Briscoes did almost as well in the first-half of this year as in 2019 but the big lockdown hit Restaurant Brands in NZ

Briscoes delivers earnings surprise

Briscoe Group’s first-half net profit fell just 1.3 percent from the same period last year while margins increased, alongside its dividend.

It was an unexpected bonus for investors who had anticipated the impact of the 50-day lockdown to be more severe.

In May the company had warned shareholders to only expect a “modest profit.”

Net profit for the six months ended July 26 eased to $28 million from $28.3 million in the same six months a year earlier, while earnings before interest and tax rose 0.6 percent to $46 million.

The retailer’s gross margins rose to 42.2 percent of sales from 40.6 percent in the same six months a year earlier. Cash at the July 26 balance date was $98.6 million, up from $55.5 million a year earlier.

The result was also affected by Kathmandu’s decision not to pay a dividend. Briscoe’s stake in Kathmandu was reduced to 6.8 percent from 16.3 percent as a result of its decision not to participate in its $207 million capital raising in April.

Managing director and major shareholder Rod Duke said August sales finished ahead of last year, despite the Auckland stores being closed for 11 days of the month, and September sales so far have also been strong.

Unlike rival retailer The Warehouse Group, Duke said no staff had been made redundant since the pandemic began.

Briscoes shares closed up 2.7 percent at $3.84.

Restaurant Brands interim result slumps due to lockdown

Restaurant Brands has reported a reduced net profit of $11.4 million for the six months ended June, down 43 percent on the same period last year.

However, its reporting period is two weeks shorter than the previous half year after it changed its balance date to December from February.

Combined store pre-tax and depreciation earnings were $62.1 million, down $10.6 million primarily due to the Covid-19 full lockdown through April and part of May.

NZ store sales were $174.6 million, down $56.2 million or 24 percent. Its Australian business, which were not subjected to lockdowns that were as restrictive as in NZ, reported a drop in sales of 5.4 percent to $99 million while in Hawaii it reported revenue of $109 million.

The company said the NZ market had recovered strongly in August with sales almost back to pre-Covid levels.

Restaurant Brands also announced plans to open three new KFC stores in Australia before the end of the year, two more Taco Bell stores in NZ and four in Australia by early 2021 saying “ it continues to evaluate further acquisition opportunities in all three existing markets, together with the US mainland.”

It would not provide “firm guidance” for the balance of the year due to continuing Covid-19 restrictions and with the possibility of further outbreaks.

At its AGM in May the company said it would not pay a dividend for the 2019 financial year given expenditure for its US investment and current uncertainty about the potential impact of Covid-19. There would also be no interim dividend for the 2020 financial year.

Restaurant Brands’ shares closed up 0.75 percent at $12.15.

Singapore’s state investment portfolio declines for the first time in four years

Singapore’s high-profile state investment company Temasek said yesterday the net value of its portfolio fell for the first time since 2016 due to the impact of the coronavirus pandemic on global financial markets.

The size of Temasek’s portfolio fell to S$306 billion (NZ$332.8 billion) for the financial year ended March, around 2.2% lower than the previous year’s S$313 billion.

While its one-year shareholder return was 2.28% lower, returns were 5 percent over a 10-year period and 6 percent over 20 years, it added.

Temasek – an active equity investor in both public and private companies – is owned by the government of Singapore.

Temasek warned of uncertainties from continued US-China tensions as potentially creating further headwinds for financial markets.

It said both the U.S. and China had been “significant destinations” for the company’s investments in the past five to six years.

As a major sovereign fund, Temasek’s performance is closely followed. Previously, its investments were mainly in Singaporean companies but more recently it has turned into a major global investor. Around three-quarters of its portfolio exposure is outside its home country while two-thirds of its underlying exposure is in Asia.

Assets in China accounted for 29 percent of Temasek’s investment portfolio in the past financial year — the largest geographical share. That was followed by Singapore at 24 percent and North America at percent, according to the company’s annual report.

UK businesses warn of severe cuts that could hamper recovery

More than a quarter of UK companies forced to take on extra debt to survive the pandemic have warned they may need to cut back their operations, highlighting a mounting crisis that economists warn could hold back business recovery.

More than 40 percent of companies took on debt during the crisis, according to a survey conducted by the British Chambers of Commerce and banking group TSB. While one in four warned over their future growth plans, about a tenth said they may cease trading altogether. Many of the companies that borrowed took government-guaranteed loans from banks using the Coronavirus Business Interruption Loan Scheme (CBILS) or the Bounce Back Loan Scheme (BBLS).

The programmes offer lower interest rates and less stringent conditions than private lenders to enable struggling businesses to secure crucial finance. In total, state-backed loan schemes have lent more than £52bn (NZ$102bn) to 1.2m businesses during the pandemic.

However, senior banking executives and policymakers are increasingly concerned over the huge debts being taken on by weakened businesses, with fears over so-called “zombie companies” that are strong enough to survive but unable to invest for growth because of the need to cover their debts.

Two-thirds of the companies surveyed said repaying debts built up during the pandemic might have a negative impact on their business. A fifth said they would change their investment plans because of their debt.

The government-backed schemes are due to end in October, with business groups calling for them to be extended.

UK Government admits up to £3.5 billion in payouts could be due to error or fraud

Up to £3.5bn could have been paid in wrong or fraudulent claims for the furlough scheme according to UK government officials.

UK Revenue & Customs said it had calculated the possibility that as much as 10 percent of the money might have gone to the wrong places.

The government has so far paid out £35.4bn in furlough payments suggesting that somewhere between £1.75bn and £3.5bn could have been paid out wrongly.

It is the first time the UK’s Customs & Revenue has spoken publicly about the level of potential fraud that could have been committed as part of the job retention scheme, which covered up to 80% percent of an employee’s salary while on furlough.

The government rapidly rolled out the huge scheme, causing many experts to say a certain amount of fraud was inevitable.

Furlough is now winding down and is expected to end permanently next month. However, businesses that bring staff back from furlough will receive another £1,000 if the employee is still in work by the end of January.

By mid-August, 9.6 million people had been put on government-supported furlough, with 1.2 million employers claiming the support.

Meanwhile, around 2.7 million self-employed workers have claimed about £7.8bn in support from the government.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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