Investment News: Heritage Oil, Debenhams, IQE, Unilever, Asos & more


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Today’s market overview

Equities resumed their positive momentum in early trading, with the FTSE threatening the 6,700 level as investors responded positively to better economic data from China overnight.


Simon Thompson Bargain Shares constituent Heritage Oil (HOIL) has expanded its exploration portfolio through a farm in with Kina Petroleum for two licences onshore Papua New Guinea.

Retailer Debenhams (DEB) has posted results in line with expectations after a tough period on the high street. The year to August saw gross transaction values rise by 2.5 per cent, with UK sales up 2.3 per cent and international sales 3.7 per cent better. Like for like sales rose by 2 per cent on flat margins but pre-tax profits dipped by 2.7 per cent to £154m after the company invested in a number of stores. Management says it remains cautious on the health of the consumer. We maintain our buy rating.

Another Simon Thompson recommendation IQE (IQE) has won a ‘major’ three year contract with Philips to supply epi-wafers for its solid state laser production.

First Property Group (FPO) is aiming to take advantage of the surging property market and changes in planning which allow office buildings to be converted to residential through a new partnership with clients of a ‘leading global investment business’. A partnership has been formed to which the investors will commit up to £35m, with First Property committing up to £5m, to invest in office properties that will be converted. First Property will take no fees but will get 20 per cent of the profits earned. The partnership has a closed life and will end in May 2018. We keep our buy recommendation.

Rail scheduling and maintenance specialist Tracsis (TRCS) posted a 25 per cent rise in revenues for the year to July but cash earnings only rose by 3 per cent to £3.4m after increased investment in the business. New contracts, clarity on rail franchising and the acquisition of Sky High during recent months mean management is confident of further progress this year. Our recommendation is under review.

Molins (MLIN) says that trading is in line with expectations and order books suggest full year performance will be solid. We keep our buy.

Care homes provider Caretech (CTH) says that trading is likely to meet forecasts and that the recent acquisition of the freeholds of two portfolios will result in a £4.4m rent saving in 2014. Buy.

Simon Thompson recommendation. Bloomsbury Publishing (BMY) posted a 13 per cent rise in interim revenues to £49.2m and a 33 per cent rise in pre-tax profits to £1.1m.

Fellow Simon Thompson recommendation Crystal Amber (CRS) grew its net asset value by 26 per cent to 133.05p in the year to June and this has risen a further 11 per cent in the three months to September. 


Unilever (ULVR) posted underlying sales growth of 4.4 per cent for the nine months to September but turnover dipped by 2 per cent to €38bn after adverse currency movements shaved 5 per cent off. The third quarter has been tougher with underlying sales growth of 3.2 per cent and growth in emerging markets of 5.9 per cent.

Media giant WPP Group (WPP) saw third quarter revenues rise by 7.4 per cent, with like for like sales growth accelerating to 5 per cent. Nine months sales are 7.2 per cent higher. The company has booked £4.9bn of new business in the opening nine months of the year.

Senior directors of Asos (ASC) have taken advantage of its soaring share price by placing some of their shares in the market. Chief executive Nick Robertson and finance director Nicholas Beighton sold 1.88m shares between them at £50 a share, raising £94.1m.

Serco (SRP) has won a £355m extension to its contract to run the Dubai metro. The five year extension runs to 2019.

Property company Segro (SGRO) has signed six new pre-let agreements including its largest ever, a 72,000 square metre distribution centre for ASICS Europe near Dusseldorf. 


Spirent (SPT) says trading has been in line with expectations but delays to some sales which were expected before the year end will push around $12m of revenue into 2014.

AZ Electronic Materials (AZEM) reports that the softness experienced in some of its end markets has continued in the third quarter which means second half revenues will come in around the same level as the first half.

Property business Workspace (WKP) has agreed to sell its Tower Bridge business complex to Grosvenor Britain & Ireland for £51m. In May Workspace won planning permission to build 800 residential units and 60,000 square foot of new business space on the site.


Investment News: De La Rue, Home Retail, Asos, Quindell Portfolio, Sirius Minerals & more


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Today’s market overview

Equities are off colour in early trading but The Trader Dominic Picarda believes that QE in the US is here to stay until early 2014 at the earliest after the latest jobs data and that the reversal today will only be a dip which represents another buying opportunity.


Sell recommendation. De La Rue (DLAR) shares have slipped back today after the bank note printer said that revenues are tracking marginally lower due to tough conditions in its end markets with banknote print volumes down 10 per cent in the first half. Improving performance in other areas of the business mitigated this a little and the order book is up by £25m to £232m since the start of the year. Pricing pressure is expected to continue through the next financial year. Operating profit for the full year is forecast to come in around the £90m level, below the three year profit improvement plan target of £100m for 2013/14.

Premier Oil (PMO) says full year average production is likely to be in the 57,000-59,000 barrels of oil per day range, which is slightly light of expectations due to pipeline and gas export issues in both the UK and Vietnam. But by the end of the year production should be running at 65,000 barrels of oil per day. Buy.

Well head technology specialist Plexus Holdings (POS) has posted record results for the year to June with revenues up by 30 per cent and profits 38.3 per cent higher at £4.27m and strong recent order intake also bodes well for a continuation of this performance. Meanwhile the final dividend is increased by 10 per cent giving a 0.99p payout for the full year. We keep our buy rating.


