Admiral, Pinterest, property prices: Business news in brief, Thursday 18 August 2016

Insurer announces sharp drop in capital but record results; Pinterest finally arrives at the video advertising party; Norway's sovereign wealth fund, the largest in the world, downgrades value of its British property assets

Pinterest has arrived late to the video advertising game (AFP)

Norway’s £680bn wealth fund slashes value of UK property after Brexit

Norway’s £680bn sovereign wealth fund, the world’s biggest, took the step of independently cutting the value of its massive UK real estate portfolio by 5 per cent after Britain voted to leave the European Union.

“It’s an extraordinary measure,” Trond Grande, deputy chief executive said at a press conference in Oslo as he presented second-quarter results. Given a pick up in the listed real-estate market in the third quarter “we at least have no indication that it should be adjusted further down,” he said.

The fund lost 1.6 per cent in the second quarter on its 168bn-krone (£15.7bn) unlisted real estate holdings, the investor said Wednesday. The fund owns larges swathes of real estate in the UK, including Regent Street properties in a partnership with the Crown Estate. In July, after the Brexit vote, it also bought an office and retail property on London’s Oxford Street.

Overall, the fund returned to gains in the second quarter even as it warned low interest rates will put pressure on its ability to generate returns amid rising withdrawals from the government.

The Government Pension Fund Global gained 94bn kroner (£9bn), or 1.3 per cent, after losing 0.6 per cent in the first quarter. Its stock portfolio rose 0.7 per cent and its bond holdings gained 2.5 per cent.

The fixed-income investments delivered “gains due to falling interest rates,” Grande said. “In the long term, however, lower interest rates have negative implications for future returns on the fixed-income portfolio.”

The fund, which largely follows global indexes, has been whipsawed over the past year by market turmoil stirred up by concerns over growth in China, a rout in commodities and most recently, the Brexit vote.

Bloomberg

Admiral's shares crash despite record results

British insurer Admiral saw its shares slide 8 per cent despite revenues up by almost a fifth to £1.26bn in the first six months of the year.

The firm attracted 340,000 new customers in the period but said market volatility around the vote to leave the EU had impacted its solvency ratio, but said it did not currently expect a material impact on its daily operations.

Admiral warned of additional risks around Brexit including interest and exchange rates volatility, less favourable economic conditions in the UK and other countries in which it operates and the withdrawal of “passporting” rights for British financial services firms.

The company announced a solvency capital ratio of 180 per cent, down from 206 per cent. A ratio of 100 per cent means an insurer has set aside enough capital to meet underwriting, investment and operational risks.

The motor insurer, which owns UK price comparison site Confused.com and US site compare.com as well as the Elephant, Diamond and Bell brands, posted a 4 per cent rise in statutory pretax profit to £189.5m in the six months ended 30 June 30, just shy of analyst estimates.

Admiral said it would pay an interim dividend of 62.9p per share, up 23 per cent from a year earlier and above a forecast of 59.2p per share.

Reuters

Pinterest playing catchup as it launches video Ads

Pinterest is starting to offer video advertising on its image-based social network, seeking to catch up in a fast-growing market.

While Facebook and Twitter have honed their video-advertising offerings for years, Pinterest pursued other priorities, like building its business model, improving search and making it possible to buy some items directly from the site. Now the San Francisco-based startup realises that it's behind on video.

“It's something we've under-invested in in the past, and we're changing that,” said Jon Kaplan, who was hired from Google earlier this year to be Pinterest's head of sales. “This is all part of a broader push from the company to make video a bigger part of the consumer and advertiser experience.”

Pinterest's site and app let people browse and save inspirational images of things they want to buy, make or do in the future. The company then create personalised feeds for each user.

Within those feeds, more video has started to pop up — with YouTube now the top source of pinned items and video use up 60 per cent from a year ago, Pinterest said. The company is also working on a tool to let people post and view original video on Pinterest.

The new video ads will be interspersed with those personalised feeds, catering to the interests of whoever is browsing. If clicked, the ads will start to play with sound. The advertiser can choose to show as many as six related “pins” of items to pair with the ad.

For example, if the ad shows video of a fashion model, the pins might be of items the user can buy to get the look.“Our video ads are going to be tailored to your interests,” Kaplan said. “We've added in additional features that allow the user to take action.”

US digital video-ad spending will reach $9.9bn (£7.6bn) this year, and is set to almost triple by 2020, according to research firm EMarketer. Pinterest, which has more than 100m users, was last valued at $11bn (£8.6bn) in a funding round in March 2015.

Bloomberg

L&G launches US infrastructure push with university deal

Legal and General (Reuters)

British insurer Legal & General has agreed its first infrastructure deal in the United States, investing around $100m (£77m) to help the University of California, Merced, expand its campus.

The deal is part of a roughly $660m (£500m) financing package that will see the campus more than double in size to accommodate 10,000 students and allow the university to grow its research and teaching programs, Legal & General said in a statement.

The 38-year financing - in what L&G said is the first-ever public-private partnership in the US educational sector - is part of its strategy to target property deals that can help it meet its long-term pension liabilities.

