Killik & Co In The News

The Telegraph

Telegraph Business Club produced a video on Killik & Co focusing on the history of the firm and the services provided.

The Independent

The telecoms group Cable & Wireless Worldwide (CWW) shocked the market yesterday as it warned that the coalition Government's spending cuts would hit its profits. The news emerged as the company prepared for clashes over its executive pay packages with shareholders attending its annual meeting today. In an unscheduled update, CWW said it had become the first blue-chip victim of the austerity Budget unveiled by the Chancellor last month, which outlined an initial £6bn of state spending cuts to help tackle the deficit. Jonathan Jackson, the head of equities at Killik & Co, said the fall in the share price yesterday was "a reflection of the market's disappointment that the company has warned so soon after the demerger".

Daily Mail

It was Cadbury that caught the headlines. Here was a quintessentially British company with a proud Quaker background. Its brands were universally recognised. When Kraft arrived with a bid, there were howls of outrage: how could so loved an institution fall into the hands of an American giant making cheese that tasted of little more than plastic? In the end, money won out: Cadbury shareholders were offered £11.5bn and the company gave in. Since that takeover, the clamour over foreign takeovers of UK companies has subsided. But over the past few months, there have been a steady stream of deals: Chloride, Delta, Scott Wilson and Arriva - all have ceded control to overseas buyers. Many other, smaller bids have scarcely shown up on the public's radar: figures from Thomson Reuters show that in the first six months of the year, 407 British businesses have fallen into foreign hands. And yesterday, two more - Tomkins and International Power - were added to the list of potential targets. The Tomkins and International Power deals are the most recent examples of foreign bids. But they are unlikely to be the last. Jonathan Jackson, head of equities at stockbroker Killik & Co, said: 'In an era when companies will struggle to achieve growth organically, takeovers become an alternative. Companies have got a lot of cash at the moment. 'And with sterling at $1.50, British companies appear cheaper than they did two years ago.' If the bids go through, International Power and Tomkins will join a long list of British industrial groups that have fallen into foreign hands.

CityAM

With BP’s temporary capping of the leaking Macondo well last week, investors piled back into the stock. Fidelity’s star fund manager Anthony Bolton declared that investors have “a classic once in-alifetime opportunity to buy BP” and even after the announcement on Sunday that gas is now leaking from the ocean floor, most investment notes yesterday retained “buy” recommendations. On the upside, analysts highlight that BP has been severely oversold. Its share price hit a low of 296p at the end of May, which was for many a strong “buy” signal. Those who snapped up shares or bet long at the stock’s bottom could by now have made more than a 30 per cent profit. Moreover, with a temporary cap cutting off the leak last week, BP has made significant progress. Many analysts target prices of over 500p, with UBS targeting 525p, AlphaValue suggesting 543p and Evolution Securities more bullish still at 580p. They argue that BP has a strong balance sheet, plenty of assets to sell and that models suggest it is severely undervalued at its current price. But not everyone agrees with this optimistic outlook. Despite its 12-month 455p price target, the Royal Bank of Scotland urges caution: “From a short-term point of view, we suspect that 400p will manifest as resistance and short-term traders should prepare to take profits.” Killik & Co’s Jonathan Jackson took a similar line on Friday even before reports of new gas leaks emerged on the weekend, pointing out that “it is still too early to tell whether the well will remain shut off”.

The Telegraph

- Inflation is yesterday’s problem and investors buying index-linked gilts today will lose money tomorrow, according to the only man I can remember who consistently predicted the credit crisis many years ago. David Kauders’s views are all the more surprising because he was extolling the advantages of gilts – that is, bonds or IOUs issued by the British Government – more than a decade ago, when most other independent financial advisers favoured shares and share-based funds. Back then the bond specialist at Kauders Portfolio Management argued that decades of credit expansion had created a bubble in asset prices which must prove ultimately unsustainable, causing stock market valuations to crash. Even if Mr Kauders is wrong about a double-dip recession, he is not the only bond expert to be wary of linkers today. Peter Day of Killik stockbrokers said: “They are bad value in the short-term, although the fact that gains are free from capital gains tax (CGT) may make them more attractive to higher rate taxpayers over the long term. “But prices have run up so far that short-term index-linked gilts currently offer negative real yields. For example, Index-linked 2.5 per cent 2011 are currently trading at £308.83 per £100 of nominal stock. “The RPI since they were issued would add £292 to their redemption value if there is no further increase before they are redeemed next year. So you would need to see RPI rise to 5.7 per cent over the next 13 months to get your money back if you buy today and I would not regard them as attractive.” While nobody can be sure what will happen with inflation, it is clear that index-linked gilts do not provide the risk-free, tax-free return that NS&I index linked gilts offered – until last week.

