04 Jul 2019

C&C - Solid Q120, seeking inclusion in FTSE UK Index Series

Prior to its AGM later this morning, C&C issued a short qualitative Q120A IMS noting that the Group has made a solid start to FY20.

No further detail has been provided, nor was expected, in the IMS, as it comes less than two months after C&C’s FY19A results release and Capital Markets Day, both held on the 22nd of May 2019. 

 

The key announcement in the release however is that C&C is seeking inclusion in the FTSE UK Index series. The company is currently listed and traded on the premium segment of the LSE but in order to facilitate the entry into the FTSE UK Index Series, the company intends to apply for the cancellation of the listing and trading of C&C shares on Euronext Dublin. C&C will, however, remain domiciled and a tax resident in Ireland with its registered and corporate head office in Dublin.

 

Undoubtedly, good summer weather is positive for brewers in general and cider producers in particular, which boosted FY19A numbers for all in the sector. The summer of 2020 has not started too badly, however, at this stage of the summer performance is dependent on the weather through the rest of the season, which has more than two months to play out. 

 

The company has taken the opportunity in the IMS, as it did in its CMD, to flag its impressive sustainability credentials, noting amongst other features that the Irish business is carbon neutral and 40% of energy is from renewable resources, while 2025 is the date targeted for carbon neutrality in Scotland. The company has pledged to eliminate one-way plastic within two years.


Donegal Investment Group - Further disposal announced

Donegal Investment Group yesterday evening announced that it has disposed of its animal feed business, Robert Smyth & Sons Ltd and its subsidiary companies, including Burke Shipping Services Ltd. It is selling the businesses to Fane Valley Co-Operative Society for a €17.25m cash consideration. Completion of the deal is subject to approval by the Competition and Consumer Protection Commission. 

 

Management notes that Donegal will use the proceeds from the proposed transaction for general corporate purposes. This disposal follows a number of similar transactions over the past three years as the company continues its stated objective of concentrating on its core businesses, which continue to be its seed potato enterprise and specialty dairy business Nomadic.


US Border Wall

A US federal appeals court yesterday upheld an injunction barring the Trump administration from using military funds to fund border projects in Arizona, New Mexico & California. In a 2-1 decision, a panel of the U.S. 9th Circuit Court of Appeals said Trump was likely to lose his appeal and the injunction by a district judge should remain in place. The court ruling marks another setback for Trump in meeting his election pledges. The continued failure by Trump to persuade Congress to fund the wall could be one of the issues that are likely to hurt his 2020 campaign. 


Trump Tweets

Trump once again accused China and the EU of manipulating their currencies by “pumping money into their system”. FX markets have not reacted to these latest tweets, but Trump will likely continue to push for lower rates and weaker USD.


UK services PMI

June's index disappointed at 50.2 (consensus 51.0, Investec 51.4), its weakest reading for three months. Survey compilers IHS/Markit noted that backlogs of work continued to fall and that incoming new business was weak once again. This completes a trio of poor PMIs this weak (the others being manufacturing and construction). Indeed IHS/Markit's estimate of the 'all sector' output index was 49.2 in June, below the so-called 50 breakeven level.

 

Central banker wanted: Economists need not apply

Much has been made of who would eventually succeed ECB chief Mario Draghi at the end of his current term in November. Months of speculation were finally put to bed when EU leaders nominated IMF chief Christine Lagarde this week. A former Finance Minister, chief of the IMF, politician, and a lawyer by training, Lagarde has an impressive resume. One thing she is not however, is an economist by training, the first non-economist to take up the reigns at the ECB. 

 

She is in good company, as current Fed chairperson Jerome Powell is also not a trained economist, the first non-economist to head up the Fed since 1979. Not to suggest that Lagarde’s career path and education will not stand her in good stead, however, the trend seems to suggest a subtle change in the job spec for central bank chiefs recently. Certainly, Jerome Powell has learnt that politics is becoming a significant factor in his daily life at the Fed. Every new Fed appointment now becomes a hugely politicised decision, while he himself has to shoulder the enormous and vocal pressure to cut rates from President Trump. Naturally, Mark Carney at the Bank of England has seen a huge amount of political pressure since the Brexit vote, as he attempts to sensibly steer monetary policy under the looming cloud of Brexit without being seen to cast aspersions on government policy, or worse yet being accused of stoking project fear. 

 

Likewise, perhaps Lagarde’s most significant task in her new role may not be navigating economic forecasts and driving monetary policy change, but rather navigating the mechanisms and structures of the various EU member states, and pushing for closer banking union and more unified fiscal policy. Certainly, her political experience will stand her in good stead in this regard. Another possible knock-on effect may be that the role of ECB chief economist, a role currently held by Ireland's Philip Lane, will take on even more importance as the most prominent economist remaining at the ECB.

 

Economic Releases

10:00  EZ      Eurozone Retail Sales

10:10  EZ      ECB’s Guindos Speaks

           US      Holiday (Independence Day)