Balfour lands £1.4 billion LA deal as Trump prepares to splash out $1.5 trillion on US infrastructure

Balfour lands £1.4 billion LA deal as Trump prepares to splash out $1.5 trillion on US infrastructure

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BALFOUR Beatty, the company that helped devise the Channel Tunnel, has landed a deal to build a new train service at Los Angeles international airport.

The contract is worth £1.4 billion to a consortium of which Balfour is 30%, the other partners being Fluor Corporation, Flatiron West, and Dragados USA.

The new rail system is being built amid talk from Donald Trump’s administration of a $1.5 trillion spend on improving American infrastructure. Critics say this is a dream rather than a real plan. Chief executive Leo Quinn said: “This award at LAX, one of the world’s busiest airports, recognises our expertise and track record for delivering critical transportation infrastructure.”

Other UK engineering companies must hope they can win a share of planned spending on big US projects, if Trump (pictured) can convince Congress to agree to his schemes.

At LAX, the plan is for a  2.25-miles above-ground transport system that will link the terminal to other facilities.

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February 17, 2018 |

Aberdeen, Schroders and Hermes question US pharma giants over opioid abuse

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City fund managers are stepping up scrutiny of US drugs giants over concerns about the impact of America’s opioid epidemic.

Aberdeen Standard Investments, Schroders and Hermes Investment Management are among UK firms raising questions with New York-listed pharma groups ahead of AGM season in America.

The move comes in response to fears about the economic and social toll of opioid abuse — which kills more in the US than car crashes and gun deaths combined — after a string of lawsuits against listed drugmakers over claims they mis-sold pills.

“It’s a social tragedy with severe economic consequences. We’re using our power to engage with companies to encourage them to address the issue,” said Aberdeen Standard Investments’ Andrew Mason. 

Aberdeen and Schroders are speaking privately with company boards that they own stocks and bonds in to explore the fallout from the epidemic. They are working on the issue separately.

“The investment implications could potentially be huge and it’s important to look past the manufacturers in the pharma sector because it has such a significant impact elsewhere,” said Schroders’ Seema Suchak.

UK shareholders in opioid-linked companies will be asked to take a view after a US shareholder group, the Investors for Opioid Accountability, said it would table a string of demands at drugmaker meetings asking boards to beef up their response to the crisis.

The IOA has identified seven New York-listed opioid makers including Johnson & Johnson, Mylan, and Insys for action.

Demand for more scrutiny of opioid distributor AmerisourceBergen, part-owned by UK chemist Boots and Walgreens, has already won the support of influential voting groups ISS and Glass Lewis.

Hermes also plans to support the motion and is examining a number of other proposals.

Hermes equity ownership service director Tim Goodman said: “Shareholders can’t turn their back on this, particularly when there are levers we can pull which can make a degree of difference. Aside from the social cost, the financial and legal risks are huge.”

Protests have been widespread and there are hundreds of legal cases, leading many to compare the opiates issue with the big tobacco lawsuits of the late nineties. 

The crisis hit the headlines in the UK last year over its links to OxyContin firm Purdue Pharma and owners the Sackler family, who are big art donors in London. 

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February 17, 2018 |

International brands eye UK shop debuts as London Fashion Week starts

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The capital is poised for a wave of investment from international clothing brands looking to open debut UK stores here as the industry sashays into London Fashion Week (LFW).

There are as many as 40 overseas upmarket apparel and jewellery firms considering opening their first London stores this year, property sources told the Evening Standard. 

Danish clothing firm Samsøe & Samsøe, which sells £349 biker jackets, wants to open as many as four shops here by the end of 2020. Locations could include Hampstead, Covent Garden and Chelsea.

A spokesman said: “We regard London as a window for buyers across Europe and ultimately a gateway to the rest of the world.”

Others looking include Chinese label MO&Co, French design house Sézane, and Italy’s Flavio Castellani.

Matt Farrell, a director at Albemarle Street and Bond Street landlord Trophaeum, said: “We have a steady stream of enquiries from luxury retailers wanting to open flagship stores.” His firm has recently let shops to designers Thom Browne and Self Portrait.

