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FTSE 100 Live: Bank of England expected to hike interest rates, Direct Line boss leaves, Bestway builds Sainsbury’s stake

 (Evening Standard)
(Evening Standard)

Insurer Direct Line today revealed that chief executive Penny James has left the group with immediate effect.

James, who has run Direct Line since May 2019, leaves in the wake of the company’s decision to axe its dividend following a surge in December weather claims.

Meanwhile, family-owned wholesale and pharmacy group Bestway has revealed a 3.45% stake in Sainsbury’s but said that it is not considering a takeover offer.

FTSE 100 Live Friday

  • Direct Line boss ousted after dividend cut

  • Sainsbury’s shares surge on Bestway stake

  • Superdry issues profits warning

That’s all folks. Next week: EU GDP, Bank of England interest rate

Friday 27 January 2023 17:45 , Simon Hunt

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That concludes our liveblog coverage today, on the day Direct Line boss Penny James quit the company with immediate effect.

The Evening Standard City Desk will be back next week, where preliminary EU GDP numbers will indicate whether the bloc has swerved a recession, and later in the week we’ll find out if the Bank of England will be upping interest rates by 50 basis points.

Bank expected to hike interest rates again as recession ‘virtually unavoidable’

Friday 27 January 2023 16:46 , Simon Hunt

The Bank of England is expected to push interest rates higher on Thursday in what analysts believe will be one of the last in a cycle of successive hikes.

The decision will pile more pressure on already-strained borrowers, but with inflation beginning to edge back down off its highs, economists say there is a glimmer of hope in the economy’s more distant future.

Markets think the Bank’s monetary policy committee (MPC) will raise interest rates to 4% on Thursday, from the current rate of 3.5%.

It is expected by some experts to be the penultimate base rate rise before rates peak at 4.5% or 4.25%, and then fall back down.

read more here

FTSE 100 closes flat: Evening wrap

Friday 27 January 2023 16:36 , Simon Hunt

The FTSE 100 finished up flat at the end of the day’s trading session in London, finishing up just over 1 point down to 7,760. The index has been fairly flat all week, dropping a mere 11 points on where it closed last Friday.

The Footsie had been flirting with hitting a record high for much of January, but it’s now well below the all-time intraday high of just over 7,900, and looks unlikely to do so before the end of the month.

Sainsbury’s has been the best performing stock of the day -- it closed up 5.5% to 253p after it was revealed family-owned wholesale and pharmacy group Bestway had built a 3.45% stake in the supermarket. Bestway said it had no takeover plans, however.

Shares in Intel drop 10% after earnings fall short

Friday 27 January 2023 14:38 , Simon Hunt

Shares in semiconductor maker intel tumbled 9.8% in the opening minutes of trade on Wall Street, after its earnings fell well short of analysts expectations.

The firm posted its worst revenue drop in at least two decades and said things could well get worse amid a drop-off in consumer demand for personal computers.

That news has had a knock-on effect on Intel’s US-listed competitors, with Advanced Micro Devices down 2.6% and Applied Materials down 2.9%.

Overall, the Nasdaq and the S&P 500 were flat after the opening bell, while the Dow climbed 0.1%.

Superdry shares tumble as boss blames wholesale problems for profit warning

Friday 27 January 2023 13:13 , Simon Hunt

Superdry boss Julian Dunkerton was forced to issue a profit warning today which he blamed on problems at the wholesale arm.

While the shops are recovering well, the revamped new store on Oxford Street in particular, there are problems with getting shipments to other retailers.

The company now expects to break even for the year, down from a projected profit of between£10 million and £20 million.

The shares fell 27p to 122p. There has been talk that Dunkerton will take the business off the stock market. He said today there are “no plans to do this at the moment”. He hopes that Oxford Street will be pedestrianised to boost customer footfall.Sales in the half-year fell 3.6% to £287 million. There was a pre-tax loss of £13.6 million.

Dunkerton added: “The Superdry brand has real momentum and I’m delighted by how our retail trading continues to strengthen. We’ve done this against a difficult macro-economic backdrop by delivering well designed, affordable, and responsibly sourced products which have resonated well with customers.”

Pressure on Asda owners Issa brothers as EG Group debt interest payments jump £200 million

Friday 27 January 2023 12:17 , Simon Hunt

Questions are mounting over the scale of the debt burden looming over the Issa brothers, the billionaire owners behind Asda and petrol forecourt business EG Group, after an Evening Standard analysis found the company could face increased interest payments of as much as $250 million (£202 million) per year in 2023.

