Growing Corporate debt echoes 2008 crisis. A risky corporate debt splurge is raising echoes of the financial crisis, the Bank of England fears, as officials scour the market for signs that a debt crunch could hurt banks and the wider economy. Growth in borrowing by heavily indebted companies and those with “junk” credit status is rising at levels seen in sub-prime mortgages before the financial crisis and now stands at more than $1 trillion globally. The Bank’s Financial Policy Committee (FPC) is “concerned” the surging debts could build new vulnerabilities in the financial system. The debts, known as leveraged or covenant-lite loans, are typically packaged up and sold on. Sir Jon Cunliffe, deputy governor at the Bank, said this shows similarities with the credit crunch.
US threatens to block European banks from exchanges over Brexit derivatives deal. A top US regulator has threatened to prevent European banks from accessing US futures markets over EU plans for the oversight of foreign clearing houses after Brexit. Speaking at the Futures and Options Expo in Chicago, Christopher Giancarlo, head of the Commodity Futures Trading Commission, called the EU plans to amend European Market Infrastructure Regulation “unprecedented and wholly unacceptable” and warned they could create “costly burdensome regulatory requirements” in the US. Mr Giancarlo said that if the EU did not change the existing plans he would have “no choice” but to select from a wide range of actions that includes barring EU banks from using US financial infrastructure such as the Chicago Mercantile Exchange.
Ryanair Holdings (RYA) has accused cabin crew of “faking” a photograph depicting staff being forced to sleep in their crew room, in the latest bizarre twist to the low-cost airline’s battle with its unions. A photo was posted on social media on Sunday showing staff bedding down in Malaga airport. The picture, allegedly of Ryanair Porto crew, was accompanied with a caption suggesting “the company left them there”. The Irish carrier initially apologised, saying there had been no hotel rooms available for the staff who had been diverted following inclement weather. However, Ryanair took to social media itself on Wednesday, releasing CCTV footage together with an allegation that the photo had been staged.
Unilever (ULVR) has not given up hope of overhauling its dual structure, insisting there remains shareholder support for simplifying the business despite opposition to its plans to move its headquarters out of the UK. Chief financial officer Graeme Pitkethly said the board was focused on finding a different way to unify the company following its failed attempt to scrap the Anglo-Dutch structure. The maker of Domestos and Ben & Jerry’s planned to shift to one Dutch holding company with shares listed in Amsterdam, London and New York, while its headquarters would have moved from London to Rotterdam. However, the 90-year-old business was forced to change tack when a roster of big City names came out against the proposals.
National Express Group (NEX) has profited from tens of thousands of passengers shunning rail travel this summer and choosing to go by coach instead. The transport giant said it had enjoyed an “outstanding” summer within its UK coach division, together with a “particularly strong” performance in Spain. It made around 90,000 extra passenger journeys during July, August and September, ferrying people between London and the south west as Great Western Railway services were blighted by engineering works. National Express’s third quarter revenue rose 9.5%, with profit before tax up 18.3%. Shares in the company rose more than 5pc in morning trade on the back of the results.
Rentokil Initial (RTO) could be forced to sell the UK arm of its newly-acquired Cannon Hygiene business after competition watchdogs warned the deal could lead to higher prices. The Competition & Markets Authority said a sell-off was one of the remedies it was considering in response to the takeover, which was referred for an investigation after it was completed in January. FTSE 100 member Rentokil makes most of its money in pest control but is also the second-largest player in the UK “hygiene services” industry, with an 11% market share. The acquisition of third-placed Cannon would raise that 16%
Surrey’s would-be oil drillers claim that crude flows could gush from the Home Counties at triple the expected rate by next year – although not everyone is convinced. Fresh testing of an oil well near Gatwick has revealed that up to 1,000 barrels of oil could flow from Surrey’s sandstone layers every day, according to the company behind the plans. UK Oil & Gas Investments (UKOG) sparked a 6% share price bounce by telling investors that its plans for the Portland oil licence are “commercially viable”. Stephen Sanderson, UKOG’s chief executive, said by the end of this year it would apply to Surrey County Council for permission to begin commercial drilling in 2019. However, experts have once again poured doubt on the latest round of claims from the company.
