Coronavirus outbreak
Illness has spread
The number of deaths caused by the coronavirus outbreak has exceeded 100. As of 28 January, there were 4,593 cases confirmed globally, 4,537 of which were in China. Governments around the world are repatriating their citizens from Wuhan (where the illness originated). Hong Kong is restricting travel between itself and mainland China. Concerns about the potential implications of the virus have knocked financial markets – particularly the price of oil and of airline and luxury retail stocks.
Huawei and 5G
Restrictions on high-risk vendors
The UK will allow “high-risk vendors” to be used in its 5G networks, but will exclude such vendors from the ‘core’ – the sensitive part of the network – and from sensitive areas such as those near military bases. The government also said there will be a 35 per cent cap on high-risk vendor access to non-sensitive parts of the network. This comes despite US pressure to avoid working with Chinese firm Huawei. Victor Zhang, vice-president of Huawei, said that his company was “reassured” by the news that “we can continue working with our customers to keep the 5G roll-out on track”.
Sainsbury’s ‘net zero’
Reducing emissions
Sainsbury’s (SBRY) has committed £1bn to become ‘net zero’ by 2040. The supermarket group says this will take it in line with the goal to limit global warming to 1.5 degrees Celsius, the highest ambition of the Paris Agreement. It will focus on reducing carbon emissions, food waste, plastic packaging and water usage – while increasing recycling, biodiversity and health and sustainable eating. Sainsbury’s current carbon footprint is 1m tonnes – a 35 per cent absolute reduction in the last 15 years, despite space increasing by 46 per cent in the same period of time.
Bank overdrafts
FCA requesting information
The Financial Conduct Authority (FCA) has written to the major banks, asking them to provide evidence of how they are choosing their overdraft rates. The regulator noted that there had been “significant comment” in recent days about such banks aligning their rates around 40 per cent. The FCA is “being clear that we expect firms to take positive steps to help customers who may be worse off or in financial difficulties as a result of these changes”. It is monitoring the market and “will act should we see continued harm”.
Ofgem subsea investigation
£1.3bn cable
Ofgem has launched an investigation into National Grid (NG.) and Scottish Power over their delivery of a £1.3bn subsea power cable transporting electricity between Scotland, England and Wales. The joint venture was due to be completed in 2015 but only came into service in 2017 after significant delays. The regulator has said it will “review the performance” of the two companies and whether the late delivery breached licence conditions. It is also looking at whether the obligation to “develop and maintain an efficient, co-ordinated and economical system of electricity transmission” has been fulfilled.
Casper’s sleepy valuation
Mattress company IPO
US mattress company Casper Sleep – “a pioneer of the Sleep Economy” – expects its New York IPO to be priced between $17 and $19 per share. At the upper end of this range, it would be valued at $744m – quite a step down from the $1.1bn figure attributed to it last year as a private business. Chief executive Philip Krim explains that “at Casper, our mission is to awaken the potential of a well-rested world”. Casper reported pre-tax losses of $67m for the nine months to September 2019, on net revenues of $312m.
Mortgage Advice’s strong 2019
Shares climbed
Shares in Mortgage Advice Bureau (MAB1) rose by 13 per cent, after the advisory network said 2019 revenue increased 16 per cent and that pre-tax profits would meet management expectations. During the year to December, adviser numbers climbed by a fifth to 1,457 and partly contributed to a dip in the average annual revenue per adviser, although the group said productivity picked up in the second half of the year, and should benefit from technology investments in 2020.
Intu the breach
Taking appropriate steps
Shares in Intu (INTU) dropped to a fresh low this week, after a covenant on the shopping centre group’s largest bond was triggered. Under the terms of the £485m bond, which backs the subsidiary owning the MetroCentre in Gateshead, the loan-to-value (LTV) ratio cannot exceed 70 per cent. A fall in the property’s value, which comes amid a slowdown in shopping centre footfall, meant the LTV climbed from 64 to 71 per cent in the final six months of 2019. Intu said it is considering “any appropriate steps” to remedy the trigger event.
UK dividends climbed by 10.7 per cent in 2019 to a record £110.5bn – helped by an “exceptionally large” £12bn of special dividends, according to the quarterly Link UK Dividend Monitor.
Underlying dividends (excluding specials) rose 2.8 per cent to £98.5bn, buoyed by exchange-rate gains because of sterling weakness. Oil was the largest-paying sector – but showed no growth last year. Telecoms gave the weakest performance.
Link says that the “big engines of dividend growth” in the past three years (miners and banks) are less likely to drive dividends in 2020.