The improving performance at both Argos and Homebase helped Home Retail (HOME) post 3 per cent sales growth in the first half to just shy of £2.6bn. Argos like for like sales rose by 2.3 per cent and Homebase improved like for like sales by 5.9 per cent, helped by the good summer weather.

Online clothing retailer Asos (ASC) has continued its strong progress with another set of stellar annual results showing a 39 per cent rise in group revenues to £769m and pre-tax profits of £54.7m, up 37 per cent. Margins edged up by 1 per cent with UK sales rising 34 per cent and international sales by 44 per cent. International now accounts for 63 per cent of the total sales.

British American Tobacco (BATS) has grown revenues by 3.5 per cent at constant exchange rates, or 0.9 per cent at actual exchange rates despite a 3.2 per cent fall in cigarette volumes and a 3 per cent decline in tobacco volumes. Its key ‘Global Drive’ brand cigarettes grew volumes by 1.9 per cent and gained market share in their key markets.

Sports Direct’s (SPD) domination of high street sports retail continues with group sales for the nine weeks to 29 September rising by 15.1 per cent to £463.7m and gross profits up by almost 20 per cent to £199.8m despite challenging comparatives from last year’s strong Olympics and Back to School period.

Temporary power specialist APR Energy (APR) accompanied a solid trading update, showing revenues of $84m in the third quarter, with news of the acquisition of GE’s Turbine Rental business for a cash and shares consideration of $314m. The deal also sees APR and GE form a strategic alliance with GE also becoming a key investor in APR.

Set top box technology specialist Pace (PIC) is to acquire Aurora Networks for $310m in cash. Aurora is a developer and manufacturer of network access products for broadband networks.


Quindell Portfolio (QPP) has won a contract to provide telecoms services to Arqiva, which offers communications and media services to the media sector, including a deal with the BBC.

Sirius Minerals (SXX) says it is considering withdrawing its current planning application for the North York Potash project and submitting a new application under which it may extend the original project boundary which would mean submitting applications to both the National Park Authority and North Yorkshire County Council. Any change would not affect current predicted timelines.

Uganda’s emerging BPO market to create employment


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Reflex Eco Group – Uganda News

by Stephen Otage (Local Journalist)

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Uganda’s youthful population, its computer literacy and the good command of the English language, are special attributes which have been identified as potential factors to steer Uganda into a global business process outsourcing destination.

According to James Saaka the executive director National Information Technology Authority, India is currently the leading global destination for business process outsourcing jobs where companies in the developed world contract out non-core business processes to cheaper and effective service providers because of rising labor costs in Europe.

Speaking at the third annual BPO Conclave in Kampala last week, Mr. Saaka said India currently is the largest BPO employer where it now creates 100 million jobs per annum because it has proved to be the most cost effective because most companies have capitalized on business models to outsource.

“ICTs have linked the entire globe. Time and distance are no longer a problem. In 2006, the global outsourcing revenue stood between $120bn-150bn and most of it was offshore business with India alone taking between 5%-6% of the business,” he said. Currently, it is estimated that the global revenue from the business stands at $952bn.

Last week, government commissioned a 250 BPO incubation center at statistics house where 3,000 graduates are currently undergoing training. According to Rogers Karebi the Secretary General Uganda Business process outsourcing association, currently, there are only 48 registered members of the association and three operators running the incubation BPO training center. He said the main services they offer include tele-sales, which involve calling customers and conducting customer surveys, transcription services, and software development.

“We want to partner with local companies like Uganda National Examinations Board, Uganda National Bureau of Standards, The Uganda Registration Services Bureau so that we can help them to digitize all their records,” he said.

Among the possible job openings in the IT sector are services management which include managed operations, customer experience management, value added services business support systems, business intelligence and analytics data and cloud services. Other possible areas include telemarketing, out and in bound sales, in-bound helplines, help desk and trouble shooting, product installation, frequently asked questions creation and hosting, data processing and entry validation, document management, order management and e-mail responses among others.

According to industry experts, the Tanzanian public service is currently the best example in East Africa where government has benefited immensely from outsourcing the cleaning of its payroll. In an interview last week, Selva Kumar the chief executive officer Greeno Tech Solution, the World Bank and the Tanzanian government outsourced a pilot project to clean up the civil service payroll and the results have saved government and the civil servants time and the pain they previously went through.

“Today in Tanzania, government has weeded out ghost workers because the system automatically weeds them out when they die because they are supposed to be verified physically every three month,” he said.

He added that the system has been able to plug gaps like absenteeism amongst civil servants, failure to report to new duty stations when they are posted to work and it has also made it easy for civil servants to receive their salaries promptly.

“We found that some people were benefiting from salaries of dead workers, government did not know the exact number of workers in its payroll but now the system requires that for every 100 workers, there is human resource officer to manage them and the workers have to report every three months to be verified physical and their recent photographs taken,” he said.

According to Anand Nagarajan the head of the India national association of software service companies (NASSOM ) government must take advantage of the literacy of Uganda’s youthful unemployed population because most of them are computer literate and can speak excellent English saying it is one of the qualities that outsourcing companies lookout for.

