Member Info for MY21

Barratt Developments says U.K. housing market to return to normal: Barratt Developments has become the latest housebuilder to warn that the U.K. housing market has returned to “normal” levels of activity as the developer launched a plan to return £950 million in cash to shareholders.

Ana Botin succeeds her father to continue family control of Santander: Santander U.K.’s Boss, Ana Botin, has become the fourth generation of her family to take the reins at its parent company after the death from a heart attack of her father, Emilio, the man who built a Spanish provincial lender into the Eurozone’s biggest bank

Boom in UK housing market eases London starts to slow while the rest of the country strengthens, according to the Royal Institute of Chartered Surveyors

Standard Life staff face cuts in pension provision: Standard Life has unveiled plans to close its generous career-average salary pension scheme to new contributions - cutting future retirement provision for nearly 3,000 loyal employees.

SSE falls on Scottish ‘yes’ poll: Utility group SSE was one of the leading fallers in the FTSE 100 as investors saw the Scottish-based power group’s profits taking a hit should the U.K. Government withdraw support for its wind farms in the event of the Yes campaign winning the Scottish referendum. Wind farms are expensive to build and take a long time to return cash to investors. To encourage companies to invest in wind energy the U.K. Government agreed to subsidise them through renewable obligation certificates, or ROCs. These ROCs guarantee a set price in the market for energy produced from wind farms. The U.K. Government has said it does not intend to automatically stand behind these subsidies for wind energy assets located in Scotland post separation. SSE generates £412 million in revenue from its Scottish onshore wind portfolio and this contributes around £188 million in profits. That makes up around 13% of the group’s forecast full year revenue of £31.2 billion and 12% of the £1.53 billion pretax profits for March 2015. The dividend payments at SSE are a major part of the company’s strategy. However they are now looking risky. The company is expected to make 119p in earnings per share in the 12 months to March 2015, and that only covers the 89.9p in forecast dividend payments 1.3 times. The dividends are also being paid out of debt, with the company forecast to generate around £200 million in spare cash after spending on capital investment this year, which isn’t enough to cover the £670 million in forecast dividends. The problem for investors is that the dividend payments are looking increasingly exposed as debts rise, and customers and energy usage fall. So, given the risks they are no better than a hold. SSE at £14.77-34p. Questor Says “Hold”.

Discovery stokes talk of a Premier League rights bid following Eurosport acquistion: The Executive in charge of international business for Discovery has stoked speculation the American media group plans to compete in the upcoming multibillion-pound auction of live Premier League rights following its acquisition of Eurosport earlier this year.

Life thru a Len: Hotels-to-hot drinks combine Whitbread is officially run by Andy Harrison. But Lombard, like many Britons, prefers to believe TV ads frontman Lenny Henry is in charge. This would mean the market has much for which to thank the Dudley-born entertainer: Whitbread has just announced a 12.8% increase in sales for the past quarter. Premier Inn is a predominantly U.K. unit, using its dependability to grab sales from patchy independent guesthouses. That will expose the chain to capacity constraints faster than Costa, whose universal consumer appeal and low capital appetite allows it to expand fast overseas. Mr Henry, who shot to fame with such zany characters as PC Ganja, will sense incipient pressure for a demerger. Wyn Ellis of Numis reckons this will be curbed by a profits disparity: he is forecasting £215 million for Costa and £550 million for Premier Inn and restaurants in 2018. However, any stumble brings splits talk to the surface for widely-held, diversified groups.

Costa Coffee to boost French presence: The Costa Coffee chain has been rolled out to the land of the cafe au lait as its Owner looks to France for further expansion beyond the U.K.