Financial Times

Asset management analysts have criticised Gartmore’s handling of the departure of star manager Guillaume Rambourg, saying it risked accelerating redemptions. The UK-listed fund house announced last week that Mr Rambourg, who was temporarily suspended for breaking internal trading rules, had resigned. Keith Baird, analyst with Oriel Securities, says Mr Rambourg’s departure is a “huge own goal” by Gartmore. Mr Baird says: “I am aware there is concern in the market [about Gartmore]. However, my feeling is that this is US-style paranoia over internal policy breaches plus over-regulation. It results in tragedy for Gartmore investors.” Gartmore’s share price dipped by 5.5 per cent last Thursday before it recovered. Jonathan Jackson, head of equities at stockbroker Killik, says: “It is likely to remain volatile in the short term.” Killik & Co’s Mr Jackson says the performance of the team’s long-only funds has remained in the first quartile and upper end of the second quartile of its peer group since March. “This is encouraging. Mr Guy’s long-term long/short equity performance remains impressive – he has generated an annualised return of 11.4 per cent since late 1999. “Although it would be prudent to wait until the dust settles on the situation, we are not minded to change our buy rating on Gartmore European Absolute Return for now,” he says.

Investor's Chronicle

Buy IQE at 21p, says Killik; Buy SDL at 504p, says Altium Securities; Buy Supergroup at 800p, says Oriel Securities.

Financial Times

Investors seeking to avoid the new 28 per cent rate of capital gains tax (CGT) are being warned not to rush into offshore bonds, as they risk paying high charges – and an even higher tax bill. Advisers report that investors with larger portfolios have been considering the use of offshore bonds, as they allow investment returns to roll-up free of tax with gains liable to income tax only on encashment. “The annual Isa allowance should be the first port of call, but beyond that we have seen those with larger asset values looking more at offshore bonds to benefit from gross roll up and the ability to manage their portfolio without regard to the CGT position on a day to day basis,” says Lee Smythe, managing director of Killik Chartered Financial Planners

Guardian

The US private health giant Humana is ready to cash in on government plans to open up the NHS to more private sector involvement. The centrepiece of health secretary Andrew Lansley's plan to reform the NHS is to transfer power to GP-led consortiums that will commission hospital and community care. GPs will manage the £70bn budget overseen by the soon-to-be abolished primary care trusts (PCTs) and will supposedly make choices on where money goes. Jonathan Jackson, healthcare analyst with stockbroker Killik & Co, said: "Outsourcing will save government money. Typically, the private sector can provide services between 20% and 30% cheaper than the state. That's what all this is about."

Guardian

Austerity drive will hand billions to private sector. Outsourcing firms are preparing for bonanza of contracts to provide everything from binmen to back office bureaucrats. A government efficiency drive aimed at slashing spending in town halls and boosting productivity in the health service is likely to deliver billions of pounds of new business for private companies, the Guardian has learned. Outsourcing firms are preparing for a bonanza of local authority contracts to provide everything from bin men to back office bureaucrats and have reported a doubling in the number of deals on offer this year. Private health companies are also expecting to earn billions of pounds from the planned overhaul of the NHS in which GPs would take over responsibility for spending £70bn.Executives at Capita, the UK's largest outsourcing firm, said the number of opportunities for local authority contracts has already doubled this year and they see the healthcare market as "vast and potentially lucrative". The US health giants Humana, UnitedHealth, Aetna and MCCI are all understood to be interested in healthcare contracts that could flow from a new commissioning system in which GPs may be given the power to buy in services from any health group or hospital that is properly accredited. Minnesota-based UnitedHealth has already become a key adviser to primary care trusts and is running two GP practices in Derbyshire and three in London. "There could be a bonanza for private companies if these changes go according to plan," said Jonathan Jackson at the stockbroker Killik & Co.

The Telegraph

Market Report: FTSE reverses gains on US growth worries.. Not even a rally from BP was enough to lift the large-caps into positive territory. News that the oil giant had choked off the flow of oil from its undersea well that has been spilling into the Gulf of Mexico sent BP shares up 5.4 to 407.15p. But Jonathan Jackson, head of equities at Killik & Co, cautioned that an investment in BP’s shares still remained high risk.