“The entire world is doing business using English. You are lucky here that your children start speaking it when they are still young. In India speaking and learning English is a challenge because we speak our mother tongue all the time and the English sometimes has an accent,” he said adding that India earns $108bn from exporting services which contribute 8% of GDP and 70% of the foreign direct investment.

Ghana Gets $9.7m For Forest Preservation


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Reflex Eco Group – Ghana News

by Cephas Larbi (Local Journalist)

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Ghana has secured $9.75 million from the Climate Investment Fund’s (CIF) Forest Investment Program (FIP) to undertake a forestry preservation project.
The funds would be used to commence the Engaging Local Communities in REDD+/Enhancement of Carbon Stocks (ELCIR+) project.

The ELCIR+ project will help reduce deforestation and forest degradation, increase carbon stocks and reduce poverty by engaging communities in land management approaches that generate financial and environmental benefits for them.

The project will pilot a jurisdictional approach to REDD+ at the regional level focusing on the Western and Brong Ahafo regions.

Twelve thousand people, half of them females, will receive capacity-building support, seeds and equipment, and financial incentives through benefit-sharing agreements to develop forestry, agro-forestry and alternative livelihoods activities.

An additional 175,000 people will indirectly benefit.

Ghana secured the funds with the support from African Development Bank (AfDB).

Albert Mwangi, AfDB’s Task Manager for the project, in a statement, said with the approval of the project Ghana can exponentially ramp up sustainability of its forest sector and ensure that forest-related communities are both recipients and creators of effective and climate-smart economic solutions.

“The project builds on the AfDB’s history of support in Ghana for sustainable forest management to generate positive environmental and socio-economic outputs.

“We look forward to the lessons coming out of the project’s implementation,” he said.

The project has four components, which are support for community restoration of degraded off-reserve forests and agricultural landscape; promoting climate-smart and environmentally responsible cocoa and agro-forestry systems; support for community alternative livelihoods and capacity-building for government and local communities and support for project management and Monitoring & Evaluation.

The project design was developed in line with FIP requirement, through an intensive stakeholder consultation process that included the private sector such as timber industry, woodworkers associations, plantation developers, cocoa farmers, and those involved in charcoal production.

Others include agriculture and finance, civil society and community organizations such as forest fringe communities, NGOs specializing in the environment, climate change, natural resources management and community development.

Why Changing Congo’s Proposed Oil Legislation Should Be Top of the Bill


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Reflex Eco Group – Africa News


by Jamie Pickering  (Columnist of ThinkAfricaPress)

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Oil legislation proposed in Democratic Republic of Congo could facilitate future corruption and lead to environmental damage in one of Africa’s most diverse and fragile national parks.

A controversial hydrocarbons bill, concerning the management of planned oil production expansion in the Democratic Republic of Congo, has already passed the Congolese senate and is set to be discussed in the parliamentary session which began on Sunday, September 15. For the country that has the lowest GDP per capita in the world and where 7 million children do not go to school, increased oil production presents an opportunity for economic development. However, there are concerns that the bill’s poor drafting will facilitate corruption and could leave the Congo’s fledgling oil industry open to abuses, whilst some opponents of the proposed legislation are aghast that it would allow drilling in Virunga National Park, a UNESCO world heritage site.

Global Witness has called upon the Congolese Parliament to stall the bill, allowing time for further consultation. They believe the bill in its current state is not fit for purpose and requires a lot of improvement.

Congolese Hydrocarbons Minister, Crispin Atama Tabe, has defended the proposed legislation, claiming that the current draft will prevent corruption and ensure transparency in future oil dealings. He has previously stated that “In our code we’ve integrated the principle of the tender for all hydrocarbons rights purchases”, meaning that the details of dealmaking should be made public. He continues, “The ministry will also open a website, so that all the different contracts will be immediately and systematically published.”

As transparent as oil

However, Nathaniel Dyer, from Global Witness, does not think that the bill provides even the most basic safeguards. He says, in conversation with Think Africa Press, that “There is nothing currently in the bill that will prevent risk of corruption or environmental damage in the future. Crispin Atama, has said that there will be an open tendering process, but if you actually look at the law it is a really weak, opaque process, with very little information getting in the public domain.”

Dyer believes some of the problems with the bill are due to a lack of expertise on the part of those who have been drafting it. However, he also thinks there are some interests which are complicit in keeping the bill vague and open to corruption.

“I think it was a deliberate decision not to include some of the basic transparency terms. There is already a Prime Ministerial Decree from May 2011 that any natural resource contract needs to be published 60 days after its been signed. We want to see that language from the decree actually goes into the law, because a decree can be easily revoked by a minister, but if it is in the law this clause is anchored in.”

On top of this desired alteration, Global Witness have called for an open tender process for the allocation of oil rights, the publication of the names of the ultimate owners or beneficiaries of these rights and the deletion of the controversial article in the oil bill that would pave the way for drilling in Congo’s Virunga National Park.

Plans for drilling in Virunga

Virunga National Park spans 7,900 square km, an area three times the size of Luxembourg. It is known for its exceptional biodiversity and is a celebrated UNESCO World Heritage Site. SOCO International, a London-based company and the owner of the ‘Block-5’ oil concession, which includes large parts of the park, plans to drill there, despite both local and international opposition, including from the UK government. SOCO have defended their desire to extract oil from Virunga in a press release, stating that “SOCO believes that our presence in and near the Virunga National Park can support the on-going conservation efforts. A responsibly managed project can bring a measure of stability to a region even in the short term.”

