Banks with egg on faces

SCRUTINEER

B&B

54.75p unch

Michael Page

317.5p -17.5

BANKING shares are so out of fashion that some of the banks have been struggling to give them away this year.

Yesterday it looked likely that it will be the banks themselves buying millions of shares in one of their own: buy-to-let specialist Bradford & Bingley.

In a bid to shore-up confidence in the banking sector, six of the largest banks on Britain's high street, including Edinburgh giants Royal Bank of Scotland and Halifax Bank of Scotland, promised to sub-underwrite half of the bank's £400 million rights issue.

With the offer expected to have been ignored by most shareholders by the time it closed yesterday morning – figures will be released on Monday – it is likely that the banks will be forced to inform the market that they now own more than 3 per cent of the troubled lender, the threshold at which they become "major shareholders".

While to the likes of RBS the price of the B&B shares is largely insignificant, it is hardly ideal for a company taking extensive steps to improve its capital position.

At its interim results Scotland's largest company said its focus on cutting costs was so wide-ranging it reached the level of sourcing cheaper printer cartridges.

In this context a multi-million pound bet on Britain's buy-to-let sector is an unwanted distraction at best.

For HBOS the stake must be just as galling. Only 8 per cent of its shareholders took up its own offer of shares earlier in the summer and now it has to prop up one of its lending rivals.

At least the bank, itself the victim of baseless rumours earlier this year that it was running out of cash, would be able, if it wished, to make mischief, to play havoc with shares of one of its rivals, dumping its B&B shares without warning. More seriously, the wider banking sector will relish the end of the B&B rights issue, which has become quite a saga, as the board persistently refused to open its books to a rival which had the backing of key institutional investors, in favour of an unpopular investor who turned and ran when the going got difficult.

Chairman Rod Kent and his board's handling of the rights issue has arguably been the worst single factor undermining British banking since Northern Rock, and that it is finally over is welcome indeed.

SHAREHOLDERS in Michael Page must be hoping their board knows something the rest of us do not.

Yesterday Britain's largest recruitment company flatly rejected an approach from Adecco, which valued it at £1.25 billion.

Although less than a year ago Michael Page shares were trading above the 400p at which the Swiss company approached it, they have dived since as the economy turned.

Even after the approach was made public, shares barely managed to come within 10 per cent of the price at which the friendly approach was made.

Yesterday's announcement may contain an element of brinkmanship, forcing Adecco to increase its offer, but with the economy expected to deteriorate further in the coming months, getting a premium of more than 50 per cent to the price before talks were revealed, would have been tempting for investors.

ARE we heading for an autumn of discontent? Next week hundreds of thousands of Londoners face the prospect of disruption on their daily commute when several of the key London Underground lines are hit by strikes over pay.

Yesterday there were threats of further disruption to Britain's capital, with hundreds of baggage handlers voting to take industrial action at Britain's second-largest airport, Gatwick, later this month, including during the English bank holiday weekend.

Both group's are striking over pay, rejecting increases of 3 per cent, arguing that the increases are not keeping up with the rate of inflation.

Unite, the union, yesterday said the offer was "an insult". Baggage handlers at Stansted airport were also preparing to vote on the issue last night with other airports planning ballots.

The Bank of England has urged restraint in pay increases in a bid to curb inflation, and to an extent an industrial backlash should come as no surprise.

Ironically, what may prevent the action from spreading into the wider corporate world is the perilous state of the economy, with many workers sufficiently concerned about the security of their position to grin and accept.

Bryan Johnston of Bell Lawrie

ONE TO WATCH

Turbotec Products

72p unch

Scotsman says HOLD

TURBOTEC Products makes heat exchangers, heat transfer tubes and fabricated metal components. The company sells its products in the US, Canada and other countries to customers in a variety of industries, including refrigeration, marine, swimming pools, plumbing and water heating. The group's manufacturing and related activities are based in the US.

