ondon’s FTSE 100 index has moved cautiously higher today as markets show signs of calming after the recent banking turbulence. In today’s corporate results, B&Q and Screwfix owner Kingfisher stuck by City forecasts for the year ahead after reporting a 20% fall in adjusted profits to £758 million for 2022/23. Meanwhile, substantial spending on energy support schemes meant public sector net borrowing for last month was £16.7 billion — some £9.7 billion more than a year ago and the highest February borrowing since monthly records began in 1993. The latest public borrowing figures could give Jeremy Hunt room for manouvre in spending, an economist noted, but “turmoil” in the banking sector could put all of that recent improvement at risk. Cumulative borrowing for the financial year so far is £132.2 billion, which is a long way below the £152.4 billion projected by the Office of Budget Responsibility as part of last week’s Budget. Ruth Gregory, deputy chief
UK economist at Capital Economics, noted that this should have “raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year”. “But the big risk is that the turmoil in the banking sector deepens the economic downturn and the recent improvement in the public finances is blown away,” she added. The
British Honey Company - a maker of spirits as well as honey - is set to enter administration. The business had been looking into ways to keep itself alive since October of last year, and while it received a loan in December to help fund its working capital requirements, it failed to secure any further funding. “Regrettably, the Board has concluded that it is required to take the necessary steps to preserve value for creditors,” the company said. As a result, it has appointed partners at FRP Advisory Trading Limited as its administrators and suspended trading of its shares on AQUIS. Directors of ExpressVPN owner Kape have warned shareholders that gambling tycoon Teddy Sagi may leave them no choice but to accept his bid despite their “firm view that it materially undervalues Kape” by taking company private. Sagi’s Unikmind Holdings - which already holds 54.8% of Kape - submitted a bid to acquire the remainder of the business in February. If accepted, Kape will delist from the
London Stock Exchange’s Alternative Investment Market. Sagi said delisting would be the best decision for the current financial climate. Unikmind added that, “regardless of the outcome of the offer”, it would aim to pass a resolution to take Kape private. However, the independent members of Kape’s board said that the deal “undervalues” their business, which started in the adtech sector before acquiring one of the world’s top VPN services. But in a full letter explaining their decision, the independent directors said the resolution to take Kape private could scupper any resistance to the deal. “Were Unikmind to become successful in obtaining sufficient voting rights in Kape to make the passing of a delisting resolution likely, Kape Shareholders would have to seriously consider accepting the offer despite the independent directors’ firm view that it materially undervalues Kape,” they said. The FTSE 100 index is 0.6% or 43.58 points higher at 7447.43, with stock market benchmarks in
Paris and Frankfurt up by around 1%. Among London-listed banking shares, Barclays rose 2% or 3p to 139p and NatWest improved 5p to 262.9p but HSBC bucked the trend by easing 0.7p to 541p. Elsewhere in the FTSE 100 index, shares in B&Q owner Kingfisher lifted 6.7p to 280p after its results-day guidance on the outlook for the current year reassured investors. Mike Ashley, the billionaire owner of Frasers Group, has pledged around £200 million worth of shares to HSBC in a sudden rush for extra cash. Frasers, which owns the Sports Direct brand, said the deal was “as security for any amounts which may be due from time to time under a derivatives trading facility” and Ashley would retain his voting rights in the shares, which represent over 5% of the share capital of the company. Ashley also pocketed £8 million from selling put options in the business, Frasers said. Annual profit at the owner of the B&Q and Screwfix home improvement chain Kingfisher 40% fell as the uplift given to sales by pandemic-era lockdowns came out of the business’s numbers and inflation took a toll. Pre-tax profit for the year to the end of January fell almost 40% to £611 million from sales of over £13 billion, down 0.9%. Kingfisher said its sales were outpeforming the wider industry, with “big ticket” items such as new kitchens performing well, but e-commerce sales down by over 9%. It pointed to a “multi-year cost reduction programmes continue to help offset inflationary pressures” while keeping its pricing competitive. Thierry Garnier , Chief Executive Officer said “We have maintained a sharp focus on pricing to deliver value to our customers during this challenging period for household finances, while at the same time managing our cost inflation pressures effectively.” The stock market reaction to the UBS-Credit Suisse deal improved gradually during yesterday’s session, meaning the FTSE 100 index and Wall Street’s S&P 500 finished 0.9% higher during their respective sessions. Energy prices were under pressure for much of the day before a recovery left Brent crude back near to $73 a barrel by this morning. Michael Hewson, chief market analyst at CMC Markets, said: “While the UBS deal raises a number of questions with respect to shareholder and bondholder priorities, regulators across the EU assured nervous markets that the Swiss bailout was unique to the two Swiss banks, while investors took the view that recent events would prompt a slowdown in the pace of central bank tightening this week. “Even the problems being felt in the US banking system were being shrugged off with further weakness in First Republic Bank being treated as a localised difficulty, rather than anything more systemic.” The US Federal Reserve’s policy meeting is due to start later today, with traders divided over whether tomorrow’s decision will see rates hiked, left on hold or even subject to a 0.25% cut. CMC expects the FTSE 100 index to open 16 points higher at 7420 but with sentiment fragile until the outcome of tomorrow’s Federal Reserve meeting and decisions from the Swiss National Bank and the Bank of
England on Thursday. UK public sector borrowing last month was the highest for a February ever, at £16.7 billion, well above City expectations of £11.4 billion. The total was up from £7.0 billion last February, with the rise mostly due to the energy price guarantee. The public sector deficit - the amount borrowed for day-to-day spending - was £10 billion, while £6.7 billion was borrowed for public investment. Net Governemnt receipts came to £77.8 billion, as PAYE income tax grew by 11.3%. The country’s debt-to-GDP ratio, meanwhile, hit 99.3%, which the Office for National Statistics noted was about the same as the level reached in the early 1960s. Trustpilot founder Peter Muhlmann is to step down as CEO of the business as the online review site begins a search for a replacement. ]Muhlmann said he wanted to “have the chance to focus my efforts and skills on promoting our brand and helping to drive the Trust agenda around the world. I have felt for some time that this is where I can make the greatest contribution and add the most value to Trustpilot in the years to come.” Trustpilot revenue grew 23% to $149 million in 2022, while losses narrowed from $25.9 million to $14.7 million. However, the firm warned it had “felt the effects of the uncertain macro environment on new business and retention bookings in Q1, which will result in lower revenues from in-period bookings in FY23.” UBS has suffered a blow from its emergency takeover of Credit Suisse after its outlook was cut to negative by credit ratings businesses S&P and Moody’s. “We see material execution risk in UBS’ integration of Credit Suisse,” S&P analysts wrote. “This could mean a weakening of the combined group’s competitive position or underperformance against its financial targets because of sizable restructuring or litigation costs, pressure on revenue capacity, or setbacks in realizing cost savings.” Moody’s analysts said “the action balances on the one hand the advantageous financial terms in terms of liquidity and capital together with the long-term potential for franchise enhancement, and on the other hand the complexity, extent and duration of the integration.” UBS shares plunged yesterday before making a recovery late into the trading session.