News & Updates

July 24th 2010

Should I buy the resolution rights issue?

Take with a pinch of salt Resolution’s claims that it is in the vanguard of those driving down fees on rights issues.

It’s true the underwriting fee for the group’s £2.06bn capital raising to buy UK businesses from Axa is lower than average at 2.72 per cent. Since the financial crisis, these fees have sometimes reached 3.5 or even 4 per cent, provoking protest and antitrust probes. It’s also true that it is unusual for a company to persuade sub-underwriters to commit themselves this early in the process. These institutional investors are reaping a nice 1.75 percentage points of the overall fee for taking on that risk. Barclays Capital and Royal Bank of Canada, joint underwriters, have agreed to their fees being squeezed. So they should: the risk of insuring less than half a heavily discounted issue is clearly lower than the risk of insuring most of it (and publicity for the “pioneering” deal may help them expand in this market).

But, hang on. It’s hardly a surprise the sub-underwriters are behind the deal. They are the core investors that backed Clive Cowdery, Resolution’s founder, when he first started to roll up the UK closed life assurance sector a decade ago. When he launched Resolution II, they were the VIPs that smashed a magnum of champagne over the bow. They committed themselves to fund rights issues so Resolution could mop up UK life assurers. It would be shocking if they didn’t show their confidence by stumping up for shares.

Meanwhile, Mr Cowdery’s team of in-house advisers takes its cut. Unlisted Resolution Operations Ltd (ROL) – to which Resolution already pays an annual fee to scout for acquisitions such as this – receives £4.5m. Granted, ROL is being paid for services other than just helping with the rights issue. It helped broker the vendor financing and bridge loans, for instance. Resolution says overall costs are still lower than they would have been had outside bankers done that work. But one of ROL’s functions was “introducing potential sub-underwriters to the company and underwriters”. It can’t take much effort to familiarise Resolution with the same friendly institutions that have backed it from the start.

This deal does represent progress in the creditable campaign to cut the cost of capital raising. It suggests that if other companies fostered a closer relationship with shareholders, they might get a more sympathetic hearing when asking them for cash, sub-underwriting support, or both. But few companies look like Resolution. In the same way, only a few rights issues will look exactly like this.

What DSG stood for

Dixons changed its corporate name to DSG International in 2005. John Clare, chief executive at the time, insisted he was Doing Something Good by putting “International” on the letterhead. “Dixons” just Didn’t Sound Great abroad. Business there was booming – unlike in the UK, which was enduring a Dreadful Summer for Gadgets.

In 2006, Mr Clare decided Britain was ready for more change. As part of “an enhanced multichannel strategy”, the group launched a Doubtful Signage Gambit, switching off Dixons’ familiar red fascia on the high street and replacing it with Currys.digital. Dixons.co.uk became one of the group’s online brands. Confusing. This was a Digital Switchover Gone wrong.

In 2007, shoppers’ Debts Started Growing and Dark Stormclouds Gathered over the UK economy. The new boss, John Browett, realised international operations were putting a Dent in Sales Growth. Some thought his company was just a Dull Stores Group. Mr Browett saw potential to do better at Distributing Satnavs to Guys and doing Deals on Software and Games. It seems to be paying off. Having long since Ditched the Strategic Goals of his predecessor, Mr Browett can finally Dump the Silly Group-name and revert to “Dixons Retail”. It’s a pity that, outside airport departure lounges, Dixons’ Stores have Gone. But the name reversal will cost next to nothing – and just talk to staff who’ve spent the past five years saying apologetically, “I work for DSG – yes, yes: the old Dixons”. They Definitely Sound Grateful.

Friends for life

Talking of rebranding, brace yourself for a new round of sickly sweet financial services advertising, once Friends Life – the new brand for the soon-to-be merged businesses of Friends Provident and most of Axa’s British operations – hits the streets. The logo wraps the hook of the lower-case R of Friends round the I. It’s an embrace that mimics that of Resolution for the life assurers it is trying to buy. A group hug, if you will.

June 14th 2010

FISCAL WATCHDOG TO DOWNGRADE UK GRIWTH FORECAST

The new UK fiscal watchdog is expected to downgrade the previous Labour government's growth estimates later.

Analysts predict the Office for Budget Responsibility will say ex-Chancellor Alistair Darling's 2011 forecast of more than 3% was too optimistic.

Government borrowing last year was lower than first predicted.

In a speech in London, Deputy Prime Minister Nick Clegg is expected to say that the government must act now to cut public debt or risk losing its ability to protect people in need.

June 9th 2010

UK TRADE DEFICIT WIDENS SLIGHTLY IN APRIL

The UK's trade deficit widened slightly in April, with both imports and exports affected by the volcanic eruption in Iceland that grounded flights in and out of the UK for about six days.

