LONDON (Reuters) - Here are the business headlines from Tuesday’s newspapers.
A report published by the Commons’ Public Accounts Committee has revealed that 181 of the 700 largest UK businesses paid zero corporation tax in 2006-07, as a result of tax avoidance, tax relief or actual losses. Although all tax avoidance schemes must be disclosed to HM Revenue and Customs, tax advisers have been creating a great number of “bespoke” schemes to reduce the tax paid by big companies. The committee’s chairman, Edward Leigh, praised his department’s determination to carry out “extensive investigations” and added that it “should also robustly apply new penalties for those companies engaged in serious tax avoidance”.
Data on mortgage outlays released by the Council of Mortgage Lenders on Monday has raised fears amongst economists that net mortgage lending could turn negative by the end of 2008. Gross mortgage lending totalled 17.7 billion pounds in September, which was a 10 per cent fall from the previous month but also a 42 per cent decline from September 2007. “The mortgage market is open for business”, said the CML’s director-general Michael Coogan. “But weakening consumer demand and ongoing funding constraints will dampen monthly lending figures for the rest of this year and into the first quarter of 2009”.
Although pension funds have seemed relatively untroubled by the stock market turmoil thus far, the consultants Mercer warn that trustees need to examine the solvency of their sponsoring employer amidst the economic slowdown. “Recent high profile corporate failures act as a stark reminder of the very real risk of sponsoring employers becoming insolvent, which could leave members with reduced benefits if funding levels are low,” said Deborah Cooper, a Mercer’s principal. The exposure of individual schemes to derivatives and other complex investments is also a matter of concern, though a survey of 80 large schemes by the Pensions Regulator indicates that exposure to these instruments is generally modest.
After the failure of the gambling industry to create a voluntary aid scheme for gambling addicts, the government is planning to instigate a statutory levy from April 2009. The 19 million pounds which the levy will raise in the ensuing three years is to be spent on education and research into problem gambling. A 2007 report from the Gambling Commission showed that between 250,000 and 300,000 people in Britain were problem gamblers, with 1.25 million at risk of falling into this category. The lack of a voluntary scheme is likely to draw fresh accusations of the indifference of betting companies to gambling addiction, and strengthen the Prime Minister’s determination to reverse the liberalisation of gambling begun by Tony Blair.
Prudential (PRU.L) is set to row back profitability targets for its Asian operations. In December 2006 the Pru predicted that it would double profit from the sale of new policies in Asia by 2009, but later announced that it expected to achieve this by the end of 2008. It is expected that, as a result of turmoil in the Asian market, the insurer will now revert to its 2009 target. Analysts forecast that Asian sales will be up from 939 million pounds in the first nine months of 2007 to 1.08 billion pounds in the first nine months of 2008.
Aga Rangemaster AGA.L is expected to be “appreciably” lower in the second half of the year than in the first six months. Orders for the company’s goods fell five per cent in the summer, and recent weeks have seen a 15 per cent decline. Aga intends to continue cost-cutting following the October closure of a U.S. factory which saved the company six million pounds. One tenth of the company’s workforce has been released in the past year. Shares were down 18.75 pence to 85.25 pence, and are down 76 per cent for the year.
Standard Life SL.L has hinted that it may be willing to increase its holding in Royal Bank of Scotland (RBS.L) and HBOS HBOS.L, arguing that the banks’ valuations were compelling following recapitalisations. Euan Stirling, Standard Life’s investment director, told BBC Radio: “It’s looking more likely that we will and I say that because of the scale and the extent of the support package that was put in place over the last two weeks. We’re still trying to assess what the future looks like as a co-investor with government.”
Keywords: PRESS DIGEST Financial Times Oct 21
UK Bookmaker William Hill (WMH.L) boldly claimed on Monday that it is to become Europe’s leading online gambling and sports betting business after striking a deal with the gambling software provider, Playtech (PTEC.L), to create William Hill Online WHO.L. Playtech has bought out its affiliate, Uniplay, on preferential terms along with other gaming brands, customer service operations and websites, totalling 144.5 million pounds and has placed them onto WHO’s assets. Under the terms of the deal Playtech is to receive a 29 per cent interest in WHO and the equivalent share of profits, and will also replace CryptoLogic as William Hill’s poker and casino software provider from January. William Hill chief executive Ralph Topping said that the company was now in the top three gaming companies in Europe on revenues and number one on profits. “We expect revenues to grow by 50 per cent over the next two years,” he said.
Subprime lender Cattles CTT.L saw its shares increase 54 per cent on Monday as fears declined over whether the bank would gain regulatory approval for a licence to take retail savings deposits. Prior to submitting the licence application Cattles raised 200 million pounds through a rights issue in order to strengthen its capital base. The lender hopes to take one billion pounds of retail deposits by 2010 to reduce its reliance on wholesale funding markets. Some analyst have been concerned that Cattles might have to hold more capital than had been expected in order to obtain the licence, owing to the fact that the lender’s customers are generally not in the mainstream and therefore more likely to default. In June around 31 per cent of the lender’s loans were in arrears although its loans loss ratio remained stable at 8.5 per cent. Cattle’s shares closed at 36.25 pence, up 12.75 pence.
Conveyor belt manufacturer Fenner FENR.L has asked the Financial Services Authority to help track down a man who has been contacting its shareholders by telephone, under the guise of a company employee, to say that the company was about to release a negative trading update. Fenner first learnt of the sabotage when eight private shareholders contacted the company to ask what was going on. Fenner released a statement on Monday in which it sought to undo any damage caused by the malicious caller. Fenner chief executive Mark Abrahams said: “The only common theme seems to be he tried to spread generally negative news. Either it is someone with one of these share scams or it is a short seller.” Shares in the company, which have lost 35 per cent of their value in the last two weeks, rose 3 pence on Monday to close at 106.5 pence.
