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Wednesday Update

DB Live: Fed rate; Santander; Barclays; Next; Weir; trusts merge

9.30pm: US stocks rise as Fed holds

US stocks gained ground and the dollar fell as the Federal Reserve’s decision to keep interest rates unchanged.

“We have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” Federal Reserve chairman Jerome Powell said during a news conference that followed release of the US central bank’s latest policy statement.

The Dow Jones Industrial Average rose 160.29 points, or 0.61%; the S&P 500 gained 40.01 points, or 1.24%; and the Nasdaq Composite added 140.85 points, or 1.35%.

4.45pm: London close

Stocks looked for direction ahead of the Federal Reserve decision on interest rate. The FTSE 100 closed flat at 6,131.46 +2.20 (0.036%)

1pm: Data centre partnership

Edinburgh’s aim to become the data capital of Europe will be powered through a partnership with Hewlett Packard Enterprise.

Full story here

12.45pm: Tourism support ‘not enough’

Marc Crothall, chief executive of the Scottish Tourism Alliance, says a new £14 million package to help support struggling businesses is welcome, but not enough to prevent many of Scotland’s hotels being forced into permanent closure which will result in many more thousands of jobs still being lost.

Full story here

10am: Island distillery plan

Plans have been unveiled for a £6.5 million whisky distillery at Gramsdale on Benbecula.

Full story here

8.30am: London open

The FTSE 100 was treading water as investors looked ahead to the US Federal Reserve’s rate-setting meeting later today and the earnings season produced largely subdued results.

London’s blue-chip index was trading up 11.54 points at 6,140.80.

7am: Santander

Santander suffered a record half-year loss of €10.8bn (£10bn). Its UK bank revealed profit before tax fell 74% year on year to £147m.

UK CEO Nathan Bostock said: “Decisive management actions have helped us to mitigate some of the impact this crisis could have had on our results and business operations and ensure we are well positioned as the UK emerges from the lockdown.”

The bank said it wants to pay a scrip dividend equivalent to 10 cents per share for 2019 after Europe’s central bank told lenders not to pay cash dividends until 2021.

Barclays

Barclays

Barclays took a £3.7 billion charge for bad debt in the first half against £900m last time as the affects of the pandemic hit company finances.

Group profit before tax fell by more than half to £1.27bn, against £3bn last time.

James Staley, group chief executive, said: “Our strength in diversification has delivered pre-provision profits of £5.0bn and, even after impairment, we remain profitable. Income increased 8% to £11.6bn for the half, with total costs down 4% to £6.6bn resulting in positive jaws of 12%, and an improved cost to income ratio of 57% versus prior year.

Funds merge

Perpetual Income and Growth investment trust will be combined with Aberdeen Standard Investments’ Murray Income Trust (MUT) to create a £1.2bn UK equity income mandate.

The enlarged trust will be run by ASI’s Charles Luke. Perpetual shareholders will be offered a cash exit for up to 20% of the shares in issue.

Unite Students

Unite Students, which provides student accommodation, swung to a loss in the first half of 2020 and said it is anticipating a 10-20% reduction in rental income in the next academic year based on 90% occupancy.

Richard Smith, chief executive, said: “We have growing visibility over our income for 2020/21 and our… operating platform gives us the flexibility to rapidly adjust marketing strategies in response to changes in demand.

“97% of universities plan to provide in-person teaching this Autumn and UCAS data reveals a record share of 18-year-olds applying to university. With the Government providing strong financial support, we are confident in the prospects for the UK’s world-class higher education sector and expect strong demand for the 2021/22 academic year.

“We see significant opportunities for growth through university partnerships, new developments and by attracting more of the 855,000 students currently living in houses of multiple occupancy.

“The proceeds of our recent placing will be used to accelerate growth opportunities in those markets where we see strongest demand from students.”

The company has acquired an undisclosed site in central Edinburgh for a £24m development providing 300 beds.

Next

Next Straiton

Next has recorded a 28% drop in full price sales in the second quarter, as it struggles to tempt shoppers back to store.

However, this was a better result than it expected at the height of the Covid-19 pandemic and has allowed it to forecast a full-year profit of about £195m. 

“Warehouse capacity has come back faster than we had planned, and store sales have been more robust than anticipated,” the fashion retailer said.

Online sales bounced as warehouse picking and dispatch capacity returned to normal levels, with sales up 9% on the same time a year ago.

But like-for-like sales in its stores, the bulk of which re-opened in June, were down 72% for the quarter to 25 July, and down 32% since 15 June. 

Childrenswear, home, nightwear and sportswear, along with some adult casual clothing, had done much better than the more formal parts of its adult clothing ranges associated with work, going out, overseas holidays and large social events, it said.

Aston Martin slumps

Aston Martin

Luxury carmaker Aston Martin Lagonda has posted a first-half loss of £227 million (last year £80m) as sales slumped.

Chairman Lawrence Stroll said: “It has been a challenging period with our dealers and factories closed due to COVID-19, in addition to aligning our sales with inventory with the associated impact on financial performance as we reposition for future success.”

The company is replacing its CEO.

Taylor Wimpey

The builder plunged to a half-year loss of £16.1 million from a profit of £311.9m last year, driven by reduced ability to absorb fixed costs on lower completions.

Devro CFO leaves

Jackie Callaway, chief financial officer, of Moodiesburn-based meat casings firm Devro is leaving to take up the same role at Coats Group.

A search for a successor is now under way and Ms Callaway will work with the chief executive Rutger Helbing and the board to ensure an orderly transition. 

Ms Callaway said: “It has been an enormous privilege to work at Devro. The business is in good shape with a strong balance sheet which will serve the company well in the coming months and years.”

The company announced it will restore its dividend as the board said it expects to make progress during 2020. It has declared the postponed 2019 final dividend of 6.3p, in the form of an interim dividend paid in October 2020, in addition to the 2020 interim dividend of 2.7p, flat on the prior year.

It reported an improved underlying operating profit of £18.5m (H1 2019: £17.8m).

Weir Group

The Glasgow-based engineer and mining group reported a 4% dip in half year operating profit from £117m to £113m and confirmed that the dividend has been cancelled.

Jon Stanton, chief executive, said: “Our performance in these unprecedented times has reaffirmed the fundamental strength of Weir.

“While the business is performing well, it is too early to provide guidance on the full year given ongoing uncertainty due to Covid-19.  More broadly, the long-term outlook for mining remains positive, supported by demographic trends, carbon transition, the long-term decline in ore grades and the need to reduce waste and water and energy consumption. 

“Weir is ideally placed to help make our mining customers’ operations smarter, more efficient and sustainable and we look forward to unlocking more of these opportunities in the future.”

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