The trade deficit in goods and services was £3.3bn in April, marking an increase on the previous month after March's figure was revised to £3.2bn.

The goods deficit also rose slightly from £7.26bn to £7.28bn, the Office for National Statistics (ONS) said.

June 2nd 2010

PRU SCRAPS PLANS TO BUY AIA

UK insurer Prudential has scrapped plans to buy AIA, the Asian business of US insurer AIG. Prudential had sought to fund the takeover by raising £14.5bn from shareholders through a rights issue, the biggest in the UK's history.

The deal collapsed after Prudential failed to negotiate a lower price for AIA. A number of the company's shareholders were opposed to the bid, believing the price being offered was too high.

May 26th 2010

EU SAYS TAXPAYERS SHOULD NOT PAY FOR BANK RESCUES

A network of national funds should be introduced so the cost of bank failures are not met by the taxpayer, the EU internal market commissioner has said. Banks would be required to pay a levy into the funds which would not be used to bail out failing banks, but manage failures in "an orderly way".

However, the EU recognises that setting up funds could lead to "moral hazard" concerns, with banks potentially taking excess risks as theyfeel they are partially insulated from the consquences of their actions.

May 14th 2010

GLOBAL SHARES FALL AS CONCERN OVER EUROPE GROWS

Global shares have fallen sharply as concerns continue about the impact of financial austerity measures in Greece, Portugal and Spain.

Amid fears both that other countries could be affected, and that it may hit the European-wide economy, the UK's main FTSE 100 index was down 3%.

April 29th 2010

HOUSE PRICE INFLATION HITS 10.5%

The Nationwide Building Society says house prices have hit doucle figures for the first time since June 2007. The building society said house prices in the UK have risen by 10.5% in the year to the end of April.

Prices rose by 1% in April to push the cost of the average home to £167,802.

However, the Nationwide predicted that the past year's surge in prices would tail off later this year, with sellers starting to outnumber buyers.

April 20th 2010

UK INFLATION RATE RISES TO 3.4%

The UK inflation rate rose sharply to 3.4% in March from 3% the month before, official figures have shown.

The rise in the Consumer Prices Index (CPI) inflation rate was greater than analysts had expected.

April 19th 2010

UK ECONOMY GROWTH OF 1% OR LESS

Forecasters have warned that the UK economy may grow by less than 1% this year. The report from Ernst and Young ITEMS Club said that an export-led recovery was unlikely to emerge until 2011 and consumer spending was too weak for a recovery, it said. despite the warning, ITEM's chief economic adviser, Peter Spencer, said there were "good reasons to be optimistic" about overseas demand - such as the weak pound - although global trade was unlikely to regain its 2008 peak until the end of 2011.

April 16th 2010

TRAINS SEE INCREASE TRAFFIC AS VOLCANIC ASH CONTINUES TO CAUSE HAVOC IN UK AIRSPACE

Travel firms have seen bookings surge as people seek different travel arrangements after planes were grounded in the UK because of volcanic ash. Eurostar said some of Thursday's services between the UK and mainland Europe were almost full after "thousands" of extra reservations.

Insurance advice

The Association of British Insurers (ABI) is advising customers to check their travel insurance policy, and speak to their travel insurer if they need clarification.

"Anyone who is likely to be affected should contact the airline or airport they are travelling from for the most up-to-date travel information," an ABI spokesperson said.

Meanwhile, the insurer Fortis said: "Fortis will be treating the volcanic ash incident as a bad weather event which means that customers may be entitled to claim under the terms of their travel insurance policy.

"Customers are advised to check their terms and conditions."

April 15th 2010

PENSION SCHEMES IN SURPLUS

The Pension Protection Fund (PPF) said the 7,400 pension schemes had a total surplus last month of £0.3bn, compared with a deficit in February of £15bn. A year ago the deficit was much higher, standing at £242bn.

However, despite the improvement overall, 68.5% of schemes are still in deficit with only 31.5% in surplus. See bbc.co.uk/news for further details.

April 14th 2010

CASH BEING REPLACED BY CARDS?

According to the latest research, cash payments will account for less than half of all transactions in just five years time. In fact, today, 80% of cash transactions were for less than £10. It predicted that cash would account for 45% of transactions by 2018, compared with 73% in 1999, whereas debit card spending would increase from £65bn to £490bn over the same period.

The use of Cheques in shops has declined to just 0.8% and there are plans to get rid of cheques by 2015.

But a recent poll for the BBC reflected opposition among pensioners to the phasing out of cheques. The survey by ICM for the BBC found that three-quarters of pensioners were against the phasing out of cheques, which has been planned for October 2018.

