Corking summer
Olympic cheers
It’s been a good summer for the GB Olympics and Paralympics teams and their medal haul appears to have been well celebrated back at home. Alcohol sales at UK supermarkets surged 8.5 per cent in the past four weeks, with sales of sparkling wines such as prosecco and champagne a third higher. Kantar Worldpanel, which monitors supermarket sales data, said consumers had been “keen to celebrate Britain’s Olympic and Paralympic golden summer”. Shares in some drink-related companies have also had a good summer, with tonic maker Fevertree and JD Wetherspoon up roughly a third in the past three months.
Sinking ship
Hanjin's woes
Things aren’t getting any easier for South Korean shipping company Hanjin as its shares hit a record low following its bankruptcy last month. The group will return all of its chartered vessels to their owners this week in an attempt to cut costs. It is losing $2m (£1.5m) a day amid a $14bn cargo logjam stemming from its financial dire straits. Hanjin filed for court receivership in August as creditors refused to provide further loans to the company. This left many of its ships stranded as port operators feared they would not get paid for unloading the company’s cargo.
Microsoft dividend
Payments fall short
Microsoft pushed its dividend up 8 per cent this week to 39¢ a share. But the move fell below Morgan Stanley’s expectations of a 10 per cent rise. The company assuaged the market by approving plans for a new buyback programme of up to $40bn (£30.8bn). That comes on top of an existing $40bn programme due to be completed by the end of the year. This shows that US companies’ preference for repurchasing stock over making shareholder payouts persists. Microsoft’s shares, which have advanced 2.4 per cent so far this year, rose 1 per cent in extended trading.
Plans rewritten
Petrobras rejig
Brazil might be celebrating after successful Olympic and Paralympic Games but it’s not all smiles for the country. Petrobras, the state oil company at the centre of a corruption scandal, has slashed planned investment by a quarter in its latest five-year business plan as it fights to stave off the crisis engulfing it and senior politicians. The company now plans to invest $74.1bn between 2017 and 2021, down from $98.4bn in its previous five-year plan issued in January. New chief executive Pedro Parente wants to cut the $125bn debt pile and is aiming for a leverage ratio of 2.5 times cash profits (ebitda) in 2018 from 5.3 times last year.
Jumbos landing
Record approaching
Debt-raisings above $5bn – colloquially called jumbo bonds – look set to hit a fresh record this year with pharma company Shire the latest to enter the fray. A record $330bn of jumbo bonds were issued last year, according to Edward Marrinan at HSBC, almost three times higher than 2014’s figure. But Shire’s $12bn bond – which had $30bn of demand and is helping it fund its $32bn buyout of rival Baxalta – means we’re already at $279bn this year.
Passport tussle
Brexit issue
Passports could be a major issue if the UK’s divorce from the EU is acrimonious – and not just the ones with a mugshot at the back. A total of 5,500 UK-registered financial services companies rely on agreements, known as passports, which automatically grant them access to the single market. But, interestingly, the number on the continent relying on such agreements to conduct business in Blighty is more than 8,000, according to the FCA. This suggests it is in both groups’ interests to maintain single market access agreements to save the time and effort of re-establishing them under new terms. Andrew Tyrie MP, chair of the Treasury committee, said the business put at risk “could be significant”.
Lumpy borrowing
Strategy unclear
The amount the government borrowed in August might have been the lowest level for that month since 2007, but it remained above economists’ expectations. This means the government may struggle to hit the targets laid out in March. The UK public sector, excluding banks, borrowed £10.55bn in August, down from £11.47bn in the same month last year, according to the National Office for Statistics. This was above the £10.2bn expected by economists. For the financial year to date (April to August), borrowing shrank by £4.9bn to £33.8bn compared with the same period last year. But borrowing for the year to March was revised up by £2.1bn to £76.6bn.
Investors may be losing track of the number of profit warnings after another disappointing update from over-50s fashion retailer Bonmarché (BON). But there’s some intrigue in this latest report as it’s the first from new chief executive Helen Connolly, who took over from Beth Butterwick this summer. She admitted the “effectiveness of execution needs to improve” and said she’d tweak operational weaknesses instead of launching a major strategic overhaul.
The business should return to growth during the 2018 financial year, but investors will be frustrated after the stock fell almost a fifth on this update. Unusually warm September weather led to “extremely poor” trading of late, the group said, and that first-half underlying sales were expected to show an 8 per cent contraction.
Profit expectations have been lowered and should now be between £5m and £7m for the full year.