The latest interest will allay concerns that Brexit could deter creative companies from investing here. It will be welcomed by buyers in town for London Fashion Week this month.

Property firm Cushman & Wakefield’s Peter Mace said companies are being enticed by “high volumes of international tourism created by the weak pound”.

However, Colliers International said high business rates and rents are discouraging some entrants.

Among the highlights of LFW will be departing Burberry design guru Christopher Bailey’s final show and London independent artist incubator Fashion East’s outing.


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February 17, 2018 |

Burberry chief steps up digital drive in deal with float candidate Farfetch

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Burberry was in fashion in the City after it inked a landmark deal on Thursday with online retailer Farfetch that could see its trademark trenchcoats available in 150 countries.

Technology developed by Burberry has been integrated to the Farfetch operating system, allowing the brand’s entire global range to be available through a online platform.

Currently only parts of its collections are sold via third-party sites such as Yoox Net-a-Porter and Matchesfashion.

The FTSE 100 designer’s website is available directly in 44 countries. Its new partnership will significantly boost its exposure globally and allow Burberry to enter new markets such as Brazil and Mexico. It marks one of the biggest tie-ups since Marco Gobbetti joined as chief executive last year. He wants to strengthen the brand’s digital arm. 

The company is committed to embracing the “see now, buy now” model, and Farfetch customers will  be able to pick up new items straight after Burberry unveils them on the runway this Saturday evening  at London Fashion Week.

Shares in Burberry rose 6.5p to 1549.5p.

The tie-up could aid London-headquartered Farfetch’s rumoured ambition to explore a $5 billion  (£3.6 billion) float in New York. 

The firm was founded by entrepreneur José Neves in 2007 and is co-chaired by Net-a-Porter founder Natalie Massenet. 

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February 16, 2018 |

GKN accuses hostile suitor Melrose of sowing confusion in numbers battle

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Takeover target GKN upped hostilities with suitor Melrose on Thursday by accusing the buyout barons of using complex number-crunching to flatter its own profits. 

Chairman Mike Turner suggested Melrose used “financial engineering” to book takeover and research costs on its balance sheet in such a way that it would “confuse understanding of its profitability”.

Melrose hit back and said the claims contained “factual inaccuracies and misleading statements” and was an attempt to “distract from the real issues”. 

Turner, the former BAE Systems chief executive, urged shareholders to reject Melrose’s hostile bid, saying it was “not a good deal, low price and high risk”.

He said: “It is your board’s belief that this offer is entirely opportunistic and that the terms fundamentally undervalue GKN.”

Melrose has offered 1.49 of its own shares and 81p in cash to win the company, worth 419.6p a share as of today. GKN shares are currently worth 419p per share. 

GKN has accused Melrose of making “heavy use” of provisioning on previous takeovers of Elster and Nortek and booking higher levels of research and development (R&D) spending. 

In the Elster case, for example, provisions on its balance sheet were £19 million before the Melrose takeover but rose to £180 million after.

GKN said its own margins — the focus of Melrose criticism — would be 0.8% higher if it had done the same. 

Melrose normally uses cash generation as the best performance measure rather than provisioning. It made £1.5 billion in cash selling Elster to Honeywell.

Claims the firm spent only 1.4% of sales on research were also “factually wrong,” Melrose said. 

Melrose is free to increase its offer to shareholders, which could take the form of more shares for GKN.

Melrose executive chairman Chris Miller said: “Quite simply, can a GKN board with a self-confessed record of underperformance be trusted to reinvent itself into an agent of fundamental cultural change? We firmly believe the GKN team cannot.”

GKN investors would own 57% of the enlarged group, which GKN’s board has used as a reason to vote against the deal. 

They say if investors stick with chief executive Anne Stevens they will receive 100% of the benefits on offer in future.  

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February 16, 2018 |

Worth it? Fresh blow for L'Oréal as Nestlé move sparks speculation

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The future of cosmetics giant L’Oréal looked less than flawless on Thursday, after investor Nestlé decided not to renew a shareholder agreement, opening the door to a potential sale.