Housebuilder Crest Nicholson scales back growth plans with third profit warning in two years. Crest Nicholson Holdings (CRST) has put the brakes on its growth ambitions to focus on cash flow and shareholder returns after warning profits will be lower than expected for the third time in two years. The FTSE 250 company, which also announced the departure of its chief financial officer Robert Allen, said sales had failed to pick up during the traditionally stronger autumn selling season as customers put off buying new homes because of Brexit uncertainty. Crest Nicholson said buyers in the south of England, where it is focused, were particularly wary – especially those who are already home owners and are looking to buy a house at the more expensive end of the market. It now expects profits of between £170m and £190m for the year ending Oct 31, compared with a £207m forecast.
Turbulence at troubled Flybe Group (FLYB) may end in a crash landing. The troubled regional carrier has issued yet another profit warning, its second this year and the fourth since Christine Ourmières-Widener took charge at the start of 2017. No wonder the shares crashed by as more than 40% yesterday. Back in June, she was insisting that operations have “significantly improved”. And as recently as August, the chief executive told one newspaper that the airline was on course to break even. Fast forward just two months, and Flybe is pencilling in a full-year pre-tax loss of £12m compared to a forecast from one analyst of £7m profit. Investors must be livid. Its share price is now at an all-time low of 18.88p, versus a float price of 295p, making it one of the most disastrous public listings ever. And the list of excuses only gets bigger. Ourmières-Widener has previously blamed falling profits on the need to spend money to boost its internet offering, and “unforeseen” costs in operating its fleet of turboprop planes. In April, the company announced that £4m had been wiped off its bottom line. The main culprit on this occasion was the Beast from the East and spiralling cancellations. This time it is rising fuel costs, currency moves and weakening customer demand to blame for an incredible £19m swing between the top end of brokers’ predictions and the sudden downgraded outlook.
Ministry of Defence has come under fire from MPs for buying early-warning radar aircraft for the RAF without an open competition. The Defence select committee also attacked the Capita (CPI) contract to recruit soldiers, which left the Army under-strength. Appearing before the Defence Select Committee, Defence Secretary Gavin Williamson faced tough questions about the decision to hold talks with Boeing about a purchase of E-7 “Wedgetail” aircraft to replace Britain’s fleet of worn-out AWACS aircraft – also built by the US aerospace giant. The committee heard how a rival offer to use Airbus jets equipped with radar from Saab was not fully considered for the £2bn-plus deal.
Royal Dutch Shell ‘B’ (RDSB) is continuing to hone its portfolio with the sale of its Danish oil fields to Norway’s state-owned energy company for $1.9bn (£1.45bn). Under the deal Noreco will take control of a share in fields that currently produce around 67,000 barrels of oil a day for the Anglo-Dutch oil giant. The Scandinavian deal is Shell’s latest divestment as it slims down its once-sprawling global portfolio of oil and gas fields in a $30bn sales drive.
Britain’s largest power generators have called on Chancellor Philip Hammond to resist watering down the carbon taxes which have helped wean the country off coal. In a letter, seen by the Daily Telegraph, the bosses behind energy giant SSE (SSE), wind power developer Orsted and coal-generator Drax Group (DRX) said the existing carbon price is “crucial” to the industry’s post-Brexit confidence. The energy trio, with a combined market valuation of over £33bn, wrote to the Chancellor amid growing fears that the Treasury may sacrifice the carbon tax in favour of hiking levies on businesses. The letter said the carbon tax “will be the cornerstone of delivering the ambition set out in the Government’s clean growth strategy, while providing billions of pounds in revenue to HM Treasury.” This is “crucial whilst there is still uncertainty” about the UK’s future in the EU carbon market, the letter said, and would “provide much-needed certainty to power generators over the coming period”.
