Hadas: Unintended consequences may be new normal 15 Nov 2017 From Brexit to Donald Trump to Saudi Arabia, the world is full of surprises. But those cheering wrenching change may face further upsets. The UK rejoins the EU, the U.S. president discredits small government, and Saudis become poorer. The next shock may be the rise of dullness.
TalkTalk investors reconnect with bleak reality 15 Nov 2017 The UK broadband provider’s shares fell 13 pct after it cut its dividend and said EBITDA would be at the low end of expectations. Yet the news is no surprise given founder Charles Dunstone’s plan to invest. TalkTalk’s valuation was hard to square with its challenged business.
Central bankers go self-referential on rhetoric 14 Nov 2017 Fed Chair Janet Yellen and other top rate-setters took the stage in Frankfurt to discuss how they communicate. It’s a slightly meta admission of the role speechifying has come to play in monetary policy in an era of ultra-low interest rates. But wordiness brings its own perils.
Vodafone is doing just fine without Liberty 14 Nov 2017 The mobile operator upped its forecast for organic EBITDA growth to 10 pct this financial year. Vodafone is cutting costs, raising prices and adding customers. Fibre-broadband growth plans in Germany and Britain, meanwhile, make a deal with John Malone or anyone else less urgent.
Rio Tinto could have high-grade chairman in Davis 14 Nov 2017 Big miners usually prefer statesman-like chairmen to dealmakers. So former Xstrata boss Mick Davis would be an odd choice at Rio, especially at this point in the commodity cycle. But he’s smart, thinks big and would keep headstrong CEO Jean-Sébastien Jacques on his toes.
UK economy will share Theresa May’s pain 13 Nov 2017 The Prime Minister is facing growing challenges to her leadership from the ruling party’s pro- and anti-EU factions. Political disarray increases the risks that leaving the European Union will do serious economic harm. A softer Brexit is growing harder to deliver.
Britain brings the gloom to global defence party 13 Nov 2017 Shares in Ultra Electronics fell by almost a fifth after a profit warning due to UK project cancellations and delays. It is a rare sour spot in a sector that has rallied this year. With UK spending tight, mid-market defence groups might face foreign invasions of their own.
ECB haste risks slowing its bad-loan cleanup 10 Nov 2017 The central bank overstepped its authority with proposals to impose stricter rules on banks for non-performing loans, the EU’s parliament says. The ECB is right to target European lenders’ 840 billion euro mountain of bad debt, but its clumsy move may set back the effort.
Mickey Mouse offers Sky investors an escape hatch 9 Nov 2017 Walt Disney has expressed interest in buying parts of Twenty-First Century Fox, including its 39 pct stake in the British TV group. That gives Sky shareholders another option if regulators block Fox’s 11.7 bln pound bid for full control. Disney may even be a more logical owner.
Frumpy Commerzbank retains M&A allure 9 Nov 2017 Germany’s second-largest lender earned a pitiable 0.3 pct return on tangible equity in the first nine months of 2017. That explains why it trades at a fraction of book value. But rising customer numbers and hope of higher interest rates will continue to tempt potential buyers.
Burberry’s risky new look rules out missteps 9 Nov 2017 CEO Marco Gobbetti’s plans to take the UK brand upmarket mean no sales or operating margin growth until 2020. Investors who lopped 1 bln pounds off Burberry’s market value will now be unforgiving. Only perfect execution and the right new designer can prevent a further slide.
Cars are the last big headache for Tata 9 Nov 2017 Newish group Chairman Natarajan Chandrasekaran has moved swiftly, tying up loose ends in steel and telecoms and reducing cross-shareholdings. The money-losing Indian unit of the $21 bln Tata Motors may be the toughest challenge. Even here, there are signs of a turnaround.
SSE and Innogy subtly unplug from UK households 8 Nov 2017 The British energy group is merging its retail unit with its German rival’s struggling UK arm. The new separately listed company should have lower costs and a better chance of turning around Innogy’s loss-making business. But tougher regulation could eat into the benefits.
M&S swaps comfort food for tougher diet 8 Nov 2017 The UK retailer will speed up closures of its clothes stores, aiming to move sales online. A fresh urgency addressing changing consumer habits bears the hallmark of Archie Norman, the new chairman. That’s all the more important with the usually reliable food business going off.
Banks walk on eggshells in post-MiFID II world 7 Nov 2017 An EU ban on providing free research comes into force on Jan. 3 next year. Instead of bundling the cost together with trading fees, lenders will have to charge separately. Breakingviews imagines how a bank’s compliance department might finesse the issue with clients come Jan. 4.
ABF’s sweet tooth will weigh on valuation 7 Nov 2017 The beets-to-boots seller is doing well in fashion as its Primark stores win market share from rivals. But profit in the sugar business will fall as EU prices dip. The exposure to commodity price swings makes it hard to justify a valuation approaching that of Zara owner Inditex.
UK gambling crackdown boosts M&A odds 7 Nov 2017 A government squeeze on betting machines known as the “crack cocaine of gambling” could knock 20 pct off bookies’ operating profit. Extra regulation makes scale more important. Once the rules are clear, targets like Ladbrokes will be easier to value. Expect a flurry of deals.
TCI turns “inactivist” investor with LSE campaign 6 Nov 2017 The hedge fund usually demands that CEOs quit. This time it’s pushing for London Stock Exchange boss Xavier Rolet to stay in his job while criticising the chairman. The LSE board owes shareholders an explanation. The risk of a board spat, though, is that both men end up leaving.
Pfizer health bid could give Reckitt indigestion 6 Nov 2017 The maker of Gaviscon may bid for the U.S. pharma group’s consumer unit. The $15 billion or more price tag would stretch Reckitt’s balance sheet. Tough markets and the hangover from CEO Rakesh Kapoor’s last acquisition may make investors less keen to swallow another bold deal.
Northern Ireland crisis risks economy and UK unity 2 Nov 2017 Westminster will pass the region’s budget after government talks failed. A return to rule from London is likely. Key reforms will be shelved, growth stall, and sectarian tensions rise. A chaotic Brexit and hard border with the Republic of Ireland may inflame them further.