“We ... continue to target transactions backed by economic and social infrastructure as part of Legal & General’s wider approach to real asset investments,” said Charles-Henry Lecointe, senior infrastructure investment manager at Legal & General Investment Management Real Assets.

Reuters

Ryanair’s u-turn as it commits to $1bn Italian job

Ryanair announced ambitious expansion plans in Italy after previously threatening to cut back on routes and axe jobs (Getty)

Ryanair announce a record growth plan for Italy in 2017, after a u-turn by the Italian government on proposed tax hikes.

The Dublin-based carrier had threatened to close routes 16 routes in the country but will now boost capacity by 10 per cent and invest £1bn in a fleet of ten new aircraft.

Ryanair says it will open 44 new routes and grow traffic to 35m passengers in 2017 and create 2,250 jobs at Italy's airports in 2017.

Matteo Renzi’s government had said it would increase passenger departure taxes by 40 per cent to help subsidise redundancy payments at ailing flag carrier Alitalia.

Ryanair’s u-turn comes a month after the airline said it would slow capacity growth in the UK due to economic uncertainty after the EU referendum.

Laura Ashley announces China launch and improved sales

Laura Ashley finally announced a launch in China after years of flirting with the idea.

The traditional brand, known for floral frocks and printed fabrics will open a website via a subsidiary of Chinese online retailer Alibaba and begin selling clothing in China’s first House of Fraser store in Nanjing this Autumn.

“China is not easy as evidenced by how many have got in and how many have come out. It is all about finding the right partner and doing it at the right time,” Seán Anglim, Laura Ashley’s finance director told the Guardian.

The company also announced results today, posting £400.9m in sales in the 74 weeks to June 30, a 4.1 per cent increase on a like-for-like basis. The online business grew 15.7 per cent in the period, offsetting a decline in fashion revenues,

Tan Sri Dr Khoo Kay Peng, the company’s chairman who owns the majority of the business, said: “In a time of uncertainty for retail and the global economy at large, we are optimistic and confident that Laura Ashley will remain a business with solid foundations to withstand challenges as they arise.”

Deutsche Boerse and LSE merger on track as 89%of shareholders accept

The London Stock Exchange (PA)

Deutsche Boerse put the final tally of its shares tendered for its agreed £22.28bn merger with the London Stock Exchange at 89 per cent of all shares on Wednesday .

The deal had already been approved by both LSE and Deutsche Boerse shareholders and is expected to be submitted to the EU competition authorities and other regulators for vetting in the coming days.

“We will now focus on achieving the necessary regulatory and anti-trust approvals,” Carsten Kengeter, executive, said in a statement.

“This merger will create a globally competitive market infrastructure group benefiting our customers, shareholders and the wider economy,” he added.

Shareholders had until last Friday to tender their shares. Deutsche Boerse had already passed the 75 per cent acceptance level that clears the way for the planned holding company to establish a control and profit transfer agreement if it chooses to do so.

The final acceptance tally is not sufficient to permit a squeeze-out of remaining shareholders but Deutsche Boerse has not so far said it would pursue a squeeze-out.

Deutsche and the LSE expect the transaction to close in the first half of 2017.

Reuters

Balfour Beatty resumes dividend as turnaround continues

( Cate Gillon/Getty Images) (Cate Gillon/Getty Images)

Balfour Beatty declared its first dividend for 18 months on Wednesday and said it expected to boost margins to standard levels for the sector over the next 24 months following a turbulent few years.

Leo Quin, Balfour's chief executive, said some UK orders had been put on hold after the Brexit vote but said it was too soon to assess the full impact of the referendum result.

Balfour overhauled its businesses after losses at its UK construction division, as well as some in the Middle East and Asia, led to multiple profit warnings that forced it to scrap its 2015 dividend, cancel a share buy-back and reorganize pension payments.

Most losses were related to projects undertaken during the recession at wafer thin margins which later failed to meet savings targets or budget forecasts as they neared completion.

Balfour shares rose almost 10 per cent on Wednesday to trade higher than their pre referendum close after it declared a 0.9p interim dividend and published better than expected results.

Reuters

Walkers crisps competition advert banned by watchdog

Gary Lineker (John Phillips/Getty Images))

A Walkers Crisps competition, starring Gary Lineker has been banned after more than 100 customers complained that prizes were almost impossible to win.

The advertising standards agency found that just 800 of the 20,000 holidays on offer had been claimed.

The promotion required entrants to spell out destinations with tokens found in crisp packets. Customers could then swap the letters on the company’s website.

The Advertising Standards Authority found the promotion was “misleading” because the letter K was not available on the website, meaning holidays on offer to destinations including Bangkok, Hong Kong, Kuala Lumpur, New York, Sri Lanka and Tokyo could not be won.

A Walkers spokesman said: “We welcome the ASA's recognition that our Spell and Go promotion was fair as everyone who participated had an equal chance of winning one of the 20,000 holidays available.

“We appreciate that the online letter swapping mechanic could have been clearer and we will ensure all future promotions take this feedback on board.”