Dulux, Direct Line, Vauxhall: Business news in brief, Tuesday 21 February

The head of Britain's biggest trade union is likely to meet the chief of PSA Group on Friday amid growing concerns over the future of Vauxhall plants if the French carmaker buys the business from General Motors, a union source told Reuters.

Peugeot-maker PSA is in talks to buy GM's loss-making European business, which operates under the Vauxhall and Opel brands, with overcapacity at existing sites, Britain's move to leave the European Union and pension liabilities all likely to influence any deal and possible restructuring.

PSA boss Carlos Tavares is also due to meet business minister Greg Clark “towards the end of the week,” a government source said, in a key test of Britain's ability to retain investment after its Brexit vote in June.

German media reports over the weekend suggested PSA had told Berlin it would continue production at all four of Opel's German sites, although Germany's deputy economy minister said on Monday there had been no binding assurances.

“We are increasingly concerned after reports that German plants are safe,” the trade union source told Reuters, adding the head of the Unite trade union, Len McCluskey, was likely to meet Tavares in London on Friday.

The pensions deficit at GM's British division is up to £1bn, a separate source familiar with the matter told Reuters. Many multinational companies are trying to rein in rising pension liabilities.

Britain's overwhelmingly foreign-owned car industry has been lauded as a success story by politicians and is set to hit record production levels by the turn of the decade, but any tariffs following Britain's departure from the EU would hit margins and could see output cut.

Reuters

Dulux paint maker AkzoNobel has announced plans to build a £10.7m innovation hub near Gateshead, safeguarding 270 jobs.

The Dutch manufacturing giant said it will house more than 100 scientists and 170 technicians at a new research and development facility in Felling.

The company was eyeing locations in Singapore and the Netherlands before settling on the North East.

Conrad Keijzer, AkzoNobel's executive committee member, said the laboratory will develop protective coatings for heavy industry using simulation techniques that replicate extreme conditions.

“The work at the state-of-the-art lab will have an important impact on our most critical industries,” he added.

“Top scientists and technical experts will be working here on future solutions that will offer essential protection to a great variety of products for our customers.

“They will reproduce conditions similar to those of the North Pole, the effects of acid erosion, or a fire on an oil rig.”

The move comes after AkzoNobel revealed that it was opening a £93.7m Dulux paint factory in Ashington, Northumberland.

Business Secretary Greg Clark said: “Having grown up in the North East, I am very aware of the strengths of the chemical sector in the region.

“AkzoNobel's significant investment in establishing a new technical innovation hub is further proof that Britain is open for business and underlines the growth we want to see and support in our local economies.

PA

British motor insurer Direct Line said on Monday new rules to determine lump-sum payouts for personal injury claims would have less impact than previously estimated because it had already started to factor in a change, boosting its shares.

A government review into the so-called Ogden Rate is due to be released soon, and most analysts expect the level to fall from its current maximum 2.5 per cent, in place since 2001, given a slide in real interest rates since then.

Any downwards move in the rate would require insurers to pay out more in cash to claimants now to ensure that returns over their lifetime met the awarded compensation, a potential hit to motor insurers' profitability.

Given its potential importance to the firm's financial outlook, Direct Line said it had decided to delay the release of its preliminary 2016 results by a week to 7 March.

Direct Line said it was already applying a rate of 1.5 per cent when calculating its personal injury claims liabilities, which could mitigate the impact of any downward revision of the Ogden Rate.

Direct Line said in its 2015 results that a 100 basis point increase from the 1.5 per cent assumed rate would boost pretax profit by £131.9m, while a 100 bps decrease would hit profits by £190m.

It said on Monday the impact would now be “materially lower,” without giving a figure.

Reuters

Interserve’s shares fell by more than 25 per cent on Monday after the British support services and construction company spooked investors by more than doubling an expected charge for getting out of its energy-from-waste business.

Interserve, whose activities range from providing care services for people in their own homes to repairing Britain's historic Sandhurst military academy, raised the provision to about £160m from £70m.

This followed a review of operational developments at the energy-from-waste business and an assessment of the impact of litigation related to a terminated contract in Glasgow.

Interserve also warned that it could be harder and take longer to get money back from third parties as its main gasification subcontractor, Energos, was in administration.

However, some analysts doubted the charge was enough.

“We can have no confidence the provision is adequate,” Liberum analysts wrote in a note to their clients.

Interserve said it was getting out of the business in August, after cost overruns and delays.

Reuters

Shopping centre owner Hammerson has seen profits collapse after booking heavy losses on the value of its property portfolio.

The group, which owns the Bullring in Birmingham, said full year pre-tax profit fell 56 per cent to £322.8m due to what it called “lower revaluation gains on the group's shopping centres and retail parks”.

In the UK, its shopping centre values fell by £6m and retail parks by £118m, with Hammerson saying £39m of this was due to the increase in stamp duty.

It also pointed the finger at transfer taxes in Paris and “weak trading” at its French operation.

Without taking into account the change in valuations, adjusted profit rose 9.4 per cent to £230.7m.

Chief executive David Atkins flagged “UK retail headwinds and geopolitical uncertainty” but struck an otherwise upbeat note.

PA

Lloyd’s of London named Bruce Carnegie-Brown to succeed John Nelson as chairman of the insurance market founded in a coffee house in 1688.

Carnegie-Brown, who is also chairman of Moneysupermarket.com and vice chairman of Banco Santander SA, will take up the position in June, subject to regulatory approval, Lloyd’s of London said in a statement on Monday.

“I am looking forward to working with Bruce,” chief executive Inga Beale said in the statement. His experience across insurance and banking “will offer Lloyd’s a unique perspective on how we conduct our business and succeed in today’s marketplace.”

Carnegie-Brown, who has more than 35 years of experience in financial services including at Marsh Europe, Aon UK Ltd and Catlin Group, takes up the post at a time when Lloyd’s of London is deciding where it wants to open a European headquarters after the government indicated Britain won’t remain part of the EU’s single market.

Bloomberg

Malaysian state-owned oil and gas firm Petronas is aiming to sell a large minority stake in a prized upstream local gas project for up to $1bn (£802.2m) as it seeks to raise cash and cut development costs, two sources familiar with the matter said.

Petroliam Nasional Bhd (Petronas) is looking to sell a stake of as much as 49 per cent in the SK316 offshore gas block in Malaysia's Sarawak state, the sources told Reuters, a move that would be among its first major recent sales as it grapples with oil prices that have slumped by half over two-and-a-half years.

That slide has squeezed the cash flows of Petronas, hurt its earnings and forced it a year ago to announce a 50bn ringgit (£9bn) cut in capital expenditure over four years.

Petronas, which accounts for a third of Malaysia's oil and gas revenue, has also cut its dividend. Sources had told Reuters in September it is considering selling its majority stake in a $27bn Canadian liquefied natural gas plant, although the company denied it.

Reuters

Samsung’s Jay Y. Lee was taken back to a special prosecutor’s office for a second day following another night in police custody as part of a corruption probe that has widened to include South Korea’s largest industrial conglomerate.

Lee, vice chairman of Samsung, was shown on a YTN television broadcast being led into the office in Seoul around 9:50 a.m. local time. Lee was inside the office for about eight hours the day before. On Friday, the Seoul Central District Court arrested Lee on a warrant including allegations of bribery, perjury, embezzlement, hiding assets abroad and concealing illegal profits.

Lee has been the acting head of Samsung while his father, Samsung Electronics Co. Chairman Lee Kun Hee, has been hospitalized since 2014. The probe could eventually interfere with the son’s ability to take full control of the group after his father formally steps down.

Bloomberg