Fake off
It was finally curtains for Patisserie Valerie (CAKE) this week as the café chain announced that it would enter administration after failing to renew its banking facilities, meaning it did not have sufficient funding to meet its liabilities. This was a “direct result” of the significant fraud, management said, which produced accounts showing £28m in cash, misrepresenting the £9.8m in net debt that was actually on its books, with “thousands of false entries” in its ledgers. The shares have been suspended at 429.5p since October. KPMG, which is acting as administrator, said 70 of the chain’s stores and concessions would close immediately.
Vodafone inks O2 deal
5G ambitions
Vodafone (VOD) and Telefonica UK (O2) have agreed non-binding heads of terms to strengthen their existing network sharing agreement in the UK, extending this to include 5G. This would enable them to deploy 5G faster, to more customers, less expensively. They are also considering options for a “shared, future proof fibre transmission network”. The companies plan to devolve more activities to CTIL, the 50:50 joint venture that owns and manages their tower infrastructure – potentially opening the towers to other third-party tenants. And they’ll consider a “potential monetisation” of CTIL once the new arrangements have been finalised. Ostensibly, this could mean a sale.
Pound rallies
Delay on cards
Sterling reached its highest point against the US dollar since November this week, breaking the $1.30 mark after the Labour party indicated it may support legislation to delay the UK’s departure from the EU to beyond 29 March. Meanwhile, a cross-party group of MPs, led by Labour’s Yvette Cooper and Conservative Nick Boles, have also proposed legislation that would give MPs a vote on extending Article 50 if they have not agreed to the government’s proposed Brexit deal by 26 February.
Debt warning
Concerns mount
The Bank of England has sought to allay concerns over high growth in corporate loans and unsecured consumer debt, with deputy governor Ben Broadbent claiming that the system is now better able to withstand any disruption from the market. That is despite there being “parallels” between the pre-financial rise in US sub-prime mortgages and the boom in leveraged UK loans. Mr Broadbent said rapid increases in debt rather than the overall amount outstanding were usually an effective warning signal for financial crises, arguing that corporate leverage had fallen since the financial crisis and interest rates were well below average and would likely remain so in the near future.
China slowdown cemented
30-year low
China posted its slowest economic growth since 1990, after gross domestic product rose 6.6 per cent in 2018, according to official data. Fourth-quarter growth of 6.4 per cent was the lowest quarterly reading since the financial crisis, with Beijing’s policymakers expected to ramp up the fiscal and monetary stimulus measures that were launched in mid-2018. Economic growth has been hampered by the government’s crackdown on the shadow banking sector – which has stemmed credit liquidity – and ongoing trade tensions with the US.
Risers and fallers (%)
| PETS AT HOME | 24.75 |
| METRO BANK | 17.88 |
| MCCOLL'S RETAIL | 16.07 |
| THOMAS COOK | 15.27 |
| DIXONS CARPHONE | 13.45 |
| SOPHOS | -12.47 |
| N BROWN | -8.99 |
| ACACIA MINING | -8.86 |
| LAMPRELL | -8.56 |
| JOHN WOOD | -7.93 |
Outlook dimmed
China effect
The International Monetary Fund (IMF) cut its global growth forecast for 2019 to 3.5 per cent, from the 3.7 per cent predicted in October. The IMF cited escalating trade wars and slowing Chinese growth, while there were also downgrades for developed economies, reflecting disruption to the German motor industry from new fuel emission standards. The world economic outlook report predicts UK growth of around 1.5 per cent for this year and next, but said those predictions assumed that a Brexit deal would be reached this year and that there is a gradual transition to the new relationship with the European Union. Meanwhile, the economies of Argentina, Turkey and Venezuela are expected to contract.
G4S coughs up
Dispute resolved
G4S (GFS) has agreed to settle a class action lawsuit, brought against it by employees in California. The security group is expected to pay between $100m and $130m (£77m-£100m) in the second half of 2019 to settle claims concerning rest and meal breaks for 13,500 employees in California between 2001-2010. This is the third such case the group has settled in the state. However, while the previous cases were similar in nature and total size, they were settled for $7.6m in aggregate. A provision for the cost will appear in the 2018 full-year results.
