Morrisons escalates UK supermarket price war 13 Mar 2014 The grocer’s pretax profit will all but halve as it sacrifices margin to chase volume. Morrisons cannot beat budget outfits Aldi and Lidl, so it may as well join them. But its overdue strategic shift could have bloody consequences for rivals Tesco, Asda and Sainsbury.
Ambition and realism correlate in European ECM 13 Mar 2014 Goldman Sachs has placed $2.5 bln of shares in Swiss recruiter Adecco, a jumbo sale that needed a 9 pct discount. It follows other big secondary offers and IPOs. Despite geopolitical and economic worries, the equity market will swallow ambitious deals priced to sell.
Candy Crush maker picks $7.6 bln IPO from thin air 12 Mar 2014 King Digital uses creative metrics like MGABPPU to justify its whopping valuation. But there’s no way to calculate what an enterprise is worth when its profit can skyrocket 70-fold one year and could collapse the next. Rival Zynga’s IPO flub serves as an apposite warning.
London IPO market absolves private equity 12 Mar 2014 Single-price chain Poundland leapt 30 pct after a 375 mln stg flotation, while rival new issue Pets at Home struggled. The contrasting debuts mask a common thread: both were priced richly. Long gone are the days when UK investors demanded a big discount to give PE an exit.
Scots’ devolution makes more sense than secession 12 Mar 2014 The revelation of an 8.3 pct fiscal deficit in 2012/13 is a reminder of how ropey an independent Scotland’s finances would be. Ex-Prime Minister Gordon Brown reckons that instead of betting the loch, Scots would be better off clinching back more powers for Edinburgh. He’s right.
Pru proves it is more than a one-trick pony 12 Mar 2014 The UK-based insurer’s Asian exposure has left some investors questioning whether Prudential will be hit by emerging market outflows. But 2013 results show its eastern growth story is largely intact. Meanwhile improving fortunes in the U.S. mean it has a second area of strength.
Hugo Dixon: Labour has just shrunk Brexit risks 12 Mar 2014 UK opposition leader Ed Miliband has virtually ruled out a vote on Britain’s EU membership if he becomes PM in 2015. David Cameron will need to win an overall majority and then lose a referendum for the UK to quit before 2020. This is good news for business.
Co-op shows how not to do it, but still gains 11 Mar 2014 The UK mutual’s chief executive has resigned after boardroom leaks about his pay. Everyone’s messed up: modernisers failed to tone down remuneration, while non-execs buried their heads in the sand. But governance changes forced through mean Co-op should become more manageable.
Scandal will reshape FX trading dynamics 11 Mar 2014 Probes into possible currency market manipulation will speed up industry change. The shift to electronic trading will be accelerated, squeezing banks’ trading profits. And with traders cagier about sharing juicy titbits on flows, exchange rates may start to move differently.
Unicorns stampede through tech fantasyland 10 Mar 2014 The single-horned stallions have made the leap from legend to run free through Silicon Valley, New York, London and the plains of Israel. The term unicorn is now used to describe the most successful startups. In a different and unintended sense, the trope couldn’t be more apt.
Just ditch forward guidance 10 Mar 2014 Central banks’ long-range rate forecasts prod excessive financial risk-taking and may slow necessary tightening, says the Bank for International Settlements. Forward guidance fails the risk-reward test. Although the BIS didn’t say it, the policy just doesn’t stack up.
Regulator helps Aviva solve overhang problem 6 Mar 2014 The UK insurer is hacking back a complex corporate structure that entailed one part of the group lending heavily to another. Pressure from the UK supervisor was a factor. But Aviva aggressively went along to remove a key uncertainty. That will give investors comfort.
BoE suspension underscores FX market limbo 5 Mar 2014 The central bank has suspended an official as it probes who knew what about alleged foreign exchange rigging. Being transparent may help avoid the mess it got into with Libor. But the move does not address the pressing need to clarify what is acceptable practice in FX.
Glencore resilience vindicates hybrid model 4 Mar 2014 The commodity trader’s revenue was flattish in 2013, despite weaker metals prices. Leverage will ease this year as capex falls and synergies from the Xstrata deal kick in. Glencore isn’t immune to falling prices but its integrated trading and mining model looks ever more attractive.
Hugo Dixon: How Britain could win EU reform 3 Mar 2014 Angela Merkel’s visit to London has been viewed as a snub to David Cameron’s aim to reform the EU. But it depends on what one means by reform. If he focuses on completing the single market, extending free trade, cutting red tape and boosting the City, the prize is achievable.
Pearson has to sell investors on recovery story 28 Feb 2014 The educational publisher has followed a profit warning for 2013 with surprisingly low guidance for the current year, sending the shares tumbling again. Pearson is struggling to adapt to change in its U.S. market. CEO John Fallon has yet to demonstrate it’s just a cyclical blip.
Merkel starts to take British EU exit seriously 27 Feb 2014 The German chancellor disappointed British eurosceptics, who wanted her to tell the UK parliament that she wants less Europe. They should be flattered. Her robust endorsement of European political idealism was directly aimed at the threat they pose to the region’s prosperity.
Back Stephen Hester to fix RSA 27 Feb 2014 The former RBS CEO has taken a full-on approach to healing the UK insurer. He’s planning disposals, cost cuts and a 775 mln stg rights issue. After a terrible 2013, the capital hike asks a lot of investors. But Hester has enough credibility to usher this through.
RBS once again asks investors to take long view 27 Feb 2014 The UK bank is to slash 40 pct off its cost base and cut its investment bank. The new focus on higher capital and a simpler structure is welcome, but won’t fully kick in until 2018. That would be a downer even if investors hadn’t already been in restructuring mode for five years.
Man starts to crawl out of the wilderness 27 Feb 2014 The hedge fund manager’s stock soared after it smashed forecasts. After years of falling assets and dependence on an ailing quant business, it is becoming a leaner, more profitable group. To close the share-price discount to peers, Man has to show it can sustain the performance.