December 1, 2020

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business is good for you

Virgin Money upbeat, Bank of England to review dividend policy, and Greggs sales recover

4 min read
Here are the top business, market, and economic stories you should be watching today in...

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Virgin Money upbeat

Virgin Money (VMUK.L) has struck an upbeat tone on third quarter trading.

The challenger bank said customer deposits rose by 4.8% in the third quarter to £67.7bn ($87bn), as Brits stuck as home during lockdown spent less. The rise equates to around £600 extra in every Virgin Money customer’s current account or savings account.

Mortgage lending fell by 1% as the housing market paused by business lending surged by 5.7% to £8.8bn in the three months to 30 June.

“Our Q3 financial results reflect lower demand from consumers due to the pandemic, but strong demand from businesses for government-supported schemes, with the Group further increasing its provisions to reflect the uncertain economic outlook while maintaining a focus on margin, cost and capital management,” said chief executive David Duffy in a statement.

Virgin Money set aside an additional £42m to cover an expected rise in bad loans, taking its total credit loss provisions to £584m.

Analysts at Jefferies said Virgin Money’s update was largely in-line with expectations and “encouraging” given the backdrop of the pandemic.

Shares rose 1.7%.

Bank of England to review dividend policy

The Bank of England will review a ban on banks paying dividends during the pandemic at the end of this year.

The central bank said in a statement on Tuesday its Prudential Regulation Authority will “undertake its assessment of firms’ distribution plans beyond the end of 2020 in Quarter 4 2020.”

“The assessment will be based on the current and projected capital positions of the banks and will take into account the level of uncertainty about the future path of the economy, market conditions and capital trajectories prevailing at that time,” the Bank of England said.

Earlier this year Threadneedle Street put pressure on banks and insurance companies to stop all dividends, share buybacks, and bonus payments to senior staff until the worst effectsx of the COVID-19 pandemic had passed.

While it stopped short of an outright ban, most major banks and insurers subsequently announced they would not pay a dividend or buy shares back this year.

European stock markets were quiet on Tuesday morning, with attention focused on the latest US Federal Reserve meeting getting underway in Washington, DC.

The Fed on Tuesday begins a private two-day policy meeting. Chair Jerome Powell will deliver a statement on policy decisions and the outlook for the US economy on Wednesday.

The FTSE 100 (^FTSE) rose 0.3%, the CAC 40 (^FCHI) fell 0.2% and the DAX (^GDAXI) rose 0.3%. After falling over 1% on Monday amid quarantine concerns, Spain’s IBEX 35 (^IBEX) rose 0.2% at the open.

Wall Street futures were little changed. S&P 500 futures (ES=F), Dow Jones futures (YM=F), and Nasdaq futures (NQ=F) were all flat.

Stocks were mixed overnight in Asia. Japan’s Nikkei (^N225) fell 0.2% and Australia’s ASX 200 (^AXJO) fell 0.3%, but Chinese markets registered gains. The Hong Kong Hang Seng (^HSI) rose 0.4%, the Shanghai Composite (000001.SS) rose 0.7%, and the Shenzen Component (399001.SZ) rallied 1.2%.

Greggs (GRG.L) posted a £65.2m ($84m) loss in the first half of the year, as store closures and subdued demand during the pandemic wiped out its profits.

But the bakery chain has reopened its stores in the past month, and said sales last week reached 72% of levels seen last year. Its shares were trading more than 2% higher on Tuesday morning in London.

Chief executive Roger Whiteside said the company was “well prepared” to deal with the challenges of social distancing, and had entered the pandemic after “successive years of unbroken growth.”

Amazon (AMZN) is to offer free grocery delivery to UK customers through its Amazon Fresh service.

Amazon Prime subscribers will be able to order groceries through Amazon Fresh, with free delivery on orders over £40 ($51), from Tuesday.

The service will be available to customers in around 300 postcodes, covering London and the South East of England. Amazon said this will be expanded to millions more across the UK by the end of 2020.

Amazon also said it will speed up delivery times to make same-day delivery available to grocery customers in more than 40 postcodes across the south-east.

Boohoo’s probe update

Boohoo (BOO.L) has published the terms of reference for the independent probe into its supply chain, following reports suggesting its Leicester suppliers were paying staff less than minimum wage.

Boohoo said the independent review, led by Alison Levitt QC, will look at the truth of the allegations, whether Boohoo was aware of any breaches, and whether Boohoo followed all relevant laws. The review will also have the power to make recommendations if it sees fit.

“We are pleased to share the Terms of Reference for the upcoming Independent Review into our Leicester supply chain,” deputy chairman Brian Small said in a statement.

“We believe this demonstrates how seriously we, as a board, are treating the recent allegations into our supply chain. The Group is committed to delivering the highest standards of ethics, compliance and transparency.”

Shore Capital’s retail analysts Greg Lawless and Clive Black said: “In our view, the external investigation looks comprehensive in its scope and we believe that investors will welcome the timing of the report by the external QC alongside the interim results in late September.”

Boohoo shares rose 2.7%.

M&C Saatchi surges

Shares in ad agency M&C Saatchi (SAA.L) leapt higher on Tuesday, after it flagged a “resilient” performance over the last few months.

M&C Saatchi said it expects to make a small profit in the first half of 2020, thanks to new business wins with clients like TikTok, BP (BP.L), and Public Health England.

“Although revenue declined in H1 2020 compared to H1 2019, the better than expected second quarter performance and the swift and decisive action taken in reducing costs has resulted in a relatively stable first half year performance, stronger than was anticipated at the start of the pandemic,” the company said.

M&C Saatchi, which is also reeling from an accounting scandal, said its cash position has also improved in the last few months and lenders have relaxed repayment terms on some of its debt.

Shares jumped 15%.

Fresnillo falls to the bottom of the FTSE

Silver and gold miner Fresnillo (FRES.L) fell to the bottom of the FTSE 100 on Tuesday, unwinding a recent rally driven by surging precious metal prices.

It came as Fresnillo published first half results. Revenue rose 5.2% to $1bn and operating profit rose 232.1% to $216.9m.

However, the actual profit delivered was 20% lower than this time last year due to the collapsing value of the Mexican peso. Fresnillo’s operation are in Mexico and the devaluation pushed profits down to just $56.5m.

Fresnillo’s stock price dropped 5.6%.

Dettol maker’s profit jumps

Surging sales of cleaning products helped consumer goods giant Reckitt Benckiser (RB.L) grow sales and profits i the first six months of the year.

The company said on Tuesday that it expects 2020 to be better than previous forecasts, thanks to soaring Dettol sales.

Sales at the the British-Dutch consumer goods giant’s health business were up by 9.3% in the first half of the financial year while the hygiene business expanded 16%. Overall net revenue was up 12% on a like-for-like basis.

Shares dipped 1%.

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