Nestlé is committed to the company that has “given us very good returns over the years”. However, the Nespresso and KitKat owner said it won’t raise its 23% investment, worth ¤22.3 billion (£19.8 billion), in the French beauty group. It will let a shareholder pact with the Bettencourt family, also a major L’Oréal stakeholder, lapse. The deal with the Bettencourts was  that neither side could raise their stake in L’Oréal until six months after the group’s heiress Liliane Bettencourt was deceased. She died in September.

Today’s update could fuel speculation about Nestlé selling its stake, causing major changes at the business which has been hit by some controversies recently. 

L’Oréal hit headlines last month when British beauty blogger Amena Khan (pictured) was selected to front a campaign to great fanfare, only to step down following the discovery of tweets she wrote in 2014, which some branded as “anti-Israel”.

L’Oréal last week said the company was ready to buy back the stake, should Nestlé sell.

Nestlé today forecast modest organic sales growth this year.

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February 16, 2018 |

Embattled giant GKN swings a £2.5bn punch to fight off Melrose pursuit

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The new chief of GKN, Anne Stevens, waved a multi-billion pound cash bonanza in front of investors on Wednesday in a make-or-break bid to see off hostile bidder Melrose. 

The under-fire engineer, battling to escape Melrose’s grip, has promised the bulk of a £2.5 billion windfall for shareholders within 18 months by selling its metal powders unit and a string of other businesses within its aerospace and car empire.

Higher cash payouts are also on the cards if investors side with Stevens’ new management team and turn away from Jock Miller’s squad at Melrose, which wants to buy GKN for £7.4 billion.

“I’m here to make the tough decisions,” said Stevens, (pictured) the 69-year-old former Ford executive who was parachuted into GKN last month.

“I’m not here to preserve this company’s history. I am here to deliver a great future. No more one size fits all. I’ve done a turnaround at every place I’ve ever been.”

Shares rose 0.5% higher to 400p. Melrose is offering 81p in cash and 1.49 shares, making its offer worth 399p. 

The Redditch-based firm, which has 60,000 staff globally, also promised “minimal job losses” from the looming overhaul, a signal to MPs concerned by  the impact of any Melrose takeover. 

Under today’s plan, named Project Boost, the 260-year-old engineer plans to switch from the strategy of chasing sales to churning out more investor cash by boosting its sluggish efficiency.  It will spend £450 million upgrading factories with robots and improving how it buys and sells products used to make gear for customers such as Boeing, Airbus, Mercedes and BMW.

The move, which will save £814 million over the period, will give a lasting benefit of £340 million per year in more cash for shareholders by 2020, GKN said.

The company has also set aside £70 million of incentive payments to gee up staff.

GKN has hired McKinsey partner Tom Kolaja as chief transformation officer to push through the plan. He will report to Stevens and has helped overhaul industrial companies in Poland.  

Former Akzo Nobel head of strategy Jennifer Midura has also been appointed to head GKN strategy and communications.

Finance boss Jos Sclater  said GKN was “investing for the future”. It plans to hand back half of the free cash it earns to shareholders, in another sop to the City, which has become disgruntled at a lack of performance.   

Melrose said the plan was “long on adjectives and promises but desperately short on detail”, and promised to keep hold of powder metals for longer than GKN plans. 

GKN still aims to separate aerospace and automotive.

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February 15, 2018 |

Serco secures big discount on Carillion healthcare contracts

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Serco on Wednesday agreed a discounted deal to buy a raft of failed Carillion’s healthcare contracts, in a move that will save the outsourcer £18 million but see it take on more risk.

The FTSE-250 firm said it will pay £29.7 million for the contracts, which provide everything from catering to maintenance and cleaning for a number of UK hospitals. It already does similar work for the Barts Health NHS Trust in London.

That is down from the £47.7 million price first agreed in late 2017, before the construction giant’s collapse.

Following the failure, Serco started fresh talks with liquidators after it was forced to re-evaluate “potential liabilities, indemnities, warranties and the additional working capital investment” required as a result of the liquidation.

