Steer clear of McBride (MCB). The private label household products outfit yesterday announced the exit from unprofitable product lines in the contract space, where it makes products for the likes of Procter&Gamble and Unilever (ULVR). That will send contract revenues plummeting by 20 per cent in the year to the end of June. On a more positive note, its own-label products saw flat revenues in the first three months of the year, as encouraging growth in the likes of France, Germany and Poland offset weakness in the UK.
However, the fact remains that it has been taking a hit from the supermarket price wars. Hence, the contribution to revenues from that side of the business now stands at 11 per cent versus 18 per cent several years back and there are no signs of lessening margin pressures. At 5 per cent the yield on the stock is attractive but not enough so given that little improvement can be expected in the core UK market, writes The Times’ Tempus.
Any high-performance undertaking requires the most precise instrumentation. Unfortunately, as financial markets careen higher central bankers have been systematically smashing all the dials. Hence the record low yields in high risk debt or depressed levels of volatility. The latter, when measured by the VIX, is at February 2007 lows, as central bankers flood the financial system with liquidity. In parallel, the Dow Jones Industrials continues to set fresh highs almost on a daily basis and the Footsie is nearing its all-time record.
Yet that is not due to growth in profits. Earnings forecasts in the UK and Europe for over the next twelve months have come down by 12.5 per cent, according to broker Charles Stanley. Companies meanwhile continue to splurge on share buybacks, increasingly financed by debt. Even when taking into account rising cash levels corporate net debt is above 2008 levels, research from Societe General shows. No, don’t panic, but you may want to think about how to best safeguard your capital in the year ahead, says The Daily Telegraph’s Questor column.
BUSINESS PRESS HEADLINES:
President Petro Poroshenko declared an end to a cease-fire in eastern Ukraine late Monday and the beginning of a new attack to "liberate our land" from pro-Russia rebels, ignoring pressure from Moscow to extend the 10-day-old truce and dealing a blow to hopes for talks. The decision to use the army represents a gamble by Mr. Poroshenko that Russia won't send in its troops, massed for months on the other side of the border, and that Kiev's ragtag forces can oust the increasingly well-armed militants who have seized swaths of Ukraine's Russian-speaking east. – The Wall Street Journal Europe
Marks & Spencer (MKS) has handed control of its high street stores to the director in charge of the company’s online business in a landmark move that highlights the evolution in the retail industry. Laura Wade-Gery, who has overseen a £100m revamp of the M&S website, will assume responsibility for the company’s 800 UK stores as part of a revamp of the board. She is the first woman to be at the helm of M&S’s retail business. – The Daily Telegraph
Britain and other countries risk being caught in a ‘debt trap’ if ultra-low interest rates carry on for too much longer, the Basel-based Bank for International Settlements has warned. It said nations that have tried to boost their economies by cutting base rates to rock bottom could find themselves in a downward spiral, as cheap interest costs encourage even more borrowing. The influential global banking watchdog does not single out individual countries for censure but its words clearly apply to Britain, which has seen the base rate pegged at 0.5 per cent since March 2009. – The Daily Mail
The government must carry out an independent assessment of the ability of consumers to pay an extra £250bn in household bills over the next 15 years to modernise Britain's ageing infrastructure, MPs have said. Warning that the poorest households would be hit hard by years of above-inflation increases, members of the influential public accounts committee (PAC) said consumers would be expected to meet two-thirds of the £375bn total cost of major upgrades to services including energy, water, communications and transport. – The Guardian
Poundworld has secured £26m in new funding to open more stores in Britain and grow its overseas supply chain. The discount retailer, the third-largest single price point retailer in the UK, yesterday said it intends to expand its total UK stores – currently standing at more than 240 – by 40 to 50 each year for the next three years. It also aims to open more distribution depots, and already 30 per cent of its suppliers are based overseas. The new funding arrangement includes a £17.6m import loan facility on extended terms. - The Scotsman
Two of Michael O’Leary’s most loyal lieutenants will be sitting on Ryanair’s (RYA) board as non-executives within the year. Howard Millar, Finance Director of the budget airline for the past 20 years — and joint deputy Chief Executive for the past ten — is stepping down at the end of the year. News of his departure follows just three months after that of Michael Cawley who left after a decade of being deputy Chief Executive with Mr Millar. – The Times
