Unsecured credit risk
Some lenders, such as Secure Trust Bank (STB, have already backed out of the unsecured personal lending market. Now the Bank of England’s Financial Policy Committee (FPC) has warned about the risks to banks offering unsecured loans at interest-free rates. The FPC said long interest-free periods for customers moving balances on to new credit cards and higher maximum loans were examples of easier lending conditions, which have pushed up annual consumer credit growth to 10.9 per cent. Interest-free offers are of particular concern because of the way banks account for them, recording interest income even in interest-free periods based on future expected consumer behaviour.
Sophos beats expectations
Cyber security booms
News of consensus-beating trading figures from tech group Sophos (SOPH) sent shares up more than 10 per cent on the day of its pre-close update. In the 12 months to March 2017, the group benefited from a huge increase in demand for its cyber security products, particularly in the fourth quarter when billings rose 27 per cent. Overall billings for the year are expected to be up by a fifth on 2016 numbers. As a result, management expects cash profits and cash flow to be ahead of expectations.
South Africa junk status
Cabinet reshuffle concerns
South Africa’s credit status has been cut to ‘junk’ by ratings agency S&P Global. Political upheaval, most recently the sacking of finance minister Pravin Gordhan, had endangered the country’s economy, the agency said. The rand fell 2 per cent against the US dollar on the day of Mr Gordhan’s dismissal. The downgrade of its credit status will make it more expensive for the government to borrow money on the international markets. S&P said the cabinet reshuffle – which included appointing Malusi Gigaba as replacement finance minister – could delay fiscal and structural reforms. Shares in Old Mutual (OML) and Investec (INVP) - both with significant South African operations - declined on the day of the announcement.
Telford Homes builds
Expects record profits
In contrast to rival housebuilder Bovis (BVS), Telford Homes (TEF) is flying high. The east London-focused housebuilder expects to deliver record profits for the year to 31 March 2017 and slightly ahead of market expectations. Over 80 per cent of anticipated gross profits for the year to March 2018 has already been secured and 60 per cent for the following year. Telford continues to increase its exposure to the build-to-rent market, securing two new deals in the last six months and taking its pipeline of build-to-rent homes to 483.
Car registrations up
Tax changes ahead
UK new car registrations hit a record high in March, according to the Society of Motor Manufacturers and Traders. The industry body said 562,337 new vehicles were registered last month, up 8.4 per cent on the same time last year. Sales were helped by a change in the licence plate in March, as well as changes in vehicle excise duty. Since 1 April new cars are taxed according to their carbon emissions. There are three bands – zero, standard and premium. Only hydrogen and electric cars escape the tax.
Opec cuts pay-off
Crude production down
Efforts to curb output by Opec seem to be yielding results. US crude inventories fell by 1.8m barrels at the end of March, according to the American Petroleum Institute. Global benchmark Brent crude hit $55 a barrel at the beginning of this month. Output was also curbed by an outage at the 180,000 barrel-a-day Buzzard oilfield in the North Sea. Opec and non-Opec producers, including Russia, cut supply by around 1.8m barrels a day for six months until June, and are considering whether to extend the agreement.
Wind farm boom
Green energy auctions
The first green energy subsidy auction to be held for two years is expected to pave the way for a rise in offshore wind, as the costs of building renewable farms out at sea tumble faster than experts predicted. The government has set a £730m budget for three auctions for emerging renewable technologies by 2019, and it has ruled out pouring any more funds into onshore wind and solar energy. The first of the three, a £290m auction, will kick off this week, and is expected to show that the fall in costs is about a decade ahead of schedule.
The strength of the dollar and a number of special dividend payouts expected in the second quarter of this year are set to boost dividends paid by FTSE 350 companies to a record high of £20.7bn. The findings by IHS Markit will be music to income investors’ ears, although much of the rise is down to the artificial boost of exchange rate movements. In total ordinary dividends worth £17.4bn are forecast to be paid by FTSE 350 companies, a 9 per cent rise on last year, with the balance made up by special dividends, of which National Grid’s £3bn payout leads the way. But strip out exchange rate movements and the increase would have been a more modest 1.7 per cent. Around one-third of the FTSE 350’s dividends are paid in dollars, including major dividend payers such as BP, Shell and HSBC. The upper echelons are proving to be a happy hunting ground for income investors right now, with 25 companies yielding more than 5.7 per cent and 10 of these in the FTSE 100.