However, opponents of oil exploration in the park, such as the Save Virunga organisation, strongly disagree. They believe drilling will scar the environment and pose a direct threat to the habitats of many animals, including the endangered silverback mountain gorilla.

Many are also worried that oil drilling will result in environmental damage that could be devastating for people in the region. Raymond Lumbuenamo, of the World Wildlife Foundation DRC, has previously claimed that “Two million people’s livelihoods depend one way or the other on the park and the surrounding ecosystem, and there could be disastrous consequences of oil extraction in what is already a very fragile area.”

Beyond Virunga

The bill’s implications for future Congolese oil extraction goes beyond the Virunga National Park. DRC recently struck an agreement with Angola concerning offshore oil and there is on-going oil exploration in other regions of the country. Many believe that getting this new oil legislation right is essential for preventing future drilling from becoming another Congolese resource curse.

Congo has a dire record concerning the responsible extraction of natural resources. Since King Leopold of Belgium plundered the country for rubber in the 19th century, the proceeds of the natural wealth of DRC have not been to the benefit of local populations, but have instead been stolen, embezzled and fought over by rival groups. Throughout its recent history, Congo’s endowment of resources has not encouraged development, but conflict and corruption.

The Africa Progress Panel released a report earlier this year describing some of the most recent natural resource abuses in the Congo. The report revealed that in just five separate mining deals between 2010 and 2012, the DRC lost at least $1.36 billion in revenues from the under-pricing of mining assets. As the report points out, this sum amounts to almost double the country’s combined budget in 2012 for health and education. So whilst well-connected government officials receive generous kickbacks and in return the mining companies benefit from purchasing grossly underpriced assets, state coffers suffer.

Although Caroline Kende-Robb, executive director of the Africa Progress Panel, stresses that only a minority of natural resource companies operate in this corrupt manner, she explains to Think Africa Press that the problem is that “There still are companies that will go in and cut deals with very high-level government officials. They will invest a small amount of money and then they will make a lot of money when they sell off all the concessions, through shell companies and very complex structures.”

Preventing history from repeating itself

Many therefore see it as essential that there is adequate legislation in place to help prevent abuses in mining from being replicated in the oil sector. Congolese civil society groups published a document in April earlier this year seen by Global Witness, entitled ‘Les Organisations De La Societe Civile Impliquees Dans Les Questions Des Ressources Naturelles’ [Organisations of Civil Society Involved in Questions of Natural Resources], recommending that, amongst other alterations, the hydrocarbon law be revised to emulate successful legislation in other countries. The document states that “The civil society organisations have also proposed to adapt the provisions of the hydrocarbon law with the laws of other countries or to use the provisions of petroleum hydrocarbons codes of other African countries [author’s translation].”

Dyer supports this proposal. He believes that “Congo can definitely learn from other countries, such as Botswana and Ghana. For example, there was a South Sudanese oil code passed last year with lots of positive elements in it, such as beneficial ownership and publication of contracts. There are other African countries with great laws on the books, even if they aren’t always followed.”

His final words highlight one key problem: there is concern that even if the oil bill is altered to include recommended best practices, this doesn’t necessarily mean the legislation will ensure that oil revenues will actually benefit the Congolese population.

However, Kende-Robb insists that reform of the bill is still fundamental in ensuring that future oil extraction is well-managed. She stresses that the bill requires stronger stipulations for the details of deals with oil companies to be clearly and openly published because, “If at least there is something in the public domain then that is a huge starting point. Countries that have more information in the public domain tend to eventually be more transparent, because you have a public dialogue and the people can hold the government to account, to a certain extent. In some countries that is easier than others, and in the DRC that is particularly difficult. But improving the bill has to be a step in the right direction.”

A fragile opportunity

Expansion of Congolese oil production could be a massive opportunity for DRC and its population, creating opportunities for development, jobs and improving the country’s currently meagre infrastructure, but Dyer stresses that this opportunity needs to be correctly managed and potential abuses safeguarded against. He states that “Crispin Atama has gone on record saying that he would like oil production to increase from 25,000 barrels per day to 225,000 – this is almost ten times its current production. If the Congolese government keep the same ratio of taxes and royalties then you are looking at around $3 billion extra per year, which is a huge amount, considering that the entire budget of Congo is about $8 billion.”

He believes that getting the proposed oil bill right is absolutely essential because “This is a once-in-a generation opportunity for Congo to relieve some of its problems.”

Gold, cocoa dip in revenues calls for focus on NTEs


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Reflex Eco Group – Africa News

Antony Sedzro (Ghanaian journalist)

This Blog is sponsored by

The World Bank in its latest report is warning Ghana of huge drop in export earnings as a result of falling prices of gold and cocoa. The bank based its predictions on the huge fall in prices of the two commodities in the coming months.

The development has already affected revenue from these commodities. The Monetary Policy Committee of the Bank of Ghana, the country’s central bank, in July released figures to show that export earnings from gold for the first half of 2013 was estimated at US$2.7 billion, compared to US$3.2 billion in the same period in 2012, fall of about 16%. This fall is attributable to lower prices and volumes.