EG Group has over $10 billion of debt, according to its most recent annual report. The majority is made up of loans with interest pegged to LIBOR, EURIBOR and SONIA, indices representing the rate at which banks lend to each other. These rates have as much as quadrupled in the past five months, leading to hundreds of millions in increased debt interest.

Annual accounts for EG Finco, the financing subsidiary of Mohsin and Zuber Issa’s EG Group, are now several weeks overdue after it failed to file them by year end, Companies House records show.

Sandeep Dhingra, CEO of capital markets insight business FactEntry, said the firm could find it difficult to refinance its debt without paying higher interest rates than before.

“It’s not a good time to have this much debt on your plate -- you have to hope you can grow the business to cover up that liability,” he said.

“It’s like a bucket with a small leaking hole at the bottom, you have to keep topping it up so no one worries about what’s going on on the other side.”

read more here

Paragon counts mini-Budget cost as buy-to-let loans shrink

Friday 27 January 2023 11:31 , Simon Hunt

Paragon Banking Group revealed today that the chaos in the wake of last year’s mini-Budget was still being felt in the buy-to-let mortgage market in which it specialises, even as overall lending rose.

It branded the short-lived spending plans of Liz Truss’s Government as “hugely disruptive to new business flows”, with its loan pipeline shrinking to £748 million at the end of the first quarter of its financial year, from just above £1 billion in the same period a year earlier. That means the company expects completions in the second quarter to fall, as the shockwaves of the September turmoil ripple out.

The disruption came as a record number of fixed-rate deals were pulled by lenders as the market was up-ended by Kwasi Kwarteng’s proposals as Chancellor.

But Paragon said overall demand continued to rise, by almost 45% to over £591 million. Total new lending rose almost 22% to nearly £862 million. Its loan book rose by over 5% to over £14.4 billion.Shares in the FTSE 250 company rose 13p to 598p.

Levelling up is a Sunak fantasy

Friday 27 January 2023 11:26 , Chris Blackhurst

THERE was something stomach-churning about seeing Rishi Sunak on his Northern tour, making his “levelling up” funding announcements.

It carried a Baron Bountiful distributing bags of gold aspect, the great benefactor greeted rapturously, handing out his loot, then off again. It felt patronising and yes, nauseating.

That’s not to say the gift wasn’t welcome. Of course, it was, in the same way a beggar is grateful for a few quid. But it doesn’t solve their plight.

Tarting up a depressed town centre is not the solution, it’s not levelling up.

Teaching relevant skills, boosting transport links, building smart social housing, creating inspiring school buildings and ensuring smaller class sizes, adding NHS facilities and providing health education — now we’re getting somewhere.

Read more here

Sainsbury’s shares jump, Rolls-Royce falls back

Friday 27 January 2023 10:12 , Graeme Evans

Shares in Sainsbury’s have risen 6% after the family-owned wholesale and pharmacy business Bestway made a £193 million swoop for 3.45% of the supermarket giant.

It intends to hold the shares for investment purposes and is not interested in a takeover, but this pledge failed to stop a flood of buy orders and short covering as speculation over the ownership of the UK’s second largest supermarket was reignited.

The company’s share register is led by Qatar Holdings with a 14.3% stake, ahead of the investment vehicle of Czech billionaire Daniel Kretínsky on 10%.

Shore Capital retail analyst Clive Black said: “The news comes as a surprise to us and may spark some chatter around both Sainsbury and the wider sector with respect to corporate activity and equity values.”

Sainsbury’s shares were at 300p a year ago but reversed to 170p in October. They’ve recovered since then and rose 14.6p to 254p today, with Booker owner Tesco up 2.3p to 247.9p.

Bestway, which dates back to 1963 when founder Sir Anwar Pervez opened a single shop in Earl’s Court, had annual sales of £4.5 billion in the year to June. Its portfolio includes Bargain Booze, Well Pharmacy and Pakistan’s second largest cement manufacturer.

The share buying provided interest in an otherwise lacklustre session for the FTSE 100 index, which crept 9.51 points higher at 7770.62.

Fallers included Rolls-Royce after its new chief executive Tufan Erginbilgic reportedly likened the engines giant to a “burning platform“ when addressing staff on the challenges still facing the group. Shares, which have been on a strong run recently following the recovery in international air travel, fell back 2% or 1.9p to 111.6p.

The FTSE 250 index rose 37.50 points to 19,953.01, led by a rebound for bootmaker Dr Martens as shares rose 6% or 8.1p to 148.6p.

Europe’s first major IPO in 2023 on the cards

Friday 27 January 2023 09:38 , Simon Hunt

Europe is set to get its first major stock market listing of the year as German web hosting firm IONOS is seeking to raise between 447 and 543 million euros (£393 million - £478 million) in an initial public offering in Frankfurt.