Few manufacturing companies are benefiting from rocketing energy costs but Turbotec is an exception. Its core business is in energy efficient heat exchangers and, despite its bias towards the slowing US, the company's sales increased by 20 per cent last year. The group is investing heavily to increase its manufacturing capacity.

Turbotec's products offer significant savings over conventional oil burning pumps, some estimates, at current oil prices, suggesting the payback period having fallen to around five years. Heat pumps now represent around 50 per cent of Turbotec's sales.

The company is not immune to the challenges facing the US economy and these were underlined by Tom Nairn, the chairman, at the end of June: "Given the already well-publicised state of the US economy, we continue to take a cautious view of the general business environment. However, we have experienced a certain resilience in our business over the last 12 months."

Increasing capital expenditure may impact on earnings near term but bring appreciable benefits further out, implying a two-year prospective p/e of around 9. There is also a useful yield of around 5 per cent. Turbotec seems to be being valued as a victim of the slower US economy when it could actually be a beneficiary.

• The value of your investment could fall and you may get back less than you invested. You should take professional advice if you have any doubt about the suitability of this company for your portfolio.

Continental tyres of resistance

RUMOUR OF THE DAY

CONTINENTAL, the tyre and car parts manufacturer, is set to drop opposition to hostile bidder Schaeffler and accept the ball bearings maker as its controlling shareholder, sources yesterday said.

"Continental is absolutely ready to sign a deal – it can all happen very quickly," said one source.

"A deal could be announced by the start of next week," another source added.

The two rivals have been locked in a tussle since Schaeffler launched a 11.3 billion (£8.9bn) hostile bid for Continental, which is three times its size, last month.

A sweetened bid would probably value Continental's equity at around 12bn.

Schaeffler had deliberately bid low to avoid winning a majority, which would force it to refinance Continental's 11bn net debt pile.

Trolley gathers pace as Gatekeeper unveils buyback

SMALL BUT BEAUTIFUL

SHARES in shopping trolley security firm Gatekeeper Systems gathered pace after the Aim-listed company announced a share buyback programme.

The firm is offering to repurchase up to 2.5 million of its shares by way of a tender offer, at a price of 20p per share.

Gatekeeper's major shareholder, with a 67.8 per cent stake in the business, has agreed not to participate in the offer.

Following the completion of the tender offer, the company said it will consider delisting its shares in a move which could save it up to $400,000 (£214,000) a year. The company also expects the offer to relieve it of the administrative burden of tending to a large number of small shareholders.

In the event that the group receives acceptances of its offer in respect of more than 2.5 million shares, the shares will be repurchased on a pro-rata basis. Irrespective of the response to the tender offer, Gatekeeper said it would continue to trade in much the same form as at present.

The tender offer announcement coincided with the release of interim results in which the firm reported higher sales.

Oil price dip sends FirstGroup and Stagecoach into positive territory

SCOTS STOCKS

FIRSTGROUP, the Aberdeen-based transport giant, closed at a three-month high yesterday, as oil fell to a three-month low. Shares closed up 4.2 per cent to 581.5p, while Perth-based rival Stagecoach rose 6.5p to 288p.

Predictably, oil prices fell, with Cairn Energy losing 44p to 2,661p, Aberdeen-based Dana Petroleum off 28p at 1,257p and Venture Production off 10p at 747p. Wolfson Microelectronics, meanwhile, added 0.25p to 121p after buying 50,000 shares for cancellation.

On Aim, football pitch operator Powerleague was unchanged at 46p despite F&C Asset Management increasing its stake in the company to more than 12 per cent. Rival Goals Soccer Centres fell 2p to 233.5p.

Microemissive Displays dropped further, closing down 14.7 per cent at 3.625p, valuing the company at just £2.15 million. Last week the firm, which makes tiny screens, warned it needed to raise cash and may be forced into a sale.

Celtic Football Club shares were unchanged at 50p despite reporting a sharp fall in profits for the year to 30 June to £4.44m.

Aberdeen headquartered Offshore Hydrocarbon Mapping hit a fresh record low, with the oil services company dropping 5.5p to 35.75p.