The price of gold on the international market has fallen from a high of about $1,700 in November 2012 to a low of $1,200 in the middle of this year. This is the highest fall in the value of the precious metal in thirty years.

Gold is Ghana’s main foreign exchange earner and the country is Africa’s second biggest producer behind South Africa. The fall in the world market price of the commodity has equally hit mining companies in the country.

Anglogold Ashanti, which operates one of the biggest mines in Ghana, has started the process of laying off about 430 of its mine workers. Newmont Ghana will cut at least 300 jobs in a bid to manage costs more efficiently, directors of the company said last month. Other mining firms have cut back on new mining projects in Ghana, West Africa’s second biggest economy.
During the boom in commodity prices, Ghana last year produced 4.3 million ounces of gold in 2012, a record for the country. Artisanal (small-scale) mining, which contributes about 30% to the country’s total production annually, also blossomed and saw the attraction of thousands of Chinese miners who mined illegally. A public outcry against the presence of Chinese miners led to a security crackdown on their operations. But even the artisanal miners have seen a sharp drop in their activities due to the steep fall in the precious metal’s price.

In a contribution on how this fall in revenue on the country’s economy can be remedied in the long term, respected Ghanaian economist, Dr. Joe Abbey, has revealed that concentrating on Non-traditional Exports (NTEs) could help address the expected challenge in the long term.

“So there is no choice for us but to look at the factors that determine the quality and cost of producing in this country. Oil may save something for us now, but we need to go beyond oil and get to non-commodity-based thing.”

Ghana produces and exports pineapples, oranges, bananas, cashew nuts, and others. These are normally produced by small-holder farmers with very low production capacity but with enormous potentially if supported financially.
For many years, the country has depended on hard currencies earned from exports from gold and cocoa to finance imports and shore up the local currency’s value.
The fall in price of gold and cocoa has also adversely affected Ghana’s currency, the Ghana cedi.
To stem this trend, Dr. Abbey, states that with less earnings from exports and an less controlled imports, “the Bank of Ghana would have to draw down on its holding of foreign exchange to meet the gaps”.
In spite of Ghana’s political stability, the Ghana cedi is currently the second most depreciated currency in Africa, according to the latest Ecobank report on the performance of currencies in Africa.
The report puts the cedi’s rate of depreciation at 14.5%.

Investment News: GKN, Cineworld, ARM Holdings, Whitbread & more


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Today’s market overview

Equities are ticking upwards again, although cautiously ahead of jobs data out of the US later on today. There are also growing concerns over a potential housing bubble in China and warnings of property bubbles in Germany’s main cities.


Engineer GKN (GKN) says trading in the period since 30 July has been in line with expectations as continued strong demand from the commercial aerospace sector has outweighed weaker conditions in the defence sector. Total sales were up 16 per cent to £1.87bn, of which 6 per cent was delivered organically. We keep our buy rating.

Cineworld (CINE) has enjoyed continued strong trading during the 16 week period to 17 October with total group revenues up by 11 per cent, helped by a strong performance from the Picturehouse acquisition, which grew proforma sales by 30.6 per cent. The company had a 25.9 per cent share of the market during the period. Two more cinemas will open before the year end, with four scheduled for next year although Cineworld also has to dispose of three of the Picturehouse cinemas following a Competition Commission ruling. The company also warned that the fourth quarter will struggle to compete with the strong 2012 showing which was boosted by the success of Skyfall. Nonetheless we retain our buy recommendation.

Development Securities (DSC) reports a 2 per cent increase in net asset value during the six months to August. The company is continuing to actively trade its portfolio, posting £13.3 of development and trading gains in the period. It also secured planning consents on seven new developments, mostly anchored by supermarkets. Buy.

Spirit Pub Company (SPRT) grew its cash earnings by 2 per cent to £150m in the year to 17 August. Its managed estate grew like for like sales by 1.6 per cent with the leased pubs showing a decline in like for likes of 2.1 per cent. The company continues to wrestle with its debts, reducing them to 4.7 times cash earnings by the period end and launching a debt reprofiling proposal today. We keep our buy recommendation.

North sea oil producer Enquest (ENQ) has acquired Centrica’s 50 per cent stake in the Greater Kittiwake area and also its 100 per cent interest in the Kittiwake to Forties oil pipeline. This strategic move opens up the potential for Enquest to create a hub by tying in the nearby Scotty and Crathes fields. The deal will cost $39.9m initially, as well as $5.1m of net debt with a potential deferred consideration of $30m if the field development plan for the Scotty or Crathes fields is approved. Buy.

Simon Thompson recommendation. BP Marsh & Partners (BPM) has posted a 9.3 per cent year on year increase in net asset value to £52m for the six months to July. The company delivered £25.2m of pre-tax gains during the first half and ended the period with £16.5m of cash available.


ARM Holdings (ARM) has posted strong third quarter figures with revenues up by 27 per cent in sterling and pre-tax profit up by 36 per cent to £92.6m, which means year to date profits are 37 per cent higher at £268.6m. The company reports that 2.5 billion Arm-based chips shipped during the period and a solid order backlog means management are confident of hitting fourth quarter expectations of revenues of $290m.

