Weekly review

Equity view

QinetiQ Group on Friday said David Smith will be retiring as chief financial officer and stepping down from the board on November 30 to be replaced by Lightsource CFO Carol Borg. Smith joined Qinetiq in January 2017. Borg will start work on October 11 “to enable a smooth transition period”, the company said in a statement.

A shareholder revolt at JD Sports Fashion has resulted in the head of the company’s remuneration committee being voted off the board over anger at the retailer’s pay policies. JD Sports said almost 55% of voting shareholders rejected the re-election of Andrew Leslie, who had sat on the fashion group’s board for 11 years, forcing him to step down with immediate effect.

Building materials distributor and DIY retailer Grafton Group announced on Friday that it has completed the acquisition of Isojoen Konehalli and Jokapaikka (IKH). The FTSE 250 company said IKH is one of the largest workwear, personal protective equipment (PPE), tools, spare parts and accessories technical wholesalers and distributors in Finland.

Newly authorised bank Distribution Finance Capital said on Friday that it was "pleased" with the progress it had made during the second quarter of its trading year but failed to record any growth in its loan book due to inventory replenishment issues. Distribution Finance stated new loan origination had continued at pace, exceeding £295.0m during the six months ended 30 June 2021, up from £115.0m a year earlier, underpinned by its "strong pipeline", which now exceeds £1.0bn.

Renewable energy company Drax has lifted its stake in the US Alabama Pellets joint venture to 90% for $29.7m. The company on Thursday said it had bought a further 20% in the venture, which owns the Demopolis and Aliceville pellet plants, from The Westervelt Company. Two Rivers Lumber Co holds the remaining 10%.

Building materials distributor and DIY retailer Grafton said on Thursday that it has agreed to sell its traditional merchanting business in Great Britain to independent builders’ merchant Huws Gray for £520m. The business being sold comprises the Buildbase, Civils & Lintels, PDM Buildbase, The Timber Group, Bathroom Distribution Group, Frontline and NDI brands. In the year to 31 December 2020, it reported revenue of £828.2m and adjusted operating profit of £18.8m.

PZ Cussons forecast adjusted pre-tax profits would be ahead of consensus of £63m - £64m and the previous year with revenue up 7%. However, unprecedented demand for its hygiene brands at the beginning of the Covid-19 pandemic was currently holding back year on year revenue comparisons and, as a result, fourth sales declined year on year, the company said on Thursday.

Micro Focus International's adjusted first-half profit fell 7.7% as the software group's revenue fell. Adjusted earnings before interest, tax, depreciation and amortisation dropped to $519m (£376m) in the six months to the end of April from $562.6m a year earlier as revenue at constant currency fell 4.6% to $1.43bn.

Government contractor Serco said it expected interim underlying trading profits to rise more than 50% driven by its work running the UK’s Covid track and trace system. The company on Wednesday said interim underlying trading profits would come in at £120m - £125m, with a 19% rise in revenue to around £2.2bn, although it warned that Covid-related revenues would fall in the second half.

Dixons Carphone reinstated its dividend as it swung back to profit on the back of a massive boost in online electrical goods sales during Covid lockdowns. The company on Wednesday reported pre-tax profits of £33m compared to a £140m loss a year earlier. Group revenue rose 2% to £10.3bn, offset by Carphone Warehouse closures in March, but online electrical sales more than doubled to £4.7bn. A dividend of 3p a share was declared.

HSS Hire shares shot higher on Wednesday after the tool and equipment hire company upgraded its earnings expectations for 2021 as trading continues to improve. Based on its performance in the second quarter, the group now expects 2021 earnings before interest, tax, depreciation and amortisation to be "slightly ahead" of market expectations, while earnings before interest, tax and amortisation will be "materially ahead".

Rio Tinto declared force majeure on customer contracts at Richards Bay Minerals (RBM) in South Africa on Wednesday, due to an escalation in the security situation at the operations. The FTSE 100 mining giant said that had led to its decision to cease operations until the safety and security position improves.