April 13th 2010

CONFIDENCE IN UK BUSINESSES AT FOUR YEAR HIGH

Business confidence has reached its highest level in four years, according to a survey of UK companies. The Business Trends survey from accountants BDO shows both confidence and output back at pre-recession levels.

However, the report warns that a "significant increase" in investment in the private sector is needed to sustain the recovery.

It said that business optimism could be "short-lived" without the investment.

Read more at www.bbc.co.uk/news

April 12th 2010

GREECE DEBT DEAL AGREED

The euro has jumped sharply against the dollar and the pound after the eurozone agreed details of a multi-billion euro loan package to debt-ridden Greece. On Sunday, finance ministers of the 16 eurozone nations agreed to provide up to 30bn euros ($41bn; £27bn) in loans. Greece hopes it will not have to ask for the emergency loans.

April 9th 2010

CONSERVATIVES OUTLINE PUBLIC SECTOR SAVING PLAN

The Conservatives have outlined how public spending may be reduced by £12 billion to prevent any increase in National Insurance. They say that spending on IT projects, office costs, contracts and recruitment could be cut. Labour say the savings are a fantasy and experts warn that the plans could cause 40,000 job losses.

April 8th 2010

BA AND IBERIA SIGN AGREEMENT TO MERGE

Today British Airways and the Spanish national carrier signed an agreement to merge, creating one of the worlds largest airlines. Called International Consolidated Airlines, the two brands will continue to fly under their own names. It is estimated the two airlines could save £350 million a year. Although the plans should be completed by December, one issue will be BA’s massive pension deficit of £3.7 billion which it needs to cut. British Airways is also seeking anti-trust immunity from the regulators for a merger with American Airlines.

March 24th 2010

We have just posted our monthly salary review for Finance - no change really on February. The market is staying fairly consistent. Gareth Purvis, Senior Recruitment Consultant www.aaronandrews.co.uk 

February 21st 2010

The country is slowly emerging from recession and so is the accountancy sector. The number of vacancies is rising but candidates are reluctant to move on and firms still aim to attract the best talent ahead of competitors, all of which could mean, in attracting the necessary headcount, the numbers may not add up.

"It tends to be a sign of a rise in the market, when you see a fall in the number of candidates searching and an increase in the number of vacancies coming online," said Gareth Purvis, Senior Recruitment Consultant at Aaron Andrews Financial & Accountancy Recruitment.

“I have seen things change dramatically over the past few months. Job flow is significantly up. In the main it has increased by 16-17%,” says Gareth Davage, managing director at Michael Page Finance (London and North).

And as the economy returns to growth and markets change, adaptable accountants are in demand, says Sara Reading, head of graduate recruitment at KPMG.

“Demand is primarily within our advisory function - areas such as performance, technology, restructuring. Along with technical ability and experience, we require the ability to adapt to the changing market, to be innovative and put the client first.”

But finding the right candidate is easier said than done, Reading adds. “There is less of a churn of the right type of candidate as organisations try harder to retain them in their current roles.”

And the intensification of the war for talent for specialists in corporate recovery has caused Samantha Weston, head of resourcing at Grant Thornton, to look inward.

“Getting high quality candidates with the right skill set, and fluctuations in demand for specialist areas, can be a challenge to our resourcing plans. These skills tend to be more in demand so fewer people are available in the market, which requires us to be agile in our approach to the problem. To respond to this we have had more of a focus on internal recruitment, secondments and re-training our people than looking for external hires.”

And with such competition for talent, even in the depths of recession, pressure on margins has not been a major issue, Davage says. “There were pressure points but we still maintained ok margins. Our margins for placement have not come down.”

But recruiters can still demonstrate added value by providing market information, according to Toby Fowlston, director at Robert Walters.

“In uncertain times recruiters can go that bit further and add real value by giving both clients and candidates accurate market information. “Salary benchmarking is key right now and we are advising employers on what kinds of packages are securing the best candidates out there in the market. Clients can use salary surveys, but we also provide sector-specific salary benchmarking too.”

But this is one war for talent that shows no sign of abating, says Stefan Pillinger, director at Eximius. “Accountancy is empirically understaffed. In the last two years, we were working with investment banks and FTSE 100 businesses, but actually accountants are always in demand and there is never enough of them.

Most businesses, even in boom time, were running 15-20% under headcount in accountancy.

So where an investment bank may have cut headcount by 10%, that still leaves 10% deficiency in accountancy.

“Most businesses have not been letting accountants go. Businesses are seeing staff competition and paying a premium for it. If you want a top-tier, director-level accountant, you will have to overpay for it. There are not that many guys sitting around on the market."

For further details please see http://www.recruiter.co.uk/1004349.article?cmpid=REC06&cmptype=newsletter