Australia, with much of their ore destined for China, Japan and Korea.

Royal Dutch Shell estimates a $4.5 billion saving

Shares in Royal Dutch Shell rose on Tuesday morning after it announced the tie-up with BG Group would produce higher synergies than previously thought. The Anglo-Dutch oil and gas supermajor said the deal is likely to achieve $4.5 billion in pre-tax savings in 2018. Shell have been left with a $70 billion debt pile after the BG merger and management are keen to start reducing this as soon as possible. “By capping our capital spending in the period to 2020, investing in compelling projects, driving down costs and selling noncore positions, we can reshape Shell into a more focused and more resilient company,” said Shell CEO Ben van Beurden. Royal Dutch Shell B (LON:RDSB) traded 2.5% higher at 1755p at 10:34 in London trade.

House prices rise in May, activity drops most since 2005.

Average house prices in the UK rose 0.6% in May from the previous month and 9.2% from the same period a year ago. Halifax housing economist, Marin Ellis pointed towards loose monetary policy and rising wages as the main factors for the increase in house prices. “Low interest rates, increasing employment and rising real earnings, continue to support housing demand. The strength of demand, combined with very low supply, is causing house prices to rise at a brisk pace in quarterly and annual terms,” said Ellis. Although the average price of home sales rose, Halifax noted activity in the sector fell significantly in April compared to March. Halifax, citing data from HMRC, said UK sales fell by 45% from March to April, the biggest drop since 2005. The upcoming Brexit vote can be attributed to the slowdown in housing activity as investors, particularly from overseas, hold off until the uncertainty diminishes. The nervousness is evident not only in housing sales activity but also in the share prices of home building stocks. Share in Bovis Homes (-3.15%), Berkeley Group (12.65%), Taylor Wimpey (7.19%) and Barratt Developments are all negative year-to-date.

Esure and Go Compare set to de-merge

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Esure have announced plans to split off from Go Compare, nearly two years after acquiring full control of the comparison site. Esure bought the remaining 50 percent of Go Compare for £95 million in December 2016, and has since increased the site’s profits by 20-30 percent and widened its product range. Matthew Crummack, previously CEO of lastminute.com, has been named chief executive as the companies prepare to split. Esure’s chairman Peter Wood commented: “Now is the right time to review strategic opportunities for the Gocompare.com business, including a potential demerger, in order to continue to maximise value for our shareholders.” Esure shares jumped 2.05 percent on the news to 288.80, its highest price in three months.
07/06/2016