Interim results from Whitbread (WTB) showed a 12.4 per cent rise in total revenues to £1.14bn with group like for like sales up by 2.8 per cent. Underlying profits were 12.6 per cent higher at £216.1m. The prime driver of performance was Costa Coffee, which grew underlying profits by 20.5 per cent although the Hotels and Restaurants grew profits by 7.9 per cent and Premier Inn sales rose 12.2 per cent.

BHP Billiton (BLT) has posted a strong operational performance for the three months to September which means it is able to confirm guidance for full year production for petroleum, copper and coal and raise iron ore guidance to 212m tonnes. The company has slashed $2.7bn in controllable costs during 2013 and is aiming to reduce capital and exploration spending by $16bn next year.

Reckitt Benckiser (RB.) says third quarter revenues rose by 5 per cent, helped by a good showing in emerging markets although the pharmaceuticals division remains a weak spot and a strategic review of this business has commenced.


Industrial chains and transmission specialist Renold (RNO) confirmed that it is planning to drastically reduce its UK facility at Bredbury after a strategic review. Meanwhile, a focus on margin improvement has offset weaker volumes and first half underlying adjusted profit is now expected to beat market expectations.

Budget airline and holidays specialist Dart Group (DTG) flew 4.1m passengers in the six months to September, up 13 per cent on last year and also more than doubled the number of package holiday passengers to 634,866. First half profits are expected to be 37 per cent ahead of last year but second half losses will also be higher due to the increased seasonality of the business. Nonetheless, management remains ‘cautiously optimistic’ about delivering full year profit growth.


Vivo Energy Spells Out Commitments


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Reflex Eco Group – Ghana News

by Samuel Boadi (local journalist)

This Blog is sponsored by

Vivo Energy, the company formed by Vitol, Helios Investment Partners and Shell to distribute and market Shell branded fuel and lubricants across Africa, acquired a majority shareholding in Shell Ghana Limited recently.

Christian Chammas, Chief Executive Officer (CEO) of Vivo Energy, who was in Accra to talk about the company’s commitment to Ghana said: “With the addition of Ghana to our portfolio, Vivo Energy now operates in 16 countries. Africa is a fast growing continent and our shareholders will invest well in excess of $250 million over the next three years to take advantage of this growth.”

“Ghana is an important market and a growing economy, which is set to benefit from significant developments in the energy sector,” he said.

“We are acquiring a business with great potential, a long history in Ghana, a high caliber workforce, quality assets and a large and well diversified customer base. Vivo Energy is looking forward to serving all our customers and investing in the business to ensure that it realises its full potential.”

Fred Osoro, Managing Director of Vivo Energy Ghana noted: “Vivo Energy’s commitment to the Shell brand will not change. For our retail customers, our service stations will continue to be Shell branded and provide high quality products and level of service. For our commercial customers only the company name has changed. Vivo Energy Ghana will continue to met their business needs by ensuring the reliable supply of quality Shell branded fuel and lubricants and by building and maintaining an unrivalled reputation for safety, service excellence and technological leadership.”

Vivo Energy employs around 2,000 permanent employees and operates 1,300 retail stations under the Shell brand and has access to approximately 900,000 metres square of storage. The Shell brand has been in Ghana for 85 years being the leader marketer of fuels and lubricants. Vivo Energy has a storage capacity of nearly 11,000 metres square and 124 retail stations with majority offering Shell cards and convenience retail stores.

What next for Kenyan Policy on Somalia?


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Reflex Eco Group – Africa News

by  Kennedy Opalo (Kenyan journalist)

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For two years it almost seemed too good to be true. Kenya had invaded Somalia and occupied Kismayo, a key Al-Shaabab-held city in southern Somalia without carnage visiting the capital Nairobi. The group instead opted for sporadic attacks against churches and police installations in the border regions of North Eastern and Coast. A few explosions rocked the capital, but these were never spectacular. Indeed, some of them appeared to have been motivated by local business rivalries and not some revenge mission by the Somali Islamist group Al-Shaabab. Within Somalia, the African Union Mission in Somalia (AMISOM) mission made quick gains that left Al-Shaabab backpedaling. With a few exceptions, the Al-Shaabab was reported to have been severely weakened and on the run. Before the recent uptick in bombings, Mogadishu was slowly becoming a reasonably peaceful boomtown.

And then Westgate happened. At around noon on September 21st three groups of armed men (and allegedly at least one woman) stormed the upscale mall in Nairobi and started shooting indiscriminately. Several hours after the attack started Al-Shaabab claimed responsibility via twitter. A day later, the Islamist group gave an alleged list of the gunmen, all men between the ages of 20-27. Six were from the US, two from Somalia, and one each from Kenya, the UK, Finland and Syria. More than 36 hours after the attack began at least 69 people had been confirmed dead, including one gunman and two Kenyan officers. A visibly incensed President Uhuru Kenyatta condemned the attacks, and reassured Kenyans of a swift response to punish the perpetrators. Just a few minutes earlier Al-Shaabab had claimed responsibility for the attacks, terming them a retribution for Kenya’s invasion of Somalia in 2011. The Kenyan Defence Forces, under Operation Linda Nchi, invaded Somalia following sporadic kidnappings and attacks along the Kenya Somalia border. The forces still remain in Somalia under the command of AMISOM.

