Sub-optimal sub-prime?
It would be tempting to tar all sub-prime lenders with the same brush, but the accompanying chart shows how wrong this would be. Pawnbrokers like Albemarle & Bond (ABM) and H&T (HAT) have been affected by the remorseless decline in the price of gold. This has hit profits, noticeably in so-called pop-up outlets. Not only are customers less willing to part with gold items, but the earlier rush following the rise in gold prices means that there is a lot less jewellery in circulation. By contrast, companies like S&U (SUS) and International Personal Finance (IPF) have gone from strength to strength. S&U has been boosted by a steady increase in demand for loans through its motor finance operation Advantage, especially as main stream lenders move to reduce their loan books. IPF has advanced steadily by taking its tried and tested doorstep lending model and applying it to developing nations such as Mexico and, more recently, Bulgaria and Lithuania.
UK car sales at 5½-year high
More cars were sold in Britain last month than at any time since March 2008. Over 403,000 hit the road in September, according to the Society of Motor Manufacturers and Traders (SMMT), up 12 per cent on last year. Clearly, the twice-yearly change in registration plates helped, but this is the 19th consecutive month of steady growth and a combination of cheap finance and PPI windfalls are behind a lot of purchases. SMMT chief executive Mike Hawes believes this growth “to be sustainable”. That’s good news for the UK economy given more than 1 in 7 new cars were built here.
IPOs underperform
Despite the clamour for the Royal Mail initial public offering this week, such issues have had a tendency to underperform over the past ten years according to research by Kleinwort Benson. The chart shows the average performance of IPOs over the year following their debut on the market compared with the returns from the FTSE All Share index over the same time period, showing that from 2006 onwards IPOs have consistently undershot the wider UK market with the performance diverging further in the past two years, culminating in a 30 per cent underperformance for IPOs which listed in 2011.
Big Mining Companies Treading Water
After gorging themselves for years on surplus cash flow from the super cycle, analysts from Citigroup say the big diversified mining companies are taking the right steps to improve shareholder returns. Over the past 12 months, the mining industry has cut around $17bn (£10.6bn) of capex previously scheduled over the next seven years. However, Citigroup forecasts it will take at least one or two years for the world to digest the overcapacity in current commodity markets. This is in direct contrast with the big oil industry, which has added an additional $61bn in capex on Citigroup’s forecasts over the past 12 months. This bodes well for oil services companies but may reduce shareholder returns if oil prices stay flat or decline.
