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Market Roundup
WPP shares fell 6.5% on Monday amid fears of business disruption and client losses following Martin Sorrell’s resignation as chief executive. The FTSE 100 index was down 0.9%.
Sage Group was also off after a profit warning. But Whitbread was up more than 7% on renewed hopes of a spin-off of its Costa Coffee business.
Tuesday saw the FTSE 100 up 0.4%, helped by a weakening pound. The market was also buoyed by news that wages had risen faster than inflation, boding well for consumer spending. Next was up 2.1%.
The blue-chip index rose 1.3% on Wednesday as lower than expected inflation figures hit the pound and raised doubts about whether the Bank of England would push up interest rates in May.
Glencore and other miners were up on news that the US sanctions could hit Russian metal exports. The FTSE’s large-cap mining index posted its biggest one-day gain in nearly two years.
Shire led the FTSE 100 gainers on Thursday after Japan’s Takeda confirmed it had made a £42bn takeover offer – which Shire rejected.
British American Tobacco and Imperial Brands were down after Philip Morris said sales growth of its heated tobacco pipe had slowed, raising doubts about whether next-generation products can compensate for declining cigarette sales. The FTSE 100 added 0.2%.
UK shares were up in early trading on Friday.
Company Focus: Unilever
Unilever is engaged in a charm offensive to allay concerns that plans to relocate its headquarters to Rotterdam could be damaging for UK shareholders.
Some large investors have expressed disquiet that the Anglo-Dutch company’s likely exclusion from the FTSE 100 index could force them to sell shares at an unfavourable price.
Graeme Pitkethly, Unilever’s chief financial officer, said on Thursday that the firm had been widely engaging with investors and that the majority supported its plan. The move needs the support of 75% of UK investors and 50% of those in the Netherlands.
Pitkethly’s comments came as the maker of Dove soap, Ben & Jerry’s ice cream and Surf washing powder reported underlying sales growth of 3.4% in the first quarter, in line with expectations. Management stuck to its guidance of 3% to 5% organic growth for the full year.
The consumer goods giant raised its quarterly dividend 8% to €0.3872 per share, and will start a €6bn share buyback next month to return the proceeds of the recent sale of its spreads business.
Less positively, price growth of just 0.1% in the first quarter was weak, and is not expected to improve much in the second quarter.

Economic Roundup
UK inflation slowed to 2.5% in March, easing pressure on the Bank of England to raise interest rates in May.
The 2.5% annual change in the consumer price index (CPI) was down from 2.7% in February. The decline suggests the inflationary effect of the weaker pound after the Brexit vote is dropping out of the figures faster than anticipated.
Howard Archer, chief economic adviser at EY Item Club, described the fall in inflation as “welcome news to consumers” and meant that a widely expected interest rate rise in May “no longer looks a racing certainty.”
Expectations of a May rate increase also eased following comments from Bank of England governor Mark Carney that its Monetary Policy Committee (MPC) was “conscious that there are other meetings over the course of this year” when it can consider rates.
Wage growth was also weaker than expected at 2.8% in the quarter to February against the same time last year, according to the Office for National Statistics (ONS).
While wages have started to grow by more than the rate of inflation for the first time in over a year, analysts had been predicting higher wage growth of 3%.
Strong employment data again accompanied the wage news. The number of people in work increased by 55,000 in the three months to February compared to the quarter before, with 427,000 more than a year ago. The UK employment rate is now 75.4%, the highest since records began. Unemployment fell to a new 45-year low of 4.2%.
ONS data also showed the first annual fall in London house prices since 2009. Home values dropped by 1% in the 12 months to February, compared with growth of 4.4% nationally.
“The official measure of house price growth has begun to register the slowdown reported by other, timelier measures,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. “The official measure lags because it is based on completed transactions, rather than mortgage offers or asking prices. Data from the Nationwide, Halifax, Rightmove and RICS all suggest that the official measure will slow further.”
Retail sales were down in March due to the cold weather – the so-called ‘Beast from the East’. Sales volumes were 1.2% lower than in February, according to the ONS.
However, the cold weather did encourage more people to purchase goods online – internet purchases accounted for 17.4% of all retail sales in March.
Britain’s retail sector has had a difficult start to the year as consumers struggled with a squeeze on their real incomes and stayed at home to avoid poor weather.
Rhian Murphy, ONS senior statistician, said: “Retail sales fell in the first quarter due to a large decline in March with petrol sales seeing a significant slump as a result of the poor weather keeping many shoppers indoors.”
“However, the snow actually helped boost online spending with department stores in particular seeing growth in their web sales.”

Company announcements that caught our attention this week

18/4/2018 Hammerson Shopping centre owner Hammerson has called off its plan for a £3.4bn takeover of rival Intu – a deal that would have created the UK’s biggest property company. Hammerson announced an all-share offer for Intu back in December 2017, but on Wednesday said: “The proposed Intu acquisition is no longer in the best interests of shareholders,” blaming “current market dynamics in the UK”. Some investors had taken a dim view of the proposed acquisition and Hammerson’s share price has fallen this year. That resulted in a hostile takeover bid for Hammerson by France’s Klépierre. Having rejected Klépierre’s offer out of hand, Hammerson’s board is likely to be under pressure to show why its French rival’s offer price of 635p per share was deemed to be too low. It may be that Hammerson now re-engages with Klépierre with a view to securing a higher offer.
16/4/2018 WPP WPP shares dived on Monday after Martin Sorrell resigned as chief executive following an allegation of personal misconduct – which he denied. Sorrell, who founded WPP 33 years ago, has been the driving force behind the group’s expansion. However, given he is 73 investors have long been concerned about who will replace him. In the short term, two chief operating officers (COOs) are to run the business, with the chairman taking on an executive role. Longer term, a new chief executive is expected – the board has said that it has a succession plan. Once appointed, a new chief executive will likely carry out a strategic review into a business that has arguably become too big and unwieldly, and too slow to react in the changing world of advertising.

Key Company Diary Dates

Tue 24 Apr Anglo American Trading update
Wed 25 Apr Whitbread Full-year results
Wed 25 Apr Lloyds Banking Group Quarterly results
Thu 26 Apr Royal Dutch Shell Quarterly results
Fri 27 Apr Royal Bank of Scotland Quarterly results

Economic highlights over the next week

Thu 26 Apr – ECB Interest Rate Decision – The European Central Bank (ECB) has kept interest rates very low and is not expected to change course this month. Many economists do not expect a rate increase in the eurozone before the middle of 2019.

Fri 27 Apr – UK Consumer Confidence – GfK’s Consumer Confidence Index measures a range of consumer attitudes, including expectations of the general economic situation. In March, the overall index rose three points to minus 7, its highest since May 2017.

Fri 27 Apr – UK GDP – The Office for National Statistics’ first – “preliminary” – estimate of UK economic growth for the January to March period is expected to confirm that growth was sluggish in the first quarter of this year.

Important Notes:
Main source of information: Company Report and Accounts, Bloomberg
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