So how will Kenya respond? There will be both short-term and long-term responses to the daring terrorist attack. The likely short-term response holds more risk, and may even jeopardize the strategic objectives of the long-term response.

Understandably, in the short-term there is going to be considerable public pressure for a swift military response from the government. In the coming weeks the government’s response will likely involve both domestic crackdowns in suspected Al-Shaabab havens in Kenya (most likely in Nairobi, the Coast and North Eastern regions) and military operations against Al-Shabab targets within Somalia.

Crackdowns within Kenya will come with a lot of risk. Depending on how they are carried out, the government could end up walking right into Al-Shaabab’s trap by alienating Kenyan Muslims and ethnic Somalis who make up the majority of residents in Coast and North Eastern regions of the country that border Somalia.

Ethnic Somalis (both Kenyan and Somali nationals) also make up the majority of residents in Eastleigh, a district of Nairobi that has in the past witnessed government crackdowns targeting cells linked to the Al-Shaabab militant group.

Kenyan security forces must therefore proceed with extreme caution to ensure that as few innocent civilians as possible are arrested or roughed up by security forces in any operations within the country. A repeat of reported cases of police brutality in North Eastern following the murder of army officers by gunmen would be a terrible mistake. It is also vital that the government stresses the unity of all Kenyans of all ethnic extractions against terror attacks. Any victimization of ethnic Somalis must be met with swift punishment.

Military operations within Somalia will likely involve significant cooperation with Mogadishu, pro-AMISOM militia in Jubaland, AMISOM and the US and may not be completely under the control of Nairobi. I suspect that Nairobi might push for a more aggressive hunt for the leaders of Al-Shaabab, including Samantha Lewthwaite a.k.a. the “white widow,” a British national that is rumored to have been the mastermind of the Westgate Mall attack. Lewthwaite, the widow of London 7/7/2005 suicide bomber Jermaine Lindsay, is suspected to be on the run in Mombasa, Kenya with her four children. Crucially, any military operations in Somalia must be informed by analysts’ observation that it might be the case that Al-Shabaab is a group on the decline that is just lashing out to maintain relevance.

In the long-run, Nairobi will most likely push for a more robust Somali solution to the security crisis posed by the lack of a functional state in its backyard. Top on the agenda will be the strengthening of the security apparatus in the administration of Jubaland, the Somali state that is on the border with Kenya (For a detailed analysis of the situation in Jubaland see here). The creation of Jubaland has long been a goal of the Kenyan government as a buffer against the chaos that has been Somalia for the last two decades. Despite obvious objections from Mogadishu, Nairobi has never publicly denounced this policy goal. The brazen attack in the capital creates even more need for a strong buffer region that can help the Kenyan security forces to deal effectively with a terrorist group that appears desperate and willing to do just about anything to remain relevant. The success of this policy will depend on Mogadishu’s ability to veto it, and support from Ethiopia and AMISOM.

Ethiopia, Djibouti, Somaliland, Puntland and Kenya all have reasons to support the creation of Jubaland, or in general, a more decentralized state in Somalia. Kenya, Djibouti and Ethiopia remain wary of a potential rise in Somali nationalism and any irredentist attempts that might follow to unite all lands that make up the so called Greater Somalia – which would include the Ogaden in Ethiopia, North Eastern region of Kenya, and Djibouti. This is not a crazy fear. Mogadishu once attempted this in the late 1960s in a botched operation (in the Shifta and Ogaden wars) that ultimately led to a military coup and the rise of Siad Barre to power (See Laitin, 1976 [gated]). Ethiopia has the most to worry about regarding this potential risk. The Ogaden remains at the periphery of the Ethiopian state, giving the Somali population lots of reasons to rebel against Addis Ababa.

In the recent past Kenya has experienced an increasing level of integration of the Somali elite into the Kenyan state. Prominent Kenyans of Somali extraction include the leader of Majority in the National Assembly, the Foreign Minister, the Industrialization Minister, the head of the electoral management body (IEBC), among others.

Furthermore, many Somalis both Kenyan and from Somalia have in the recent past made significant investments in Kenya, most notably in the real estate sector. A lot of the investments have been means of laundering money got from illicit activities (some say including piracy). Indeed the governor of the Central Bank of Kenya is on record to have said that he could not account for billions of shillings in the economy. With an estimated total of only 20,000 mortgage accounts, most of the Kenya’s real estate boom has so far been financed by cash.

Yes, a lot more needs to be done for the average Kenyan of Somali extraction in North Eastern region, but the Somali elite in Kenya have every reason to not rock the boat and remain wedded to Nairobi. This same elite has so far tacitly supported Nairobi’s policy regarding the creation of an autonomous region in Jubaland.

The powerful imagery of a picture that went viral showing a Kenyan police officer, who also happens to be an ethnic Somali, carrying a baby while shielding three adults as they ran for safety at Westgate is hard to miss.

