Analysts have warned Cineworld’s entire value could be wiped out after the cinema chain was ordered to pay more than £700m following a court ruling.
Cineworld was taken to court last year by Canadian rival Cineplex after it pulled out of a planned takeover deal. It hit back at the claim and launched a counter-suit, arguing Cineplex had breached a number of covenants.
But a judge ruled against Cineworld and ordered it to pay C$1.24bn (£728m) in damages to settle the claim. Cineworld said it will appeal the decision, but shares plunged as much as 38pc.
Berenberg analyst Owen Shirley described the judgement as “dire news” for Cineworld, adding it had “the scope to wipe out all the remaining equity in the business”.
Gas rally takes a breather on supply hopes
Gas prices have slumped this morning, providing a much-needed respite from a rally that sent prices surging by more than a fifth earlier this week.
Gas flows into Germany from Russia jumped to their highest level so far this month, while the outlook for liquefied natural gas deliveries to Europe has improved.
The prospect of higher supplies drove down benchmark European gas prices by 5.3pc. The UK equivalent has fallen 4.5pc.
Zara owner and H&M bounce back from pandemic blues
Sales at Zara owner Inditex and H&M are back at or above pre-pandemic levels as the world’s two biggest fashion retailers rebound despite a supply chain crunch.
Inditex said sales were up 10pc on 2019 levels in the quarter to the end of October, and had continued at that rate up to Dec. 10, helped by strong online demand.
Smaller Swedish rival H&M said sales in local currencies matched pre-pandemic levels from September through November.
However, shares in both companies fell around 3pc in early trading as the resurgence of Covid cases linked to the omicron variant clouding the picture for Christmas trading.
Retailers are also facing pressure from a supply chain crunch that has pushed up the costs of raw materials and labour.
It comes as Inditex prepares for a major change at the top, with Marta Ortega, a daughter of the company billionaire’ s founder Amancio Ortega, taking over as chair next April.
GSK and Sanofi delay data on Covid booster candidate
GlaxoSmithKline and Sanofi said they expect data from late-stage clinical trials of the booster dose of their Covid-19 vaccine candidate in the first quarter, instead of this year, marking another delay for the potential jab.
Reuters has more details:
It came as the French and British partners said preliminary data from trials showed the single-dose booster provided strong immune responses.
The companies said they need more time to test the booster on more people who have not been infected by the virus before they can submit data to regulators.
The Phase III trial for the recombinant adjuvanted Covid-19 vaccine recruited most participants in the third quarter, coinciding with a significant increase in the number of people infected globally due to the Delta variant, it said.
“To provide the necessary data to regulatory authorities for the booster vaccine submission, the trial will continue to accrue the number of events needed for analysis, with results expected in the first quarter 2022.”
LadBible valued at £360m in stock market debut
The company behind viral publishing site LadBible has been valued at £360m after debuting on the London Stock Exchange this morning.
Shares in LBG Media jumped 11pc above their asking price following an initial public offering on Aim.
The company raised £30m in the float, while shareholders sold £81m worth of existing stock.
Co-founders Alexander Solomou and Arian Kalantari, who set up the business in 2012 while at university, were among those in line for a windfall from the IPO.
Manchester-based LBG Media operates 10 core brands, including flagships LadBible and Unilad, as well as female-focused outlet Tyla.
Fortress snaps up pub group Punch
Fortress Investment has snapped up one of the UK’s biggest pub groups in a major bet on the future of the British boozer.
The US private equity firm has acquired the entire share capital of Punch Pubs Group from Patron Capital Partners.
Punch, which specialises in suburban and rural sites, has 1,300 pubs across the UK. The deal follows its takeover of 56 pubs from Young’s Ram Pub Company in July.
Clive Chesser, chief executive of Punch Pubs, said:
This is very positive news for everyone connected with Punch, and we are extremely excited about the opportunity that lies ahead with Fortress Investment Group.
Fortress is a hugely experienced investor who understands the strengths of our business and fully buys into our strategic positioning and business plan.
We welcome their ambition and commitment to work alongside the existing management team to invest in the business with innovation and capital to ensure our long-term success in what is a highly competitive market.
Billionaire Drahi weighs up Sotheby’s IPO
It’s a busy week for French telecoms tycoon Patrick Drahi. After tightening his grip on BT on Tuesday, the billionaire is reportedly now eyeing a stock market float for Sotheby’s.
Bloomberg reports that Mr Drahi has held discussions with potential advisers about a US listing of the iconic auction house.
Sotheby’s, whose history stretches back almost 300 years, has enjoyed strong online sales during the pandemic and has been moving into digital offerings including non-fungible tokens. It competes with Christie’s, which is owned by French billionaire Francois Pinault.
Mr Drahi – a serial dealmaker – stunned the art world when he bought Sotheby’s for $3.7bn (£2.8bn) including debt in 2019, a deal that ended its three-decade run as a public company.
Poll: Two-thirds of Britons expect interest rates rise by June
A record two-thirds of British households expect the Bank of England to raise interest rates in the next six months, though the outbreak of omicron has dented expectations in the short term.