Barratt Developments has hired Mike Scott from Countryside Properties as its next chief financial officer. Scott, who is Countryside's CFO, joined the FTSE 250 housebuilder as group financial controller in 2014. He will join Barratt when a date is agreed and Countryside is looking for a replacement. He helped oversee Countryside's flotation in 2016.

Civitas Social Housing has agreed to buy four supported living properties in the east of England for £2.5m. The company said it had completed the purchase of three of the properties and exchanged on the fourth. The acquisitions comprise four self-contained single occupancy properties that are adapted for adults with learning disabilities and mental health care needs.

Standard Life Aberdeen said on Tuesday that wholly-owned subsidiary Standard Life Mauritius has sold just over 100.8m shares in HDFC Life on the stock exchange in India for around 67.3 bn rupees (£652m). The proceeds will be used for general corporate purposes.

US private equity firm Clayton, Dubilier & Rice on Tuesday confirmed its increased final £2.7bn offer for Dublin-based UDG Healthcare. CD&R, which is also seeking to take over the UK supermarket chain Morrisons, lifted its bid to £10.80 a share, UDG said in a statement to the stock market, adding that the board had agreed to its terms.

International sports retailer JD Sports Fashion bought 80% of Spanish cycling, running and outdoor equipment seller Deporvillage for up to €140.4m. The deal, conducted through JD Sports’ 50.02% holding company Iberian Sports Retail Group, is being funded through existing cash resources and bank facilities, with €40.4m of the purchase price deferred depending on the performance of the business to the end of the year.

Anglo American has agreed to sell its 33.3% interest in the Cerrejón joint venture to Glencore for around $294m in cash. The deal represents the final stage of Anglo’s previously-announced transition from thermal coal operations.

UK bank NatWest Group said it was selling most of its Irish commercial lending business to Allied Irish Banks as part of its exit from Ireland. AIB will take over about €4.2bn in gross performing commercial lending and associated undrawn exposures of around €2.8bn from NatWest's Ulster Bank.

Government services contractor Serco has been awarded a contract by the Department of Health and Social Care to continue providing support services to Covid-19 regional, local and mobile test centres in England and Northern Ireland. Serco said on Monday that the contract was for 12 months, with an option to extend for a further six months, and could be worth up to £322.0m to the group, although it acknowledged the actual amount was unknown and could "differ materially" as the contract was designed to be flexible.

Economic news

Britain's Competition and Markets Authority needs an update of its powers, said former chair Andrew Tyrie, who claimed that consumers are being “ripped off” as a result. Tyrie said the opportunity to "rip off ordinary people" at online marketplaces fostered by the likes of Amazon, Facebook and Google was growing, but the regulator had no means to keep up.

Nissan said it would build a battery factory at its UK plant as part of a £1bn investment that secures the Sunderland site's future beyond the UK's ban on new petrol and diesel vehicles in 2030. The Japanese carmaker said the EV36Zero project brings together electric vehicles, renewable energy and battery production. It will create 6,200 jobs at Nissan and its suppliers, including 1,650 new jobs at Nissan and its partner Envision AESC in Sunderland, the company said.

UK manufacturing growth slowed in June, according to a survey released on Thursday. The IHS Markit CIPS manufacturing purchasing managers’ index fell to 63.9 from May’s record high of 65.6, coming in below the flash estimate of 64.2. A level below 50.0 signals contraction, while a level above indicates expansion.

The Bank of England should not overreact to a "temporary" rise in inflation, Governor Andrew Bailey said on Thursday. In an annual speech to financial services leaders at Mansion House, Bailey said: "It is important not to overreact to temporarily strong growth and inflation, to ensure that the recovery is not undermined by a premature tightening in monetary conditions.

Chancellor Rishi Sunak is set to launch a green finance plan worth £15bn and a savings plan that will help to fund green jobs. The plans will transform the City of London into a hub for green finance in a move to try to boost its competitiveness on the global stage after Brexit.