Daily Mail

GlaxoSmithKline attempted to draw a line under its legal woes yesterday, announcing an estimated £1.57bn charge to settle a host of disputes over its controversial Avandia diabetes treatment and other drugs. The drugs giant said the second quarter charge would deal with the ‘vast majority’ of liability cases relating to its Paxil anti-depressant drug and Avandia, which some research has linked to heart attacks. Jonathan Jackson, head of equities at brokerage Killik & Co, said: ‘The last two days look to have been good for Glaxo, helping to draw a line under various disputes, at least as far as you can in these situations.’

The Associated Press

Commenting on BP, Jonathan Jackson, head of equities at Killik and Co in London, said a bout of profit-taking was understandable given the share price rebound since late June and continued uncertainty about how much the company will be damaged by the Gulf disaster. "Only once the flow of oil has been stemmed can the market begin to gain some visibility over the cost of the cleanup and potential liability for damages," Jackson said. "However, the latest announcement brings this point ever closer." BP says the total spending included nearly $165 million paid to settle individual claims. The company says it is still too early to estimate the final total of costs and compensation. Meanwhile, it agreed to set up a $20 billion fund to cover potential costs, and it has suspended share dividend payouts for the rest of this year. "Going forward,it is unclear what level of discount the shares will trade at relative to the peer group," said Jackson, the analyst. "Consideration will have to be taken of factors such as the ability to access new assets — clearly the speculation BP may be barred from obtaining drilling permits in the U.S. in the future is unhelpful — or to attract specialist staff in a notoriously tight labor market."

Daily Mail

Market Report: There's no stopping Blinkx. Shares of the video search engine, which was spun off from Autonomy in 2007, followed June's leap of 35pc with a further rise of 7.75p, or 16.5pc, to a year's high of 54.5p. It is in brokerage Killik's Top 10 Special Situation fund, and stock-picker Mike Savage says the shares are still a buy given the huge potential in internet video traffic, through which it can offer highly targeted advertising.

Financial Times

- Investors buying exchange traded funds (ETFs) are being urged to confirm their tax efficiency, as capital gains from some ETFs can be subject to income tax at rates of up to 50 per cent. Wealth managers and analysts warn that most ETFs listed on US or European exchanges, and up to a quarter of the few hundred listed on the London Stock Exchange (LSE), do not have “distributor” or “reporting” status, so creating a significant tax disadvantage for UK investors. Without this designation, gains from ETFs are taxed as income in the hands of investors, rather than the less-penal capital gains tax (CGT) rates of 18 or 28 per cent which normally apply to investment funds and shares. Mick Gilligan, funds analyst at Killik & Co, an advisory stock broker, said: “The tax status of ETFs makes a huge difference and is a huge headache for investors.” While the most commonly bought ETFs do have distributor status, Killik’s Gilligan said that investors were also likely to be mistakenly buying non-distributor funds.

Financial Times

David Stevenson mentions Killik in his Adventurous Investor column: I agree with a note from brokers Killik & Co last week that said: “Even though a number of companies have cut or reduced their dividends over the last couple of years, the prospective yield on equities, even after adjusting for the suspension of payments by BP, is currently around 3.9 per cent. This is currently well ahead of its 30-year average (3.1 per cent) and the return on cash and UK government bonds. After a period of financial prudence, many companies have come through the recession in rude health. Cost bases have been realigned, so that the recovery in sales has led to a sharp increase in profitability and free cash flow due to operational gearing. As a result, strong corporate balance sheets provide the flexibility to pay progressive dividends to shareholders.” The key for me is that word “progressive” – where a company’s management has publicly committed to growing the payout year in, year out – hopefully at a rate that is above inflation. As Killik noted: “A progressive policy is a sign of management’s confidence in the outlook for the company. In addition, a growing dividend stream contrasts with the flat income derived from both corporate and government bonds, and provides protection from inflation over the long term”. So which UK companies would a “progressive” dividend stock screen currently identify? I’ve studied three screens. First, a Killik screen that searches for progressive dividend payers with more than ￡1.50 in cash earnings for every ￡1 of dividend paid out, decent cashflow and a solid balance sheet. Second, a screen by the French bank SocGen that looks for companies with really strong financial controls and balance sheets – it uses ideas developed by a US academic called Joseph Piotroski plus a model for debt called the Merton model. Third, my own screen to pick out FTSE 350 companies that have increased their dividends every year for the last five years, have strong earnings cover and projected earnings per share growth in the next 12 months. Putting these three screens together, I come up with this diversified, progressive “starter for ten” portfolio: AstraZeneca, Halfords, BAT, Vodafone, FirstGroup and BAe Systems.