Old oil platforms loom over Scottish vote: Scottish independence would land the oil industry in the middle of a £35 billion dispute between Holyrood and Westminster over who should foot the bill to decommission the North Sea’s old platforms and pipelines

Apple sought to recapture a decisive lead over the rest of the personal tech industry, unveiling its first large-screen iPhone and wristwatch, along with a payment service that brings it squarely into the financial industry for the first time. Apple’s share price, which had risen strongly in the run-up to the launch event, slipped in the aftermath, though tech industry analysts said the new gadgets and services Mr Cook showed off would give the company a fresh edge over competitors. (Financial Times)

Scotch whisky giant Diageo to stay in Scotland even if country votes ‘yes’: One major firm that cannot move its operations south is Scotch whisky giant Diageo. The world’s biggest drinks firm earns about a quarter of its £11.30 billion annual sales from Scotch and employs more than 4,000 in the country.

U.K. housebuilders: feeling the chill: On house prices, there has been plenty to get the nerves going. Last week top-end builder Berkeley said that the market had reverted to “normal” transaction levels, from last year’s high point. On Monday, Halifax data showed that house price growth slowed from 1.2% in July to 0.1% in August. Shares in the largest seven builders have underperformed the FTSE All-share over six months; last week Barratt lost its place in the FTSE 100. For some of the builders, this is a green light for rapid growth. Numis estimates that Bellway, Bovis and Redrow will roughly double their annual volumes between 2012 and 2020. But the investment required crimps dividends – the yields of the three average just 1.3%, according to Deutsche Bank. Taylor Wimpey and Persimmon, the two largest builders by market capitalisation, offer something for those with a nervous disposition. Volume growth will be more restrained, but cash returns will be higher. Taylor Wimpey plans to return about £200 million per year to shareholders on top of regular dividends; Persimmon has a more detailed scheme to return £1.9 billion over eight years. That provides some welcome comfort, given that house prices are about as predictable as the weather and football.

Berkeley Director walks out after management clash: The finance Director of a leading housebuilder has resigned unexpectedly after management differences, forgoing a potential £75 million pay-off.

Standard Life shares jump 8%: Standard Life has agreed to sell its Canadian business for almost twice its book value and return £1.75 billion to investors. Questor agrees with analysts that this looks like a “fabulous deal” for shareholders. The business that has been sold to Manulife for a total cash consideration of £2.2 billion is currently held on Standard Life’s books at about £1 billion. Selling the company at around twice its book value has crystalised a gain for shareholders of £1.2 billion. Standard Life will retain £450 million of the sale proceeds to invest in the expanding asset management business. The company has been building on its investment management capability during the past 18 months. The deal to buy Ignis Asset Management for £390 million was completed in July of this year and the £83 million deal for Newton’s private client business was completed in September of last year. David Nish, Chief Executive of Standard Life, believes that the business post the sale of the Canadian operations will be stable and faster growing. Standard Life generates the majority, almost 90%, of its revenues from charging fees for the administration and investment of its clients £156 billion in funds. Mr Nish said that managing those assets provides predictable revenue which was growing at an average of 9% a year, once the Canadian business is excluded. He added that the Canadian revenue was more volatile and slower growing. The effect of this has been for analysts to increase their valuation of the Standard Life group that remains after the deal. The shares are trading on 17 times earnings, but that falls to 15 times next year and 13 times the year after. The prospective dividend yield is also a healthy 4.4%, and the dividend is forecast to rise by 6% this year and next. Questor doesn’t expect the shares to run away from here as most of the gains are now priced in. However that steady and growing dividend income is attractive. Standard Life at 417.2p+31.1p Questor Says ‘Hold’.