A survey by IHS Markit showed 67pc of people expect the BoE to raise its main interest rate from its current record low of 0.1pc by June, up from 66pc in November’s survey and the highest percentage since the series began in 2013.
But the proportion expecting a move within three months fell to 43pc from 44pc, and just 12pc expect a rise when the BoE announces its December policy decision on Thursday.
Lewis Cooper, an economist at IHS Markit, said: “Although dented slightly due to pandemic-related concerns, households’ interest rate expectations are at levels where the Bank of England have historically hiked.”
Pound pushes higher after inflation jump
Sterling has rallied against the dollar after the latest data showed inflation hit a 10-year high in November.
Consumer prices surged to 5.1pc last month, fuelling expectations in money markets that the Bank of England will increase interest rates at tomorrow’s meeting.
The pound gained as much as 0.4pc to hit $1.3283 – its highest since December 7. Against the euro it’s down 0.2pc at 84.94p.
Retailers slide as Currys warns on Christmas sales
Retail stocks are taking a beating this morning after a downbeat warning from Currys that the spread of omicron and fresh restrictions were denting festive sales.
In a statement this morning Currys said: “The immediate outlook has become more uncertain, with the omicron Covid-19 variant and associated government restrictions potentially further dampening market demand.”
Currys has dropped more than 10pc, while online retailer AO World is down 4.6pc. B&Q owner Kingfisher has slipped 1.9pc.
Cineworld plunges as much as 40pc
It’s a rough start for Cineworld, which has seen its shares crash as much as 40pc after being ordered to pay Cineplex more than £700m to settle a court case over its failed takeover.
Berenberg analyst Owen Shirley describes the judgement as “dire” and warns it has “the scope to wipe out all the remaining equity in the business”.
Ivor Jones at Peel Hunt adds that the damages are “in excess of” the company’s available resources and warns of uncertainty over the outcome.
Energy suppliers to face financial stress tests
Energy suppliers will face financial stress tests from January to ensure they can withstand price surges that have wiped out more than two dozen companies in recent months.
Under new proposals tabled by Ofgem, firms could be blocked from taking on new customers once they hit certain milestones – such as 50,000 and 200,000 accounts – until the regulator is happy with their balance sheet strength.
Ofgem is also proposing to launch financial licence requirements for suppliers and wants to improve the “fit and proper” rules for energy firm directors, while ensuring boards have proper oversight and control of management.
As part of the proposals, it added it will review the energy price cap to make sure it is better able to cope with price volatility.
Currys warns on Christmas sales slowdown
Currys has warned there’s been a slowdown in sales at its stores in the run-up to Christmas as the fresh wave of Covid cases takes its toll.
The retailer also said the emergence of the omicron variant and the rollout of further restrictions have cast uncertainty over future trading. Shares dropped 6.7pc.
It came as Currys revealed sales in the UK and Ireland fell 4pc to £2.5bn for the six months to the end of October compared with the same period a year ago.
However, underlying profits in the UK and Ireland rose from £25m to £33m following cost-cutting across the business.
Despite concerns over the future, the company said it would spend £75m buying up shares from January and would also pay out a 1p-a-share dividend to shareholders.
Chief executive Alex Baldock said:
Our market has been softer over recent weeks, and we may face into further headwinds from Omicron and associated restrictions, but the stronger business we’ve built can ride out both the industry-wide disruption to supply chains and bumpy demand.
British Airways owner scraps £420m Air Europa takeover
British Airways’ parent company has scrapped its planned £420m takeover of Air Europa.
The two sides said discussions were at an advanced stage to terminate the deal. It comes just weeks after the competition watchdog said it would investigate whether it breached takeover rules.
IAG first announced plans to buy the Spanish airline in 2019 for €1bn (£840 million) although the price was slashed after the Covid-19 pandemic knocked the entire sector by grounding planes. It has now been scrapped entirely.
Bosses had already offered concessions to EU antitrust bodies over the deal, although the details have not been made public.
Cineworld shares tank on £700m court ruling
Away from inflation, it’s a torrid start to trading for Cineworld.
Shares have gone into freefall this morning after the cinema chain revealed it’s been ordered to pay more than £700m following a court ruling.
Cineworld was taken to court last year by Canadian rival Cineplex after it pulled out of a planned takeover deal.
It’s now been ordered to pay C$1.24bn (£728m) in damages to settle the claim.
Cineworld said it will appeal the decision, but that didn’t stop shares from crashing 28pc.
Berenberg analyst Owen Shirley describes the judgement as “dire news” for Cineworld, adding it has “the scope to wipe out all the remaining equity in the business”.
FTSE 100 dips at the open
The FTSE 100 has started the day on the back foot as investors react to startling inflation figures.
The blue-chip index is down 0.1pc at 7,210 points.
Expert reaction: BoE may be able to ignore inflation… for now
Paul Dales, chief UK economist at Capital Economics, argues the Bank of England may just be able to hold off on raising interest rates.
The further jump in CPI inflation from 4.2pc in October to 5.1pc in November takes it well above the 4.5pc the Bank of England forecast in early November.