On Monday, Aga Rangemaster AGA.L announced that sales of its famous cast-iron cookers are running 15 per cent below the levels of a year ago. Aga’s chief executive, William McGrath, said: “Clearly we have a more traditional customer, Princess Anne was in the factory the other day and she has an Aga, but I don’t think there are many people who can ignore what is going on in the economy.” The company’s shares dropped 18.75 pence to 85.25 pence - an 18 per cent decline to reach its lowest level for almost 25 years.
The fear that private equity company 3i (III.L) will reveal a large drop in the value of its investments next month has made it one of a handful of losers in a rising market. The firm’s shares declined another 5.5 pence to 450.5 pence. In the three weeks since 3i revealed its spending on acquisitions had slowed along with realisations, or cash from disposals, its shares have fallen by 44 per cent.
PartyGaming PRTY.L announced it has licensed branded slot games from Cryptologic CRYP.VX , including Marvel’s Hulk, Spider-Man, and The Fantastic Four, as well as Bejewelled, Cubis, and Street Fighter. The decision by the online gaming company means these games will be added to PartyCasino.com, PartyBingo.com and other gaming sites in the coming months.
The Daily Telegraph
Standard Life SL.L, one of HBOS HBOS.L and Royal Bank of Scotland’s (RBS.L) largest investors, has become the first major institution to announce that it is minded to top up its holdings in both banks. Standard Life is the fourth-biggest shareholder in HBOS with a 3.5 per cent holding, and RBS’ second-biggest with a 3.2 per cent stake. Euan Stirling, Standard Life’s investment director, said it is looking “more likely” that the insurer will raise its stakes.
UBC Media UBC.L, the radio company, has been forced to scrap the 15 million pound sale of its news and travel service to Global Traffic Network GNET.O. The decision to abandon the sale of UBC Commercial comes as the group saw a 15 per cent decline in advertising revenue. The service provides news and travel packages to 250 radio stations in return for advertising slots that it sells on to clients. However, the division has been suffering from cuts to company marketing budgets. Both companies had been set to finalise terms last week, but the deal collapsed due to “current market conditions”.
According to Stephen Green, the chairman of HSBC (HSBA.L), the crisis currently consuming global markets is part of a fundamental shift of power from the U.S. to emerging economies in China and the Middle East. Green said: “The rebalancing of the global economy towards Asia, home to over half the world’s population, and its implications for the Middle East, is the shift that will affect financial markets most profoundly.” On Monday, HSBC agreed a 351 million pound deal to buy nearly 90 per cent of Bank Ekonomi BAEK.JK, the Indonesian lender.
HURRICANES BLOW 45 MILLION POUND HOLE IN AMLIN’S PROFITS
Amlin (AML.L), the Lloyds of London insurer, has warned that this year’s profits would take a 45 million pound hit after the hurricane season left it with claims totalling 166 million pounds. The UK group revealed that the market-insured loss for Hurricane Ike will be more than 16 billion dollars, higher than modelling agents’ current estimates. Amlin added: “This is due to the far-reaching impact of the storm both on offshore energy installations and on the mainland.”
STRUGGLING FINANCIER LAYS OFF ONE-FIFTH OF ITS STAFF
Davenham Group DAV.L, the commercial finance company, saw its shares fall by nearly 80 per cent on Monday. The drop came as the group, which is based in Manchester, admitted its profits had suffered as result of the credit crisis, and it had laid off 40 of its 200 staff. The company, which specialises in providing loans for property deals, said the “rapidly deteriorating climate” and “exceptionally low” number of property deals had forced its hand. Its shares declined to 13 pence from 38.5 pence.
A series of early afternoon trades on Monday sparked speculation of a possible ITV (ITV.L) stake sale. The broadcaster has been hit by concerns about the slowdown in the UK advertising market, and traders cited talk that a large institutional investor might be selling out of ITV. The company denied rumours that BSkyB BSY.L was selling down its stake, and one source said: “It is more likely to be a fund manager selling out. The move would be steeper if it was Sky.”
William Hill (WMH.L) has reinforced its struggling internet operations by combining forces with gaming software specialist Playtech (PTEC.L). The Aim-listed company will acquire a 29 per cent stake in William Hill Online, a new online gaming and sports betting operator. In return, Playtech will provide 145 million pounds worth of recently acquired affiliated businesses with a strong supply of customers, as well as “marketing and customer retention expertise”. William Hill will own the rest of William Hill Online and have full operational control, keeping open an option to buy out Playtech’s share in four or six years’ time.
Cadbury CBRY.L has agreed to sponsor the London Olympics, and has paid more than 20 million pounds to use the event to market its products and become the sole supplier within the Olympic Park. The move will give organisers much needed funds amid fears that financial turmoil will leave them struggling to meet sponsorship targets. Cadbury had previously raised concerns after the company announced it was to shed 600 jobs despite an increase in third-quarter sales.
Express Newspapers has closed its final salary pension scheme because of financial concerns. Robert Sanderson, finance director, wrote to members of the scheme last week to announce it would be closed by the end of this year. Mr Sanderson said that, in addition to its contributions, the company was adding 500,000 pounds each month because of the scheme’s deficit. The letter said: “Despite these large contributions, the cost of providing pensions for the existing fund continues to increase.” It is believed that nearly a third of Express Newspaper’s 270 employees are members of the fund.
Prepared for Reuters by Durrants
Prepared for Reuters by Durrants