BUSINESS LIVE: Metro Bank secures financing lifeline; GSK agrees £2.5bn China vaccine


BUSINESS LIVE: Metro Bank secures financing lifeline; GSK agrees £2.5bn China vaccine deal; Croda cuts profit outlook

The FTSE 100 is up 0.2 per cent in early trading. Among the companies with reports and trading updates today are Metro Bank, GSK and Croda. Read the Monday 9 October Business Live blog below.

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Croda cuts profit guidance as clients focus on reducing stockpiles

Croda International has slashed its annual earnings outlook following a weaker-than-expected performance as its customers continued to destock their inventories.

The speciality chemicals provider now anticipates reporting adjusted pre-tax profits of £300million to £320million this year, down from previous guidance of between £370million and £400million.

GSK agrees £2.5bn shingles vaccine deal with China’s Zhifei

GSK has agreed a bumper deal with China’s largest vaccine company Zhifei for the exclusive rights to distribute the FTSE 100 firm’s shingles vaccine.

The pharmaceutical giant told shareholders on Monday the distribution agreement for Shingrix will be worth £2.5billion over an initial three-year period starting on 1 January 2024.

‘The fundamental challenge for Metro is that they do not have a large enough balance sheet’

‘The asset sale will likely attract decent interest, particularly in an environment where there is limited opportunity for organic loan growth for the sector.

‘However, we note that as a result MTRO will (i) likely have to recognise a considerable loss on disposal given the current higher rate environment, although over time this would likely be offset by higher revenue from re-investing the proceeds in higher-yielding assets, and (ii) reduce any AIRB benefit, were it to materialise.

‘In addition, the fundamental challenge for MTRO is that they do not have a large enough balance sheet for the current cost base, which will only be exacerbated by an asset sale. ‘

Could House of Fraser be lost from the high street forever?

Frasers Group’ boss Michael Murray has announced that House of Fraser could be getting rebranded, after taking the reigns of the business from his retail mogul father-law Mike Ashely.

Mr Murray, who is married to Ashley’s daughter Anna, is set to abandon his father-in-law’s winning formula of selling stock at heavily slashed prices, to shift the Frasers Group upmarket.

Metro Bank secures fresh financing in ‘new chapter’ for troubled lender

Metro Bank agrees rescue deal

Victoria Scholar, head of investment at Interactive Investor:

‘Metro Bank has agreed to a rescue deal – Colombian billionaire Jaime Gilinski Bacal will take control of the lender by becoming its largest shareholder, amassing a 52% stake by investing £102 million into the lender. He’s contributing to Metro’s £325 million fund raise made up of £150 million of new equity and £175 million of new debt. Plus, it is refinancing £600 million of debt. CEO Dan Frumkin said this is ‘a new chapter’ for the bank

‘Over the weekend Sky News reported that NatWest and Lloyds were approached by regulators about a bid for some or all of Metro Bank. Santander UK was also reportedly working on an offer as the board sought out financing solutions before the Monday morning London stock market open. However, getting gobbled up by a big lender would clearly destroy Metro’s ambitions as a challenger bank.

‘Last week was an extremely volatile period of trade for Metro Bank with a sharp sell-off on Thursday following news it was looking to raise hundreds of millions of pounds in cash to boost its balance sheet and Fitch put the stock on negative watch.

‘Treasury officials and the Bank of England were understood to be in discussions about the embattled lender. The stock then rebounded significantly on Friday following reports it was looking to sell off £3 billion of assets from its mortgage book.’

Market update: FTSE 100 flat; FTSE 250 down 0.2%

London-listed stocks are treading waster in early trading, as oil prices jump more than 2 per cent due to the ongoing military clashes between Israeli and Hamas forces, while shares of embattled Metro Bank have gained after announcing a capital raise.

Precious metal miners have gained 0.6 per cent while the heavyweight energy sector are up 2.9 per cent.

Aerospace and defence stocks have added 1.2 per cent.

UK tax system holds us back, top firms warn

Nearly half of UK businesses have said the nation’s tax regime is ‘unfavourable’ and puts Britain behind China and other rivals.

Manufacturers are seeking major business reform in next month’s autumn budget – bringing the economy ‘out of its current torpor’.

The call comes as a survey published by Make UK, a manufacturing group, and RSM, a consulting firm, revealed flailing confidence in the system.

Croda cuts profit outlook

British speciality chemicals group Croda International has cut its 2023 profit, due to destocking and weak demand, particularly in its beauty care business in North America.

The FTSE 100 company said it now expects 2023 group adjusted profit before tax of £300million to £320million. It had previously forecast £370million to £400million.

Retailers selling beauty products globally have been battling weak demand for much of this year, amid a slow recovery at duty-free and travel destinations and especially in the key China market.

GSK agrees £2.5bn China vaccine deal

China’s largest vaccines company Zhifei will pay GSK £2.5billion for the exclusive rights to distribute GSK’s shingles vaccine in the world’s No.2 pharmaceuticals market.

The vaccine, named Shingrix, is GSK’s top-selling medicine. The deal with Zhifei is part of its efforts to reach more £4billion in sales by 2026, GSK said.

Zhifei will purchase volumes of Shingrix with a value to GSK worth £2.5billion over an initial three-year period, it said in a filing to the Shenzen stock exchange.

Luxury goods giant LVMH set to bag a bumper quarter

Metro Bank secures financing lifeline

Metro Bank has secured hundreds of millions of pounds in fresh financing, with the lender declaring a ‘new chapter’ in its history and promising shareholders ‘significant’ growth ahead.

The bank told shareholders on Monday it had secured a £325million capital raise and £600million of debt refinancing, ‘enhancing balance sheet strength and accelerating earnings potential’.

It also confirmed it is in discussions regarding the sale of up to £3billion of residential mortgages, providing further breathing space on its balance sheet.

Daniel Frumkin, CEO at Metro Bank, said:

‘Today’s announcement marks a new chapter for Metro Bank, facilitating the delivery of continued profitable growth over the coming years.

‘Metro Bank made a statutory profit after tax in Q3 2023, and continues to demonstrate ongoing momentum as we strive towards our ambition to be the UK’s number one community bank.

‘Our strong franchise is underpinned by our loyal customer base and engaged colleagues and we will continue to develop the Metro Bank offer to provide the digital and physical banking services our customers expect. We thank our shareholders and noteholders for their continuing support of Metro Bank and our customers.’

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