The Telegraph

Bull vs Bear: Who's right about FTSE's recovery? Time to buy says Jonathan Jackson, head of equities, Killik & Co. The recent decline in equity markets – driven, in part, by concerns over sovereign bond issues and the sustainability of the economic recovery – provides a buying opportunity. Although some of the leading economic indicators are starting to roll over, they remain in positive territory and we believe the outlook for global economic growth remains good, driven by continued expansion in emerging markets. The outlook for corporate earnings is also positive. Many companies realigned their cost bases during the downturn, so that now the recovery is under way an increase in sales is leading to a sharp bounce in profitability and free cash flow because of the positive impact of operational gearing. As a result, we believe equities look reasonably valued in absolute terms on most earnings-based measures and offer a forward dividend yield of about 4pc. However, equities look particularly attractive relative to other asset classes. Returns on cash are negligible and, we believe, are likely to remain so as interest rates are maintained at low levels to stimulate economic recovery. At the same time, returns on 10-year gilts have been driven down to 3.4pc due, in part, to the global investment community's increased confidence that the UK will address its budget deficit. Corporate balance sheets are strong. After a period of financial prudence, many companies have come through the recession in rude health and it is estimated that UK plc is sitting on more than £140bn of cash, equivalent to more than 10pc of market capitalisation. We believe this paves the way for progressive dividends to be paid, providing an attractive source of inflation-protected income for investors. The prospect of increased M&A activity provides further support for equities. There are plenty of world-class companies that provide an attractive target for predators looking to supplement rates of organic growth. Importantly, following the depreciation of sterling over the last couple of years, UK-based assets are especially attractive to overseas buyers. Finally, we would highlight that investor cash levels remain high, providing further ammunition to drive equities higher. For now, the focus of our attention would be on strong companies with attractive global franchises that are able to offer a progressive dividend yield.

Scotsman

Commenting on Bovis, Analyst Jonathan Jackson of Killik said the results confirmed his view that Bovis is the most attractive stock in the housebuilding sector. "The shares trade on a 35 per cent discount to the historic tangible net asset value (520p), a level which we believe more than discounts our concerns over the medium-term outlook for the UK housing market," he said.

BBC

Paul Kavanagh broadcast live on 5 Live Wake up to Money market spot discussing why it was too early to raise interest rates due to the challenges for the UK, particularly as we are unsure of the impact of the Government cuts as well as the problems within Euro zone. IMF dropped UK growth forecast from 1.3% to 1.2%. Indications are that big international banks are slowing up during the summer months. Equities remain cheap and will remain volatile, rising or falling depending on concerns over Europe. Compared Tesco and M&S remuneration policy and the problems M&S face being squeezed in the middle market as lower cost and high end retailers do well. Click on the 11.51 minute marker on iPlayer to hear Paul.

BBC

Paul Kavangh broadcast live on Radio Four's flagship Today programme. He discussed the IMF UK growth forecast mirroring laid out in George Osborne Budget. One area of the Budget he is less confident on is the growth forecasts for 2012, 2013, 2014 bearing in mind the new austerity measures and how reliant the UK is on retail spending. If interest rates were to rise in November this year it would be adding pressure to the system at the wrong point. Bond markets indicate that rates are not going to be moving for long bearing in mind Deutsche Bund auction yesterday sold 10 year bund at 2.56%. The stock market has been looking at cash flow and dividends with many companies being remarkably adept at managing the downturn and profits have held up. BP's announcement of having fixed its well in the Gulf of Mexico by 26th July is better than expected. BP is shoring up its balance sheet. We previously saw sovereign wealth funds step in to shore up the banks, it may now be the turn of the oil industry. Click on the 20.14 minute marker on iPlayer to hear Paul.

Daily Mail

Market Report: XP Power, the provider of critical power control components to the electronics industry, surged 42p to 625p. Killik is a fan after management reported that trading in the second quarter has been strong, with the group gaining market share. It has a record order book.

The Telegraph

Lee Smythe, managing director of Killik Chartered Financial Planners, said the sooner people start saving the better. “Even delaying commencement of contributions of £100 per month for just one year from the age of 30 to 31, could result in over £1,000 per annum less pension at age 65 – assuming investment returns of 6 per cent per annum and contributions rising at 3 per cent per annum. “You should aim to be saving a percentage of your income equivalent to half your age – for example, if you are 30, you should be saving 15 per cent of your income into a pension.”

