Key Concepts

M&A continues to grow (July/August 2012)

Mergers and acquisitions are set to increase in the logistics market, according to a survey from Barclays Corporate and Grant Thornton.

It found that 58 per cent of decision makers from UK logistics businesses believe that M&A activity will increase over the next 12 months and over a third of companies are actively planning acquisitions.

Philip Bird, corporate finance director at Grant Thornton said: “Many medium-sized logistics firms need to consider mergers or acquisitions to avoid being squeezed out by major operators offering economies of scale or niche players offering tailor-made solutions.

The survey also revealed that that more than half of the UK’s largest 50 logistics companies are now overseas owned.

“UK logistics firms need to be more successful in expanding overseas if they want to remain independent,” said Bird. “After all, more than two thirds of the UK’s top 50 total turnover is generated by firms based outside the UK.”

Cost inflation was seen as the biggest issue facing the sector over the coming year months, which could see businesses reassess their commercial relationship with customers.

Over three quarters of respondents will be investing in vehicles over the next 12 months, which can be seen as a result of rising fuel costs. 83 per cent of businesses are concentrating on improved vehicle efficiency as a measure to counter rising costs, however only 15 per cent of businesses surveyed are currently hedging against fuel prices.

Rob Riddleston, head of transport and logistics at Barclays Corporate said: “The logistics sector is always going to have to face the vagaries of the foreign exchange markets and fuel price volatility. While fundamental movements in FX and fuel rates have to be managed by the sector, companies can hedge against short and medium term volatility in price movements.”

FTSE 100 Sags (October 2012)

(Reuters) - The FTSE 100 fell early on Monday, exhibiting weakness after gains in the previous session and overnight falls in Asia, with some caution building among investors ahead of the start of the new earnings season.

By 08:41 a.m., the FTSE 100 was down 48.68 points, or 0.8 percent at 5,822.34, erasing Friday's gains with concerns over the third-quarter earnings season, which begins in earnest in the United States on Tuesday, mounting after a batch of downbeat updates set the tone for the market.

"(The fall) is likely to reflect a degree of caution ahead of the looming Q3 reporting season," Ian Williams, equity strategist at Peel Hunt, said.

"There is understandable bottom-up caution from corporate managements who may still be suffering from a lack of visibility, which could just cap the near-term upside in equity indices."

Cookson Group, which makes products for the global steel industry, and recruiter Michael Page on Monday became the latest UK firms to issue profit warnings. Cookson fell 14.4 percent while Michael Page shed 5.4 percent.

Mid-cap news retailer WH Smith is the most shorted stock in Europe announcing earnings with 7.1 percent of its shares on loan, according to data explorers.

Promises by central banks in Europe and the United States to provide economic stimulus continue to provide a back stop for equity markets and prevents a radical retracement of a rally that began in early June.

The gains for equities in tandem with weak earnings in the previous quarter has left the FTSE 100 trading on a 12-month forward price-to-earnings of around 11.5 times - near post credit crisis highs.

But the economic backdrop remains murky with high unemployment in the world's biggest economy, the United States, while the World Bank cut growth forecasts for the East Asia and Pacific region and said there was a risk the slowdown in China could get worse and last longer than expected.

UBS analysts said in a note that while PEs are not expensive versus a long run average of over 13 times, no one believes consensus 2013 earnings per share growth of 12.5 percent.

"It seems that no one trusts the PE. We look to Q3 reporting season/outlook statements to focus the mind on something realistic for 2013," the bank said.

With the cut in forecasts from the world bank, lack of faith in valuations and Cookson's update reverberating around the market, miners, which trade on 11 times PE, were the major fallers on London's blue chip index.

Global miner BHP Billiton shed 2.0 percent.

With risk appetite among investors subdued banks and integrated oils also retreated.

Elsewhere there was more uncertainty for BAE Systems as the saga surrounding its proposed tie-up with French peer EADS rumbled on after the largest shareholder in BAE issued a long list of objections to the group's proposed $45 billion merger.