Supergroup up on sales growth: The manufacturer which makes Superdry-branded clothing showed signs that its new autumn-winter collection has been well-received by customers and this was enough to send the shares up almost 14%. The retailer added that sales have accelerated during the first five weeks of its second quarter. Total retail sales in the first quarter increased 13.6% to £60.4 million. However, sales at stores open more than a year fell 3.7%. The company said this reflected strong sales in the same period last year, shortages of key spring-summer lines such as shorts and polo shirts and a highly competitive market, with rivals in the youth sector such as Ted Baker, ASOS and Abercrombie & Fitch discounting more than they have done in previous years. The shares have had a tough time this year, down more than 25% before update was released. The retailers, and in particular online retailers such as ASOS, have been left with too much stock on their hands and have had to cut prices aggressively to shift stock. The market has priced in fears of how badly this would impact the wider sector. Supergroup shares are not looking that cheap, trading on 16 times forecast earnings, falling to 14 times next year. However, market consensus is pointing towards there being the added bonus of a maiden dividend of around 4.4p being paid at the full year stage, rising to 10.4p next year. Questor thinks that with the retail outlook still looking shaky the shares are best avoided for now. Supergroup at £11.63+145p Questor Says ‘Avoid’.

Islamic finance: sukuks go mainstream: As Goldman Sachs prepares to borrow via sukuks for the first time, Islamic financing could soon hit the mainstream. Britain has already issued sukuks and other non-Muslim countries look set to follow. One problem: the Islamic academics who interpret sharia law have their focus far above the bottom line. Goldman understands how this can happen. In 2011 it had to scrap a $2 billion sukuk issue after some Islamic scholars said that its sukuk was not compliant with sharia, which forbids charging interest because it is considered to be usury. For agnostic capitalists, the customer is always right, even if religion must sometimes provide the guidelines. Global sukuk issuance in the first half of 2014 rose 6% to $66 billion, according to the International Islamic Finance Centre, on track to beat its 2012 record of $140 billion (up 50% from a decade ago). Global companies are keen to tap the new sources of wealth in the Middle East, Asia and Africa. Ernst & Young predicts that Islamic banking will grow to $3.4tn by 2018, up eightfold from 2010.

Fuels rush in as energy blackout threat prompts action from National Grid: One of the new niche areas for investment in the energy sector is – no, not solar arrays, wind farms or anaerobic digestion plants, but diesel generation parks. It is one of the ironies of the current “energy crisis” that it has allowed the return of one of the most carbon-polluting technologies at a time when we are trying to tackle global warming.

The Questor Column Sell Hargreaves Lansdown on margin pressure: Hargeaves Lansdown shares fell by more than 6% last week as the company reported a sharp fall in its profit margins despite a jump in assets under management. The online brokerage and financial advisory group has seen customers flock to its services following the Royal Mail flotation last year. Assets under management increased by 29% to £46.9 billion in the 12 months ended June 30. The flood of IPOs during the past 12 months attracted 144,000 new clients to Hargreaves Lansdown with 42,000 of those being IPO related, total clients ended the year at 652,000. Customers may be flocking to Hargreaves Lansdown but the amount of money the company makes from each extra pound invested is falling. The retail distribution review, or RDR, is forcing Hargreaves to move to an upfront fee model which is less profitable. When this is combined with a fall in savings rates offered by banks on deposited funds it has resulted in a sharp fall in the returnon the assets under management. The company has warned returns on cash will fall further in the year ahead. Competitors are also trying to undercut Hargreaves. The online brokerage is applying for a full banking license which would enable it to generate better returns. It is estimated Hargeaves currently holds about £3.8 billion in client cash, but due to rules it has to place this on deposit with other banks. If it obtained a license it could retain the cash itself and then invest the cash on behalf of customers to generate a higher rate of return, these returns could either be used to offer higher rates of interest to attract more clients, or it would generate higher profits for the company. Hargreaves Lansdown at £10.61. Questor says “Sell”.

Saudi Arabia cuts October crude prices: Saudi Arabia cut October selling prices this week to customers in Asia, Europe and the U.S., in a sign that Opec’s largest producer is unlikely to curb production even amid an excess of crude oil supply.

Oil and gas group Tullow Oil rose slightly on the news that is to sell its interests in two blocks offshore Netherlands for €62.7m (£50m) as it continues to shed off its gas assets in the North Sea.