Low-cost airline was Flybe Group (FLYB) was sent into tailspin after warning projected losses would be larger than expected. Shares sank to an all-time low, falling by more than a third and valuing the company at around £40m. Flybe’s pre-tax losses will be £22m, excluding a £10m credit on an onerous lease. This compares with analyst forecasts of a £6m pre-tax loss and the airline’s own previous projections of a £4m loss. Chief executive Christine Ourmières-Widener singled out “the headwinds of currency and fuel costs” as the reason for the downgrade. But Numis analyst Kathryn Leonard argued Flybe’s troubles were mainly a product of weakening passenger demand, with the profit hit from fuel and foreign currency costs amounting to just £5m of change in forecast. Liberum analyst Gerald Khoo said: “The opportunities for self-help improvements remain, but they are being more than offset by the challenging external environment.”
Inchcape (INCH) skidded to its lowest level in more than five years after City scribblers slashed earnings estimates as concerns mount over the health of the UK new-car market. HSBC warned investors to expect up to a 7% slump in pre-tax profit as new-car sales splutter in its key UK and Australian markets. The new-car market in the UK has been stuck in reverse gear in the last year. Sales have been hit by the so-called “demonisation of diesel” and squeezed consumers reining in big-ticket purchases. The market was dealt another blow last month by new emissions testing standards disrupting supply from carmakers. HSBC insisted that Inchcape is a “well-managed company” but warned investors to expect a 15% fall in second-half, new-car sales after Volkswagen and Audi were affected by the testing. HSBC estimated that the two German carmakers account for about 30% of the car dealer’s sales. Inchcape shares reversed 80p to 536.5p, wiping more than £300m off the company’s value.
WPP (WPP) sank to a fresh five-year low after an industry report warned that UK marketing budgets were growing at their weakest level in almost three years. The Institute of Practitioners in Advertising blamed Brexit uncertainty and “rising cost pressures” for dragging down marketing spend. It found that a net balance of just 2.5% of ad budgets had grown in the third quarter of the year, the weakest expansion since 2015. Signs of renewed pressure on ad spend weakened WPP 34.5p to £10.29.
Crest Nicholson Holdings (CRST) profit warning following slow sales in London rattled the sector. Berkeley Group Holdings (The) (BKG), which is also heavily exposed to the capital’s struggling property market, slumped 92p to £33.08 while Persimmon (PSN) slid 61p to £21.98.
British American Tobacco (BATS) mitigated the FTSE 100’s losses after rebounding strongly from Tuesday’s post-update slide. Jefferies urged investors to snap up the stock, arguing that the market’s “misplaced concerns” will “dissipate”. With the broker’s analysts remaining “firm believers” in the tobacco giant, BAT rallied 107.5p to £32.84.
Uranium miner Berkeley Energia Limited (DI) (BKY) nosedived 9.8p to 13.8p after a report claimed the Spanish government will block the opening of its mine close to Salamanca.
Shares in mixer maker Fevertree Drinks (FEVR) went flat after Deutsche Bank predicted that the market darling’s explosive pace of growth would slow. It dipped 11p to £28.83.
Pearson reassures on recovery under pressure from Amazon. Education publisher Pearson (PSON) has insisted it is making progress in its battle to protect its lucrative US college business from an assault by Amazon as it sought to restore investor confidence with a solid trading update. Pearson is attempting to recover from a torrid period in which its cash cow business selling textbooks and digital course materials to American students has been under serious pressure on two fronts. US college enrolments have declined amid a strong jobs market and those who do attend are increasingly turning to Amazon to rent used textbooks rather than buy them new.
Asos shares and profits surge as retailer looks to ‘bigger prize’. The boss of ASOS (ASC) says the online retailer is eyeing a “significantly bigger prize” than its £4bn sales target as it unveiled bumper profits. Chief executive Nick Beighton said investment would continue once the £4bn net sales target had been met as it looks to feed the huge demand for online shopping. It came as pre-tax profits climbed 28pc to £102m for the year to August, beating market expectations. That sparked a rebound in the company’s share price, which surged 15% to record its biggest one-day jump in three years to £57.60.
Questor: housing market dynamics favour Taylor Wimpey (TW.) – and it is on course to yield 10%