Serco, led by Rupert Soames, still expects the contracts to generate the same revenues and profits as before, £90 million and £8 million per year.

The shares rose 1.25p to 84.8p.

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February 15, 2018 |

Coca-Cola bottler bubbles away as City swallows 'exceptional' claims

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The company which bottles Coca-Cola was in self-congratulatory mood today, and the City duly lapped up its confidence.

Coca-Cola HBC gave its annual statement the title, “exceptional results”: it posted a healthy £43.8 million rise to £310.7 million, sending shares up 81p to 2317p.

But others were sceptical that a 1.1% rise in volumes in established markets justified such ebullience.

Neil Wilson, at ETX Capital, said: “Good, great even, but exceptional is a stretch. Coca-Cola benefited from an increase in pricing and volumes which more than offset higher input costs and increased operating expenses. But profits were flattered by favourable [foreign exchange] tailwinds and lower restructuring costs from a year ago.”

There were also gains for Sky and BT after both broadcasters retained their grip on Premier League TV rights. Sky made a commitment to pay £3.58 billion over the three years of the next deal, a significant cut from the £4.1 billion it is paying for its prime packages in the present 2016-19 seasons.

Shares in Sky rose 34p to 1095p and BT climbed 3p to 229p.

Elsewhere, education publisher Pearson was also scaling the leaderboard, up 13p to 666p. Yesterday it said it was partnering with littleBits, a maker of hands-on electronic-focused classroom products, giving pupils the ability to “invent anything” from alarms and robots to digital instruments.

Overall the FTSE 100 was up a healthy 48.05 points at 7216.06, but the real action was taking outside the blue-chip index. 

Tool hire company HSS rose 1.2p to 25.4p after it reaffirmed that full-year performance was in line with guidance and that it had reached an agreement with Unipart to make changes to the business’s supply chain.

HSS also said it has agreed with its lenders to extend its £80 million revolving credit facility, which will now mature in July next year.

On AIM, Iofina, a specialist in the exploration and production of iodine, announced the completion of construction of its plant in Oklahoma.

Iofina’s boss Dr Thomas Becker said: “The start of production at the plant is a proud achievement for the Iofina team as it demonstrates the successful execution of our long-term strategy — to increase iodine output while lowering production costs.

“Completing this project within time and budget further showcases the strength of the workforce at Iofina. Iodine prices continue to strengthen, and the group is well placed to advance its position in the global iodine market.” The market, however, didn’t share his enthusiasm and shares dropped 0.2p to 19.35p.

Keystone Law rose 9p to 256p after the challenger law firm reported significant growth. It said: “Keystone is well-positioned to establish itself as one of the leading UK mid-market law firms with a clear and simple growth strategy enabling it to take advantage of the significant addressable market.”

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February 15, 2018 |

Tata Steel ploughs £75 million more into Port Talbot plant

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India’s Tata Steel will inject  £75 million into the Port Talbot plant, easing concerns over its commitment to the industry, it emerged on Tuesday. 

The move comes almost two years after Port Talbot’s survival was hanging in the balance as it struggled with debt and pension liabilities. 

Tata, which has offices across London, was set to sell its business in Britain, but eventually agreed not to make any staff redundant and to keep the plant open until 2021.  

The cash will used to repair one of the two blast furnaces in Wales, Reuters reported, extending its life by seven years, and reaffirming the steel’s giant confidence in the business. 

Tata ploughed £14 million into one of its Port Talbot mills this month after it injected another  £30 million in November.  

Tata merged its European business with Germany’s ThyssenKrupp in September, creating the continent’s second-largest steelmaker after ArcelorMittal. 

Management changes at the Indian parent company last year have also helped steady the ship, sources said. New chief executive Natarajan Chandrasekaran replaced Cyrus Mistry, who was ousted in 2016 after a public spat with Tata’s board. 

A spokesperson for Tata said: “We are looking at a range of options as we continue to develop a sustainable UK business for the future. There is, however, no definitive decision made yet on any form of blast furnace repair or reline.”

The steel sector is recovering after prices fell to 12-year lows in 2015.

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February 14, 2018 |
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