The UK economy contracted a touch more than initially estimated in the first quarter as households saved more during the third national lockdown, according to figures released on Wednesday by the Office for National Statistics. Gross domestic product fell 1.6% between January and March, compared to an initial estimate of a 1.5% decline. That leaves GDP 8.8% below pre-pandemic levels, revised from a first estimate of 8.7%.

The Trades Union Congress accused the UK government on Wednesday of rushing into post-Brexit deals with countries that systematically violate or deny workers their rights. The TUC says the UK should use its leverage when negotiating the deals to ensure countries respect labour and human rights.

UK house prices rose at their fastest rate since 2004 in June as buyers competed fiercely in a market rebounding from Covid-19 lockdowns, Nationwide said. The average price of a property in the UK rose 13.4% in June from a year earlier to a record £242,709, Britain's biggest building society said. In the quarter to the end of June prices rose 10.3%, up from 6.3% in the first quarter of 2021.

Mortgage approvals rose in May, Bank of England data showed on Tuesday, as the UK’s super-charged housing market continued to strengthen. Mortgage approvals for house purchase were 87,500 last month, up on April’s 86,900 and above consensus expectations of 85,800. Approvals are currently below November 2020’s peak of 103,200, but above pre-February 2020 levels.

The Confederation of British Industry's headwill address the current state of the UK labour market and the struggles it faces with ongoing shortages in a speech to the Recruitment and Employment Confederation’s Annual Conference. In the speech, Lord Karan Bilimoria, president of the CBI, will identify a combination of factors, ranging from the job retention scheme to European Union workers not returning to the UK amid the coronavirus crisis.

International events

The International Monetary Fund joined those who believe that America's central bank should start hiking interest rates towards the end of 2022 or the start of 2023 amid a quick rebound in economic growth. Policymakers on the Federal Open Market Committee predicted in June that America's gross domestic product would rebound by 7% in 2021, thanks to the unprecedented government stimulus measures approved by Congress.

Non-farm payroll growth in the US picked up a tad more quickly than anticipated last month, even if in part as a result of strong hiring by the government. According to the US Department of Labor, non-farm payrolls increased by 850,000 in June.

Confidence among Japanese corporates improved markedly over the second quarter, the results of a closely-followed survey revealed. Yet economists were left dividend on the outlook for the Japanese economy in the back half of 2021.

German retail sales rose 4.2% in May, missing market expectations but showing a recovery in demand as stores reopened in Europe's biggest economy. The increase from the month before was lower than the 5% average analysts' forecast.

China’s President Xi Jinping warned foreign forces on Thursday against bullying China or they will “get their heads bashed”. In a long-hour speech from Tiananmen Square to mark the centenary since the founding of the Chinese Communist Party, Xi also hailed a “new world” created by his people.

Eurozone manufacturing activity hit a new high in June but prices rose at record rates as supply constraints persisted, a survey showed. IHS Markit's eurozone manufacturing purchasing managers' index rose to 63.4 from 63.1 in May and was firmer than an earlier "flash" figure of 63.1.

Eurozone unemployment was lower than expected in May as the number of people without jobs dropped more than 300,000 and economies reopened from lockdowns. The headline unemployment rate for the eurozone edged down to 7.9% from 8.1% a month earlier, Eurostat said, and was below the average analysts' forecast of 8%.

First time jobless claims in the US retreated to their lowest level since March 2020, in a further sign of the challenges faced by companies to retain workers. According to the Department of Labor, initial unemployment claims fell by 51,000 to 364,000 over the week ending on 26 June.

Economic growth in China eased in June, official data showed on Wednesday, as the country's manufacturing and services sectors both softened. The country’s manufacturing purchasing manager’s index was 50.9 in June, little changed from May's 51.0, according to the National Bureau of Statistics. The reading was only marginally higher than consensus, for 50.8.

The global economy could lose more than $4trn because of the damage Covid-19 has had on international tourism, a United Nations report has warned. The report, issued by the United Nations Conference on Trade and Development in conjunction with the UN World Tourism Organisation, said international tourism and its closely linked sectors lost an estimated $2.4trn in 2020, and predicted a similar loss for this year, of between $1.7trn and $2.4trn.