A domestic outcome of the Westgate attack will likely be greater scrutiny of the police and intelligence forces. The Kenyan police have been exposed in the past for having looked the other way in exchange for bribes to allow gun-runners to do their thing along the country’s highways. President Kenyatta will likely call for a cleaning of house both at Vigilance House and at the NSIS headquarters. All security agencies will likely see closer scrutiny from the political class and calls to pull up their socks. The minister in charge of internal security, Joseph Ole Lenku, probably has his days numbered on the job.

The quest for greater security will be completed by the proliferation of small arms and light weapons in the country on account of civil wars and general insecurity in the border regions with Uganda, South Sudan, Ethiopia and Somalia. According to a 2012 a study by the Small Arms Survey and the Kenya National Focus Point on Small Arms and Light Weapons, there are between 530,000 and 680,000 firearms in civilian arms across the country. The government must tighten its disarmament operations. Westgate has shown that AK-47s are not just the weapons of cattle rustlers, bank robbers and carjackers.

Will the reforms succeed? Very likely. The Kenya Revenue Authority is a testament to the fact that when it matters, the Kenyan government can reform key state institutions. The security sector is need of just such a reform drive. Insecurity is on the rise across the country, both from common criminals and organized gangs and terrorists. The Kenyan leadership appreciates that insecurity is not just bad in terms of risk to human lives. It is also bad for business.

If Mr. Kenyatta’s first term is to achieve even a modicum of success, the security sector must be reformed.

In all likelihood the president’s quest for a successful first term will outrank a few officers’ venal machinations within the administration. Police ineptitude in dealing with common petty and not-so petty crime creates loopholes for spectacular attacks like Westgate. Reform will therefore need to go beyond capacity building within the Special Forces and dedicated anti-terror units.

For regular Kenyans, life in Nairobi will never be the same again. It is almost impossible to imagine that things that most only read in the news could happen right at home; that a Saturday afternoon at the mall could turn into a ghastly massacre. It will take time before the capital, and the nation, finds its new normal, if at all it does.

So far Kenyans’ resiliency has been outstanding. People showed up in their thousands to donate blood. Buses in Nairobi lowered their fares to take people to blood donation points. More than 40 million Shillings has so far been raised through MPesa for affected victims. Never before in my life have I felt or seen this level of patriotism from fellow Kenyans.

I hope it sticks. Especially because the country will need it in the next few weeks and months as the government formulates and effects a response to the Westgate Mall attack.

Investment News: Costain, Merlin Entertainment, Infinis Energy, Quindell Portfolio & more


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Today’s market overview

Equities are holding to their gains of last week and The Trader Dominic Picarda is ignoring any nay sayers and staying positive.


Costain (COST) is likely to be one of the main beneficiaries of today’s announcement that EDF is going ahead with the Hinckley C new nuclear power station in Somerset. Pending the final investment decision, Costain will provide the design and delivery of the water cooling systems. No value has been given for the contract. We keep our buy on Costain.

Rail scheduling and monitoring technology specialist Tracsis (TRCS) has won a ‘significant’ framework agreement for its rail condition monitoring equipment for an existing customer. This extends the relationship out over the next five years. Buy.

IC Top 100 Funds constituent HICL Infrastructure (HICL) has acquired a 50 per cent interest in the Brighton Children’s Hospital facilities management project and a 29 per cent stake in a Falkirk Schools project which runs four schools.

Japan Residential (JRIC) announces an uptick in the average occupancy of its residential portfolio in the country over the past 12 months, from 94.9 per cent to 95.7 per cent. Buy.


Hot on the heels of the success of the Royal Mail flotation, Merlin Entertainment has announced its intention to float this morning. The amusement park giant, second only to Disney worldwide, generated revenues of more than £1bn from its 99 attractions in 2012, recording a cash profit of £346m. The float, which will have a retail element, will raise around £200m to pay down debt and allow the likes of Blackstone and CVC to cash in some of their holdings. The free float will be at least 20 per cent.

Also joining in the fun is Infinis, the renewable power company owned by private equity house Terra Firma, which has announced its intention to float. The business, which owns 147 power generating assets from landfill gas to windfarms with a capacity of 621MW, is looking for a free float of at least 30 per cent and will also include a retail element.

Co-op Bank says that a review of its financial situation suggests it is likely to need to put aside a further £100m-£105m to settle customer claims including PPI redress. It also reports that the terms of its recapitalisation plan, first announced in June, are now likely to be ‘materially different’ after discussions with disgruntled bond holders but no further details were disclosed.

Third quarter results from Quindell Portfolio (QPP) showed gross sales of £98.1m and adjusted cash earnings of £34.5m. Management says that the company is now delivering run-rate growth of around £300m a year and should hit the top end of expectations for the full year and exceed those expectations in the market for 2014.

Balfour Beatty (BBY) has won a £64m contract for electrification of a 12 mile stretch of the Great Western Line as part of the Crossrail project.

Engineer Senior (SNR) says that performance since 1 July has been in line with expectations and that strong cash generation has allowed it to reduce net debt by £10m to £61m.


Anglo Pacific (APF) has announced a change of management with South African natural resources investment specialist Julian Treger taking over as chief executive and Mark Potter joining as chief investment officer, replacing John Theobald and Chris Orchard respectively.

Graphene Nanochem (GRPH) has announced the resumption of operations at its palm oil refinery in Malaysia. The plant has been shut down since 2012 due to the poor economics of the industry, but this has now changed.