This gives the Bank enough ammunition to raise interest rates tomorrow, but we still think it is more likely to keep its powder dry until it knows more about the Omicron situation […]
Inflation may stay around 5pc for about six months and may even nudge up a bit further in April 2022. But we still think it will start to fall sharply from June 2022, perhaps to quite close to 2pc by the end of 2022.
So while the Bank of England won’t be able to ignore the inflation backdrop for long (we wouldn’t completely rule out a hike tomorrow), we doubt it will raise interest rates next year as far as the 1pc level priced into the markets.
Pressure mounts on Bank of England
Today’s grim inflation figures will make difficult reading for the Bank of England, which shocked markets when it opted not to raise interest rates at November’s meeting.
The Monetary Policy Committee will now have to weigh up the surge in price rises against the threat of the omicron variant for economic growth when it meets tomorrow.
For some analysts, the surging CPI is a sign that the Bank made the wrong move. Others are more sanguine, though, arguing that inflation will prove short-lived.
Expert reaction: Inflation set to remain above 2pc target until 2024
Yael Selfin, chief economist at KPMG, predicts inflation will remain above the Bank of England’s target of 2pc until 2024.
The latest setback in the evolution of the pandemic could put additional strain on supply chains despite overall weaker economic activity, with inflation expected to peak just over 6pc in April next year – while a continuation of supply bottlenecks in the crucial Christmas period, coupled with worsening supplier delivery times, could push inflation to 5.6pc in December.
Inflation rose to 5.1pc, its highest level in over decade, above the Bank of England’s latest forecast of 4.5pc and up from just 2pc four months earlier as rising energy costs and supply disruptions hit consumer prices.
Reduced stock continued to put pressure on prices in November, with 10pc of groceries reported at low or no availability, rising to as much as 17pc for items such as sparkling water.
Despite today’s inflation figures, we expect the Bank of England to adopt a wait-and-see approach at this week’s meeting, allowing for more time to assess the net impact of the omicron variant on growth and inflation.
Energy and transport costs rise
The ONS has broken down the figures into discretionary and non-discretionary spending, which gives us a better idea of what’s behind the price rises.
Since January 2005, prices for non-discretionary items have risen by around 49pc while prices for discretionary items have risen by around 41pc.
The data shows energy and transport are the biggest drivers of inflation in the non-discretionary category. When it comes to discretionary spending, the price rises are more evenly spread.
‘Wide range of price rises’ drives inflation
Grant Fitzner, chief economist at the ONS, said “a wide range of price rises contributed to another steep rise in inflation”.
The price of fuel increased notably, pushing average petrol prices higher than we have seen before.
Clothing costs – which increased after falling this time last year – along with price rises for food, second-hand cars and increased tobacco duty all helped drive up inflation this month.
The costs of goods produced by factories and the price of raw materials have continued to increase significantly to their highest rate for at least 12 years.
Inflation surges at record pace
There’s some troubling reading for policymakers at the Bank of England this morning, with the latest official data showing inflation surged to its highest in more than a decade last month.
The consumer price index jumped to 5.1pc in November – well above forecasts and the highest since September 2011, according to the Office for National Statistics.
The cost of clothing, fuel and second-hand cars all contributed to the surge.
It’ll raise eyebrows over the Bank’s decision not to lift rates last month and pile further pressure on policymakers for action at tomorrow’s meeting.
5 things to start your day
1) Energy suppliers face tougher tests after spate of collapses Ofgem boss promises robust stress-testing to prevent suppliers passing on ‘inappropriate risk’ to consumers
2) Channel 4 directors blocked as privatisation decision looms Broadcaster on course for an all-white board after a dispute with ministers forces the departure of Althea Efunshile and Tom Hooper
3) Nightmare before Christmas as businesses warn of lockdown by stealth Retailers and hospitality and travel firms brace for a tough winter as ‘confusing’ guidelines hit consumer confidence
4) Ministers vow to protect UK interests as French tycoon increases stake in BT Patrick Drahi denies a takeover bid is imminent despite his holding reaching a new high of 18pc, prompting rare government intervention
5) Apple and Google’s ‘vice-like grip’ on smartphone market harms consumers, warns watchdog iOS and Android operating systems are a duopoly, says CMA
What happened overnight
Asian markets stood still on Wednesday as the world waited to hear from the US Federal Reserve on when it would stop buying assets and start raising interest rates, possibly piling pressure on its peers to follow.
Futures have already priced in an end to tapering by March and a first hike to 0.25pc in May or June, with rates approaching 0.75pc by year end.
Japan’s Nikkei dithered either side of flat and South Korea lost 0.2pc.
Chinese blue chips were little moved as retail sales missed forecasts with a rise of 3.9pc while industrial output gained a firmer-than-expected 3.6pc.
Coming up today
- Corporate: Avon Protection, Hollywood Bowl, Character Group, Finsbury Growth & Income Trust (Full-year results); Currys, Hipgnosis Songs Fund (Interims)
- Economics: Federal Reserve interest rate decision (US), consumer price index (UK), producer price index (UK), retail price index (UK), retail sales (US, China)