The listing would value the company at up to 3.1 billion euros, making it the biggest IPO since luxury sports car business Porsche hit a 78 billion euro market cap after it went public in September 2022.

IONOS, which is owned by German firm United Internet and New York private equity business Warburg Pincus, offers web hosting, web domains and cloud services for consumers and small businesses. The company was launched in October 2018 following the merger of 1 & 1 Internet and ProfitBricks.

The owners are each offering 15% of their holdings as part of the IPO, via a public offering in Germany and private placements in several jurisdictions outside the country.

Wholesale problems hit Superdry

Friday 27 January 2023 08:35 , Simon English

SUPERDRY boss Julian Dunkerton was forced to issue a profit warning today which he blamed on problems at the wholesale arm.

While the shops are recovering well, the revamped new store on Oxford Street in particular, there are problems with getting shipments to other retailers.

The company now expects to break even for the year, down from a projected profit of between £10 million and £20 million.

The shares fell 27p to 122p. There has been talk Dunkerton will take the business off the stock market. He said today there are “no plans to do this at the moment”.

He hopes Oxford St will be pedestrianised to boost customer footfall.

Sales in the half-year fell 3.6% to £287 million. There was a pre-tax loss of £13.6 million.

Dunkerton added: “The Superdry brand has real momentum and I’m delighted by how our retail trading continues to strengthen. We’ve done this against a difficult macroeconomic backdrop by delivering well-designed, affordable, and responsibly sourced products which have resonated well with customers.”

Sainsbury’s shares jump 6%, FTSE 100 flat

Friday 27 January 2023 08:20 , Graeme Evans

Shares in Sainsbury’s have jumped 6% after Costcutter and Bargain Booze business Bestway disclosed a 3.45% stake in the supermarket and said it would be interested in buying more.

The rise of 14.6p to 254p came in a lacklustre session for the FTSE 100 index, which stood broadly unchanged at 7761.94. Other stocks in positive territory included Tesco, which lifted 2.7p to 248.3p.

Rolls-Royce shares fell back 2% or 1.9p to 111.6p after new chief executive Tufan Erginbilgic reportedly likened the engines giant to a “burning platform“ when addressing staff on the challenges still facing the group.

The FTSE 250 index was 2.36 points higher at 19,917.87, with Direct Line Insurance shares up 1.34p to 180.14p after announcing the departure of boss Penny James.

Bestway builds Sainsbury’s stake

Friday 27 January 2023 07:52 , Graeme Evans

Family-owned wholesale and pharmacy business Bestway today revealed a 3.45% stake in Sainsbury’s worth £193 million.

It said it intends to hold the shares for investment purposes and that it may make further purchases. However, it ruled out a takeover offer and said it looked forward to supporting the management of the UK’s second largest supermarket chain.

Bestway was founded in 1963 and started out as a chain of retail convenience stores before spreading to hold interests across the wholesale, pharmacy, real estate, cement and banking sectors. The group, which generated turnover of £4.5 billion in the year to June, is the largest overseas investor in Pakistan.

Qatar Holdings owns a 15% stake in Sainsbury’s, with the investment vehicle of Daniel Kretínsky the next biggest with 10%.

Direct Line boss leaves in wake of dividend blow

Friday 27 January 2023 07:34 , Graeme Evans

Direct Line Insurance is looking for a new chief executive after announcing that Penny James has left the group with immediate effect.

Pressure on James has grown since she announced that the company no longer expects to pay a dividend for 2022 due to a surge in weather claims in December. Shares tumbled 28% as a result.

Today the FTSE 250-listed company, which owns Churchill and Green Flag, said that James had agreed to step down and that chief commercial officer Jon Greenwood will run the business on an interim basis.

James joined the company as chief financial officer in late 2017 and took on the top job in May 2019.

She said: “While the business was impacted by significant headwinds at the end of 2022, the group has continued to make strategic progress.

“I am proud of what the business has delivered for customers, where our technology transformation has seen improved digital capability in our core business areas, setting the group up for the future.”

Amigo loans still doesn’t have enough capital to begin lending, firm says

Friday 27 January 2023 07:33 , Simon Hunt

Subprime lender Amigo Loans said it still hasn’t raised enough capital to begin lending in a blow for the company as it seeks to avoid collapse.

In a statement the firm said: “The Company has received a number of expressions of interest to support the Capital Raise. However, this remains below the targeted £45m of equity funding that the business requires.

“The Board continues to seek the best possible outcome for creditors, employees, shareholders, and other stakeholders.”

Amigo said its shares would become worthless if it is unable to raise the funds to lend.