BP in $1.5Bn supply deal with Rosneft

Major oil player BP (BP.L) has announced that it has signed a supply deal with Russian oil major Rosneft in which it will pay at least $1.5Bn upfront for the supply of oil. This is the second agreement reached recently between the two companies since Rosneft’s Executive Chairman Igor Sechin had a visa ban and asset freeze imposed on him after the Annexing of Crimea by Russia earlier this year.

The agreement will run for 5 years on a pre paid basis and covers export deliveries of up to 12m tonnes of oil products which can be replaced by oil.

The company Rosneft has not been affected by any sanctions directly and the two companies are said to be looking for other opportunities of working together.

Rosneft chairman Sechin said in a statement today “It provides BP with stable supply chain and guaranteed quality of oil products and allows Rosneft to support high profitability of its sales activities and acquire additional financial resources in accordance with the referential nature of such deals.”

Shire Rebuffs AbbVie Approach, hails independant future..

In focus Shire Plc (SHP.L) today revealed a bid by US Group AbbVie for the company, comprising 2,044p in cash and 0.7988 AbbVie shares per Shire share, valuing it at 4,611p per share.  This represents a 23% premium to Shire’s share price of 3,738p on June 19th.

Shire has turned down the current approach, which they say “fundamentally undervalued Shire and its prospects as a leader in rare diseases and specialty markets” and also expressing concerns over the proposed structure of creating a US listed holding company within the uk tax domicile.

Shire said it has grown significantly and made increasing returns to shareholders over the last 12 months and also expects this growth to continue in the future, commenting on the deal proposal the company said it would “deny Shire shareholders the full benefits of Shire’s growth strategy”.

Rolls Royce Unveils Share Buyback Scheme

Rolls Royce (RR.L) today announced news that it has committed to a £1Bn share buyback scheme subject to the completion of the sale of its Energy gas turbine and compressor business to Siemens. The sale announced on 6 May this year, is expected to complete by the end of 2014.

John Rishton, CEO of Rolls-Royce, said: “As no material acquisitions are planned, and reflecting the strength of our balance sheet, we will return the proceeds of the Energy sale to our shareholders”.

Shire Soars on Bid Rumours

Pharmaceutical group, Shire Plc (SHP.L) continued its climb this afternoon after reports earlier in the week of a potential bid on the company. It was reported by reuters that Shire has hired Citi as an advisor as it expects to receive approaches.

As an Irish tax based company the corporation tax rate is the lowest in the world and a growing portfolio of effective drugs makes the company a likely target, particularly after similar companies in the healthcare sector have been getting snapped up as buyers look to achieve lower tax bills to keep up with the competition.

The share price was up nearly 4% at a record high tuesday and it has continued its rise today, particularly strong this afternoon.

Berkley Group Full Year Results Show Higher Home completions

Homebuilder, Berkeley Group (BKG.L) today announced full year results for year ending 30th April 2014.

Highlights of the results show strong home completions, an increase in the earnings per share of nearly 40% and a much larger net cash balance. The company has been upgraded to BUY from HOLD buy numis brokers with a new target price of 2491p (current trading around 2194p), though Berkeley Group shares fell in early trading this morning.

OPERATIONAL HIGHLIGHTS

·    3,742 new homes completed in the year, some 30% more than at the peak of the market in 2007

·    Consistent delivery of around 10% of all new homes built in London over the last five years

·    £353 million invested in nine new sites in the year, sufficient to build a further 2,500 new homes

·    All of Berkeley’s sites which benefit from an implementable planning consent are in construction

 

Commenting on the results, Managing Director Rob Perrins said:

“Berkeley has built and sold 3,742 new homes this year at an average selling price of £423,000, driving a 40.4% increase in pre-tax profits to £380.0 million and a rise in pre-tax return on equity from 22.4% to 27.5%.

The Group remained ungeared throughout the year, with net cash rising from £44.7 million to £129.2 million after paying £195.2 million of dividends to shareholders and investing further in new land and construction. This investment and a favourable market have enabled us to build and sell over 15,000 new homes in London and the South of England over the last five years, during which period we have delivered some 10% of both the total private and affordable homes built in London.

Berkeley’s vision is to be a world class business generating long-term value by creating successful, sustainable places where people aspire to live. These results are due to a unique combination of an entrepreneurial approach to land buying, a track record of working in partnership with local authorities to create great places, strong financial discipline, autonomous management teams and above all a passion for proving how good new housing can be.

With cash due on forward sales now approaching £2.3 billion and estimated gross margin in its land holdings now in excess of £3 billion, the Board has visibility over its commitment to meet the remaining 180 pence of the first milestone through regular dividends. The land and planning now in place has extended this visibility to delivery of the second milestone payment of 433 pence by September 2018 and Berkeley has made substantial inroads into the planning requirement on the land required to cover the third milestone payment of a further 433 pence by September 2021.

Looking forwards, we continue to see opportunities to acquire land that meet our hurdle returns.  This will typically be characterised by long term and complex development sites to which Berkeley can bring its expertise.  The land already in our pipeline comprises a number of sites that match these criteria and the ongoing operational focus is to deliver this over the next five years.  If this is achieved, it has the potential to enhance the existing gross margin in the land bank by some £1.5 billion and help build a sustainable business.

Berkeley has finished the year well, delivering a strong cash flow performance, growing its unrivalled land holdings through acquisition and optimisation, continuing to invest in inventory and securing additional forward sales. This gives the Board the confidence to continue to invest and add value whilst never underestimating the risks inherent in a cyclical market.

Over the remainder of the current plan, the Board aims to deliver the targeted dividends from earnings while maintaining the balance sheet at least at its current level and the value in its land holdings above £3 billion.”

Broker Commentary positive for Weir Group

Recent broker comment has turned positive for Weir Group Plc (WEIR.L).  The share is now rated as a hold by 8 major brokers amid positivity in the US oil and gas sector. It is reported US companies are drilling pretty much non stop to hit their targets which is good news for Weir Group as 40% of their total sales go to this sector.  Weir Group supplies pump equipment used in fracking and non conventional drilling techniques. Weir Group is also benefits from after market maintenance and resupply as overworked pumps breakdown and wear out quicker than they normally would.

Another positive to note of Weir Group is the recent decision to walk away from a buyout of Finnish Group Metso.

Rumours of Qatari or EDF takeover bid for Centrica

There have been reports circulating today of a rumoured takeover bid by Qatari investors or French energy company EDF on energy giant Centrica (CNA.L).

Reports in the media suggest a group of Qatari investors may have already approached Centrica Shareholders with a stock purchase offer ahead of a cash offer for the company. This comes after Centricas deal last November to import liquified gas from Qatar, a deal which due to run for the next 4 1/2 years.

There has also been speculation that an offer may appear from UK power station partners, EDF.

Centrica (CNA.L) has been under pressure lately amid 2014 profit warnings and the departure of several top company executives. Also the company has recently pledged to put three of its UK gas fired power stations up for sale.