Market Report: Revenue slide takes toll on Tullet Prebon
Saturday 10 November 2012
Being a "hated" banker is tough, but it's not much better being a broker. A quiet summer, too many people to do an ever-dwindling amount of work, and a host of regulatory changes on the horizon mean it is getting tougher for broking firms, analysts reckon.
Results from inter-dealer broker Tullett Prebon highlighted the problem yesterday. The company reported a 12 per cent slide in revenues compared to last year for the July-October period and things got worse when superstorm Sandy shut down Wall Street.
HBSC analysts said: "Uncertainties abound. There are regulatory headwinds ahead… It is difficult to predict that volumes will recover in 2013 as there are uncertainties related to Basel III, collateral requirements and the threat from exchanges."
Numis analyst James Hamilton summed it up and said: "We expect revenues to remain under pressure as the banks continue to reduce trading activity."
Tullett Prebon shares lost 22p to 240p. The company also took a £7m charge in legal fees over three ongoing disputes with rival BGC.
City sacking season is in full swing. If you are one of the unfortunate many facing the axe, there was perhaps a small glimmer of hope from one share tipster.
Analysts at UBS think there is still some growth in "professional jobs".
UBS, which itself is axing 10,000 jobs, with around 2,000 going in London, said "emerging markets are an interesting, long-term prospect" and "although structural growth in the professional segment is lower than some believe, we still prefer the growth and margin prospects".
Its stance means white-collar recruiter Michael Page's recent share price fall, after its third-quarter revenues shrunk last month, could be overdone.
UBS's William Vanderpump said: "Michael Page is not immune to these pressures, but we continue to see it as relatively well positioned within its peer group."
UBS raised its rating from neutral to buy and gave it a target share price of 450p, up from 400p. It also rates recruiters SThree and USG as buys but gives Adecco a neutral rating.
Michael Page's shares booked in an 8.3p gain, to 366.5p.
A riser on the benchmark index was car insurance group Admiral. Its shares drove to the top of the index after Bank of America Merrill Lynch analysts gave it a buy rating with a share price target of 1,180p.
Analyst William Hardcastle reckons it is time to buy the car insurer on the prospect of its dividend.
He said: "The 2013 estimated dividend yield of 9.1 per cent... is now the highest in the sector."
Admiral shares raced up 35p to 1,054p.
Diageo confirmed its purchase of a stake in India drinks group United Spirits. The long-mooted deal sees the global drinks giant take its stake to 53.4 per cent. Diageo's shares trickled up 14p to 1,803p.
Aerospace expert Rolls-Royce said it will deliver good growth in full-year profit, despite lowering forecasts for its marine division. Its shares hovered up 16p to 877p, after the third-quarter update.
Investors were feeling cautious amid weak earnings updates and the FTSE 100 index was also hit by ongoing concerns on the euro crisis and it lost 6.37 points to 5,769.68.
Gas giant BG Group has been the subject of takeover talk since its shares crashed 20 per cent after it issued a shock warning on future production. It has hired bankers to advise on how to protect itself from any hostile approaches. City traders, who think its production warning was a wobble, not crisis, rumour a bid could still emerge. Its shares hissed up 13p to 1,057p.
Talking of long-running bid speculation, publisher Informa is still touted as a target for German publishing giant Axel Springer. It booked a 2.4p rise to 393.1p.
The deadline for William Hill and AIM-listed Gaming VC to make a firm offer for online gaming group Sportingbet is Tuesday, but City sources think it will ask for another extension for its £530m bid. Sportingbet's shares, on the small-cap index, edged down 0.5p to 51.25p.
Back on the mid-cap index, insurer Beazley said the impact of superstorm Sandy "will result in a material loss to the insurance industry", but said it "is not possible to quantify the impact on Beazley at this stage". In its third-quarter update, the company said premiums written for the nine months to October were up 9 per cent compared with the equivalent period last year. The shares slipped 0.3p to 172p.
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