...the main business headlines..........
BOE governor warns on mortgages
The Bank of England governor Mervyn King has warned that UK mortgage lenders will not be able to depend on the central bank to support them through the credit crisis, reported the Daily Telegraph. This is the first glimpse of the bank’s new funding system, which goes “one step further” than its predecessor in allowing banks to swap new mortgages against liquid instruments, although there will be a strict time limit on the swaps. His speech is likely to “come as a disappointment” to the mortgage industry.
XL Leisure goes to wall
XL Leisure Group, the UK’s third biggest holiday company, has gone into administration after lenders pulled their financing. Talks have been ongoing for the last two weeks, but creditors failed to come to an agreement. XL owns XL Airways, which flies to more than 50 destinations and was acquired from Icelandic transport group Eimskipafelag Islands in a management buyout at the end of 2006. Thousands more passengers were stranded after the announcement, which affects brands including Freedom Flights and Medlife Hotels.
Lehman continues slide
Leman Brothers looks unlikely to retain its independence as it fights for survival, reported the Independent. Its attempts to divest various businesses “look doomed” and shares in the investment bank fell by a further 42 per cent. The likely outcome now looks to be a sale of the entire company at an increasingly low price, with Bank of America among the possible buyers or a consortium comprising a number of different financial institutions. Analysts lowered their ratings ahead of likely downgrades by ratings agencies.
Profits fall sharply at John Lewis
The John Lewis Partnership has unveiled a 27 per cent fall in first half profits, underlining the current polarisation of high and low-end retailers in the high street. The business comprises 27 department stores and 190 Waitrose supermarkets, which have been forced to cut prices in “difficult” trading conditions. Chairman Charlie Mayfield said expansion plans would remain on track as its mutual ownership structure allowed the group to weather the downturn better than competitors with shareholders to recompense.
Trouble at Homebase and Argos
Home Retail Group, owner of Argos and Homebase, shocked the market yesterday with the extent of sales declines and writedowns at its retailers. Sales at Argos in the last quarter fell by 5.8 per cent, the group’s worst performance for nine years, with furniture revenues slumping 20 per cent. Meanwhile sales at Homebase declined 8.3 per cent over the same period and the company gave notice that it would be forced to write down the value of the chain by £700 million, from almost £1 billion to about £300 million in its half-year results.
China output growth slows
Industrial production in China grew at its slowest rate in six years last month, the latest sign that the world’s fourth-biggest economy is cooling. Output grew 12.8 per cent year on year in August, after growing 14.7 per cent in July, failing to achieve analysts’ targets. Exports in the month were weaker and factory closures during the Olympics also depressed growth. The slowdown comes on the back of weaker inflation numbers and adds to conjecture that the Chinese government will seek to stimulate the economy as global growth slows.
...in brief..................
Volvo cuts output and E.on gets dressing down
Volvo is to announce production cuts of around 5 per cent in reaction to falling sales, said the Financial Times. The Swedish carmaker, owned by Ford, is likely to make the announcement next week, which will be accompanied by news of job losses among its 25,000 employees…………
Rupert Murdoch has begun talks with French advertising group JCDecaux to swap his European billboard business for cash and a stake in the company. The deal would allow Murdoch to exit from a business which has been suffering political problems, leading to a recent raid on its premises…………
BG Group’s most recent oil discovery is more than three times larger than expected, reported the Independent. The company revealed that the find in Brazil’s Santos Basin could contain between 3 and 4 billion barrels of oil. The news sent the company’s shares up over four per cent…………
Faith Shoes, the high-street chain which has been facing financial difficulties, has been bought by Scottish businessman John Kinnaird. Kinnaird is buying the group’s 85 UK shops with Agilo, an investment fund which focuses on distressed companies. 2,000 jobs are expected to be saved…………
Japan’s economy shrank three per cent in the last quarter, the most severe decline since 2001. Gross domestic product contracted more than expected, as corporates and consumers alike cut spending and exports fell amid slowing global growth…………
Industry bodies have criticised the comments made by the head of emissions at energy group E.on, Mark Owen-Lloyd, who said at a seminar that increased gas prices this winter would make more money for the company. The company has apologised and launched an investigation…………
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