The Telegraph

City fat cats exposed in good deed shock. Now that the words ‘City’, ‘fat cats’ and ‘greed’ have become nearly synonymous, it makes a refreshing change to report how financial institutions and individual shareholders are quietly helping those in need. ShareGift is scarcely a household name, even among charities, but it has raised £14m for good causes since it was set up 14 years ago. Yesterday, the Prince of Wales held a reception at Clarence House to celebrate its success and to encourage investors and institutions to help it even more. ShareGift is a brilliant example of how creative thinking can conjure up millions of pounds, virtually out of thin air. Founders Lady Claire Mackintosh and Matthew Orr realised that many shareholders find themselves with odds and ends of stock, often after takeovers or when scrip dividends are paid after the main holding is sold. It is often uneconomic for these individuals to sell small parcels of shares because they may be worth less than stockbrokers’ minimum commission. ShareGift brings these holdings together to create substantial proceeds for a wide range of charities. More than 1,600 good causes have benefited from this clever idea to date. Rotten luck and volcanic ash prevented Lady Mackintosh or Mr Orr attending the Clarence House reception – they were both stuck on the other side of the Atlantic. But Susan Brealey of ShareGift told me: “All sorts of charities have received donations, ranging from millions of pounds to cancer charities such as Macmillan and Marie Curie to tens of thousands to smaller charities, such as the Hillingdon Blind Bowlers. “We are particularly grateful to BAA, BT, Cable & Wireless and Lloyds Group for mentioning us in their recent letters to shareholders, as this helps us reach a wider audience of potential donors who might want to help charities.” Better still, because Mr Orr is a partner at Killik & Co stockbrokers, he is able to provide ShareGift with a free dealing facility to keep costs to a minimum. So, very little of donations’ value sticks to the shovel before it reaches the ultimate beneficiaries. No wonder this clever idea is being supported by so many financial institutions and individual shareholders. Between them, they may have done more good for charities than all of their critics put together.

Gulf News

ETFs give investors access to asset classes formerly reserved for the wealthy. Mick Gilligan, head of research at Killik & Co, said: "I view equity ETFs as a means of getting quick exposure to the market or of parking money when we have a positive view on equities but want time to finesse our thinking on which funds or stocks to buy and in what proportion. "I personally hold the iShares FTSE 100 ETF as a market-timing portion of my pension and the Powershares Global Agriculture ETF for low-cost exposure to companies that should benefit from world population growth, water shortages and the need for higher crop yields." But Gilligan warned that not all ETFs are equal — some allow investors to "short'' an index, that is, make money in falling markets: "They need to be fully understood by investors. They reset daily so that if held over a long period, the returns may bear little resemblance to those the investor expects."

The Times

Paul Kavanagh, a partner at Killik &Co, the stockbroker and fund manager, said: “It’s been a quarter where we are still getting aftershocks and the market has absorbed them. It’s natural to say, after what happened in 2007 and 2008, that we were looking for more shocks. In this quarter corporate risk at the financial level shifted to sovereign risk.” He added: “ If you go back to August and September last year, the consensus was that rates would start to go up at the end of this quarter. Now most people don’t think there will be much change this year.”

Financial Times

Simon Marsh from Killik & Co answer FT readers questions on taking out this year's ISA subscriptions

The Times

Commodities have traditionally been regarded as something of a “niche” investment. They were seen as rather too exotic for run-of-the-mill investors and mention of the word “commodity” tended to conjure up images of large men in stripey jackets trading pork belly futures. But the picture has now completely changed. You can, if you want, still buy pork bellies, but they are just one of dozens of commodities on offer in what is now a much more sophisticated market. Today commodities are used much more extensively in the wealth management industry and are more readily accessible to the ordinary investor thanks to a rapid growth in exchange-traded funds (ETFs), which replicate the rise and fall of a commodity, or basket of commodities, and can be placed in individual savings accounts (Isas). Our experts pick their investment performers: Mick Gilligan, of Killik & Co, the stockbroker, likes BlackRock World Mining investment trust. “It invests in mining companies around the globe, producing both base and precious metals. There is a bias towards larger companies and the trust stands at a 15 per cent discount to net asset value.” For a mix of metals and oil, he selects the City Natural Resources investment trust. “It is focused more on medium and smaller companies, including some mining of very specialised metals, and stands at a 17 per cent discount.” His third choice is PowerShares Global Agriculture ETF. This tracks the Nasdaq Agriculture Index, which includes companies such as Monsanto, the chemicals company, and John Deere, the tractor manufacturer.