13 July 2018 2 March 2018 Market Roundup Chart 1: UK Manufacturing Growth 8 September 2017 March 2017 UK shares rose on Monday despite the resignations of government 2 ministers Boris Johnson and David Davis. The FTSE 100 index gained 1.5 0.9%, led by mining stocks and dollar-earning companies. 1 Antofagasta was the biggest gainer, up 3.4%, followed by Melrose 0.5 Industries (2.8% ahead) and BHP Billiton (2.6%). 0 Ocado soared 9.1% on Tuesday as management expressed optimism -0.5 for future technology licensing deals. The FTSE 100 closed up 0.1%. -1 Trade war worries hit markets on Wednesday after Donald Trump -1.5 pressed ahead with plans to impose tariffs on a further $200billion of imports from China. The FTSE 100 lost 1.3%. Thomas Cook and Tui were among the biggest blue-chip fallers on worries that demand for package holidays had been hit by the UK’s hot Manufacturing Growth (%) weather and the World Cup. Source: ONS Data at 12/7/2018 Micro Focus International also fell more than 9% after the software firm raised cost guidance for integrating HP Enterprise and expressed Chart 2: UK Output caution for 2019. But rose 3.5% after forecasting record profits of £835m in a trading update. 1.5 1 Thursday saw the FTSE 100 rebound 0.8%. Astra Zeneca led the 0.5 gainers with a 3.5% rise, amid a global rally in healthcare stocks. Sky 0 -0.5 hit a record high on hopes that 21st Century Fox would outbid -1 Comcast’s £26bn offer (see Company Announcements below). -1.5 UK shares were up in early trading on Friday. -2 -2.5 Company Focus: Kier Group

Kier Group said it is on course to meet profit forecasts and is pursuing a cost-saving plan that will include the sale of non-core assets.

In a trading update, the construction and support services group said it Construction Growth (%) has begun to implement its “efficiency and streamlining programme”, branded “Future Proofing Kier”. The aim is to improve productivity, Source: ONS Data at 12/7/2018 operating margins and cash generation, though no details were given Chart 3: Kier Group, Operating Profit about what assets it expected to sell. More details will be released with the group’s full-year results, scheduled for 20 September. Kier also announced that it had won three-year extensions to two 26% 19% Highways England contracts with annualised revenues of £250m. With the group having exited the Caribbean and the Far East, the UK represents about 70% of construction work, particularly in the education and health sectors. On these projects, gross margins are agreed in advance. An order book of more than £10bn in the group’s 4% construction and services divisions means that 90% of revenues for the coming year are secure.

Average month-end debt of £375m was higher than expected due to bad weather affecting the construction business over the winter. 50% However, management said that all this debt is asset-backed, and that Construction Services Residential Joint Ventures the debt profile is controlled. Source: Brewin Dolphin client note Data at 12/7/2018

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Economic Roundup

The UK economy rebounded in the three months to the end of May following its weak start to the year, official data showed this week. The economy expanded 0.2% in the three months to the end of May, having seen no growth overall between February and April, according to the Office for National Statistics (ONS). Growth of 0.4% in services drove the recovery, while manufacturing and construction contracted 1.2% and 1.7% respectively over the three-month period. Rob Kent-Smith, ONS Head of National Accounts, said: "Retailing, computer programming and legal services all performed strongly in the three months to May while housebuilding and manufacturing both contracted. Services, in particular, grew robustly in May with retailers enjoying a double boost from the warm weather and the royal wedding." “We are witnessing a rebound”, said George Buckley, chief UK economist at Nomura, adding that the recovery “has legs”, with wage growth now outpacing inflation The data makes it more likely that the Bank of England will raise interest rates at its August meeting, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. “Today’s report should leave the Monetary Policy Committee confident that quarter-on-quarter GDP growth likely will rise to 0.4% in Q2 [April to end of June], matching its forecast,” he said. In other official data, the UK’s trade deficit widened by £5bn to £8.3bn in the three months to the end of May as exports of cars fell. Meanwhile, the government published its proposal for a post-Brexit partnership with the European Union. The proposed “association agreement” would recreate many aspects of the existing economic relationship between Britain and the EU for goods and services. The plan sparked the resignations of senior ministers Boris Johnson and David Davis. The US-China trade war looked set for further escalation, with Donald Trump announcing plans to impose tariffs on an additional $200bn of Chinese imports - and China threatening retaliation. The European Commission blamed growing trade tensions as it lowered its growth forecast for the euro area to 2.1% for this year, down from 2.3% in May. Its forecast for Germany saw one of the biggest downgrades, to 1.9% from 2.3% previously. The commission said that the risk of a trade war with the US was already affecting the economy, and that “a further escalation in trade protectionism…remains a serious downside risk that could derail global growth over the forecast horizon and beyond”. Donald Trump has threatened to hit Europe’s car sector with heavy tariffs, and has already targeted imports of steel and aluminium. The commission is also concerned about the knock-on effects from US-China trade strife. “While the direct macroeconomic effect of the measures implemented so far are likely to be rather limited, the broader impact on confidence and investment decisions could be much more significant and immediate,” it said.

