UK TOP NEWS SUMMARY: BAE Systems Spends USD2 Billion On Acquisitions

(Alliance News) - The following is a summary of top news stories ...

Alliance News 20 January, 2020 | 11:16AM
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(Alliance News) - The following is a summary of top news stories Monday.

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COMPANIES

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BAE Systems said it has made two acquisitions in the US, purchasing the military global positioning system from a United Technologies Corp unit and Raytheon Co's Airborne Tactical Radios business. The Farnborough-based aerospace firm is acquiring a military GPS business from Collins Aerospace - a unit of US aircraft manufacturer United Technologies - for USD1.93 billion in cash. BAE is also buying US defence contractor Raytheon's Airborne Tactical Radios business for USD275 million in cash. These deals are subject to the closure of the merger between Raytheon and United Technologies.

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Anglo American said it has made a formal offer for Sirius Minerals PLC, valuing Sirius's equity at GBP404.9 million. Anglo American is offering 5.50 pence per share in the London-listed potash mine developer, which reflects a 34% premium to the Sirius closing price of 4.10p on January 7, the last day before the start of the offer period. Sirius Minerals said its directors consider the acquisition to be "fair and reasonable", and have recommended that shareholders vote in approval of the offer. The offer is conditional on no fewer than 75% of Sirius shareholders voting in favour of the acquisition at an upcoming general and court meeting, as well as being sanctioned by the High Court of Justice in England & Wales. Anglo American said it expects the acquisition to be completed by the end of March.

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Fevertree Drinks said revenue is expected to come in below board expectations, due to "subdued" Christmas trading in the UK. For 2019, the tonic water maker expects total revenue of GBP260.5 million, which would represent a 9.7% increase on the GBP237.4 million generated in 2018. Fevertree, in spite of the "soft" trading, said it continued to invest in the business. As a result, its margins will end 2019 behind expectations. The company expects earnings to fall by about 5% from 2018. Fevertree reported adjusted earnings before interest, tax, depreciation and amortisation of GBP78.6 million in 2018. Looking forward, the company said it will continue to invest in its business, and is guiding for gross and Ebitda margins of about 49% and 28% in 2020. Fevertree recorded a gross profit margin of 51.8% with an Ebitda margin of 33.1% in 2018

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MARKETS

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London shares were lower as investors cashed in profits following last week's gains. In the FTSE 100, BAE was the best performer, up 2.7%. The pound was down against the dollar as fears that the Bank of England will cut interest rates next week mount. Financial markets in the US are closed on Monday for the Martin Luther King day holiday.

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FTSE 100: down 0.4% at 7,642.55

FTSE 250: down 0.2% at 21,833.03

AIM ALL-SHARE: down 0.8% at 966.91

GBP: down at USD1.2985 (USD1.3030)

EUR: down at USD1.1086 (USD1.1094)

GOLD: firm at USD1,559.70 per ounce (USD1,556.62)

OIL (Brent): up at USD65.16 a barrel (USD64.74)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Businesses have warned of price rises after UK Chancellor Sajid Javid vowed that there will be no alignment with EU regulations after Brexit. The Treasury would not lend support to manufacturers that favour EU rules as the sector has had three years to prepare for Britain's transition, Javid said in an interview with the Financial Times. Javid urged businesses to "adjust" and said that while some will benefit others will not. He added: "There will not be alignment, we will not be a ruletaker, we will not be in the single market and we will not be in the customs union - and we will do this by the end of the year."

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The HS2 high-speed rail project in the UK could cost as much as GBP106 billion, according to an official government review not yet published. The review led by Doug Oakervee, a former chairman of HS2, reportedly says there is "considerable risk" that the project's cost will rise by up to 20% beyond the GBP81 billion to GBP88 billion range set out in a report by current HS2 chairman Allan Cook just four months ago. Oakervee's review says work on phase 2b of HS2 from the West Midlands to Manchester and Leeds should be paused for six months to study if it could mix conventional and high-speed lines, according to the FT, which has seen a copy of the paper.

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UK house prices got a post-election boost in December, according to the latest Rightmove house price index released. Prices increased 2.3% in December, which Rightmove said is the largest monthly rise it has ever recorded at this time of year. Nearly 65,000 properties were marketed between December 8 and January 11, with sellers feeling a "surge of optimism", said Rightmove. In the period stretching December 13 to January 15 - beginning immediately after the election - enquiries to estate agents were up by 15% compared to the same period a year ago.

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The number of London-listed companies making profit warnings reached an 18-year high in 2019, with retailers in particular feeling the brunt of political instability. According to figures compiled by accounting firm Ernst & Young, UK quoted firms issued 313 profit warnings in 2019, up 9.1% from 2018. Crucially, 17.8% of all London-quoted companies issued warnings, higher from 17.7% last year and the highest level since 22.7% in 2001. EY Head of Restructuring Alan Hudson said: "2019 was a challenging year, full of twists and turns that undoubtedly contributed to a remarkably high level of profit warnings. A toxic combination of protracted uncertainty and rapid sector change, left many companies facing an uphill struggle to meet their earnings forecasts in 2019." In the fourth quarter alone, 22% of profit warnings from companies cited "political uncertainty", according EY's report.

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The House of Lords could be moved out of London in a bid to "reconnect" with voters, senior Tories have said. Conservative Party Chair James Cleverly said the idea was an option being considered by ministers. It has been suggested that the upper house of parliament could be transferred from Westminster to York. Cleverly told Sky News: "What we are looking at is a whole range of options about making sure every part of the UK feels properly connected from politics.

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The leader of Fianna Fail has said Irish people do not respond well to negative campaigning as his party opened up a 12-point lead on rivals Fine Gael. The Sunday Times/Behaviour and Attitudes opinion poll published on Saturday night shows Fianna Fail's support has increased by five points to 32%, while Fine Gael has dropped by seven points to 20% – the party's lowest standing in the survey. Further polls will be published this week, with the election to take place on Saturday February 8. Speaking to reporters in Dublin on Sunday, Micheal Martin urged caution over the poll and said it will be a tight race between the two parties.

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Scope Ratings affirmed the Republic of Ireland's long-term local- and foreign-currency issuer ratings at A+ and raised their outlook to Positive from Stable. The German credit-ratings agency said the changes were driven by continued deleveraging, an improved budgetary position, and robust growth potential. However, still-high public- and private-debt levels, as well as external vulnerabilities, are rating constraints, the agency noted.

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US President Donald Trump on Sunday hailed the trade deal signed last week with China for dramatically improving relations with Beijing, saying it was "much better" than he expected. The "phase one" deal marks a truce in the two countries' trade war after nearly two years of tensions. But with tariffs still in place on two-thirds of more than USD500 billion worth of imports from China, US consumers and businesses will be left to foot the bill. "This is an incredible success for our entire country," Trump said Sunday evening at a rally in Austin, Texas. He was speaking to a convention of the American Farm Bureau Federation.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
BAE Systems PLC 656.40 GBX 2.56

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