Company announcements that caught our attention this week

Date Company Comment

11/7/2018 Burberry Burberry said same-store sales grew 3% in the last quarter - in line with expectations. The fashion house posted revenues of £479m in the 13 weeks to 30 June, driven by a strong performance in North America and continued demand from Chinese buyers. However, sales fell by “a low-single digit percentage” in the UK and Europe as a stronger pound and euro deterred Chinese tourists who shopped more in Asia. The fashion house is gearing up for the debut collection from its new chief creative officer Riccardo Tisci. Burberry’s chief executive Marco Gobbetti has also implemented a plan to reposition the label to be more upmarket. The “brand elevation journey” has already started with the introduction of new bags in the £1,200 to £2,000 range, which have apparently been well received by customers. 11/7/2018 Sky The long-running media tussle for broadcaster Sky hotted up this week as Comcast and 21st Century Fox upped the stakes in their battle to take control of the broadcaster. On Wednesday morning, Rupert Murdoch’s 21st Century Fox increased its cash offer, offering to pay £14 per share for the 61% of Sky it does not own. The new Fox bid came with the support of Disney, which is seeking to scoop up a swathe of Fox assets in a separate deal. The bid eclipsed Comcast’s offer, made in February, of £12.50 per share. But not for long, as Comcast hit back late on Wednesday with a £14.75 per share bid, valuing Sky at £25.9bn. Sky’s share price responded positively to the news moving above £15.25 in anticipation of the bidding battle continuing.

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Key Company Diary Dates

Tue 17 July Trading update Tue 17 July Royal Mail Trading update Wed 18 July Severn Trent Trading update Thu 19 July Anglo American Trading update Thu 19 July SSE Trading update

Economic highlights over the next week

Tue 17 July – UK employment – The number of people in work in the UK increased by 146,000 to 32.4m in the three months to April.

Wed 18 July – UK inflation – The annual rate of Consumer Price Index (CPI) inflation was 2.4% in May, unchanged from April.

Thu 19 July – UK retail sales – In the three months to May, retail sales volumes increased 0.9% from the previous three months.

Index Movements* Index Value %Change FTSE 100 7,651.33 0.63 FTSE 250 20,779.77 0.77 AIM 1,090.24 0.64 Dow Jones 24,924.89 2.33 S&P 500 2,798.29 2.25 Hang Seng 28,480.83 1.06 Nikkei 225 22,187.96 2.97

Currency Movements* Currency Pair Value %Change £:$ 1.32 0.00 £:€ 1.13 0.00 £:¥ 148.66 0.02

Best & Worst performing sectors (rel. to FTSE 350)* Best & Worst FTSE 100 performing stocks*

Sector %Change Company %Change Media 3.03% Coca-Cola HBC 8.0% Healthcare 2.00% Sky 6.8% General Industrials 1.76% GVC Holdings 6.2% Basic Resources -2.32% Associated Brit.Foods -4.7% Telecoms -2.92% Severn Trent -4.9% Autos & Parts -2.93% United Utilities Group -5.2%

*Weekly movements up until close of business Thursday Important Notes: Main source of information: Company Report and Accounts, Bloomberg The value of investments and any income from them can fall and you may get back less than you invested. Past performance is not a guide to future performance and performance is shown before charges, which would reduce the illustrated performance. No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy. If you invest in currencies other than your own, fluctuations in currency value will mean that the value of your investment will move independently of the underlying asset. Any tax advantages or allowances mentioned are based on personal circumstances and current legislation which are subject to change. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd. The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Brewin Dolphin Ltd, a member of the Stock Exchange, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Smithfield Street London EC1A 9BD. Registered in England and Wales no 215876.