Edition:
United Kingdom

Aimee Donnellan

Breakingviews - Allianz picks brave moment to double down on UK

31 May 2019

LONDON (Reuters Breakingviews) - Allianz has picked a brave moment to expand in the United Kingdom. The German insurer on Friday announced it was spending 820 million pounds ($1 billion) to bulk up its car, pet and home insurance businesses in Britain. That will boost scale, but competition and looming regulations will make it hard to make a decent return.

Breakingviews - UK supermarket M&A will return in bargain bin

25 Apr 2019

LONDON (Reuters Breakingviews) - J Sainsbury’s proposed 7.3 billion pound takeover of Walmart-owned Asda has been shelved but UK supermarket mergers may well resurface in the future - in the bargain bin.

Breakingviews - Brexit tips Ireland into economic purgatory

11 Mar 2019

LONDON (Reuters Breakingviews) - They’re counting the cranes over Dublin again. A decade after Ireland’s devastating property crash, the capital city’s skyline is once again a display of frantic construction activity. In January journalists at the Irish Times spotted more than 100 cranes from the newspaper’s offices, triple the number three years earlier.

Breakingviews - Ocado will do better than M&S out of a tie-up

26 Feb 2019

LONDON (Reuters Breakingviews) - In some weddings, there’s an obvious winner. Ocado would do better than Marks and Spencer if the two UK grocers go ahead with a joint venture that could see the latter paying a hefty price to secure a much-needed delivery service.

Breakingviews - Walmart is smallest loser in UK supermarket salvo

20 Feb 2019

LONDON (Reuters Breakingviews) - Walmart may be the smallest loser in the UK supermarket shakeout. British competition watchdogs released a damning view on the 7.3 billion pound tie-up of J Sainsbury and Asda, owned by the U.S. giant. The verdict leaves both groups struggling to fend off discounters Aldi or Lidl. At least Asda has its parent’s global clout.

Breakingviews - Veganism may prove a more durable diet fad

19 Feb 2019

LONDON (Reuters Breakingviews) - The latest diet trend may prove more durable than previous fads. Concerns about climate change and animal welfare - as well as healthy eating - are prompting more consumers to embrace veganism. Like the low-carb trend of the early 2000s, companies are scrambling to keep up with changing consumer tastes. But the shift to shunning animal products looks more than a flash in the pan.

Breakingviews - Ryanair CEO’s 100 mln euro bonus is within reach

15 Feb 2019

LONDON (Reuters Breakingviews) - Ryanair is notorious for keeping costs low, but its chief executive’s new incentive scheme is anything but frugal. The budget airline has granted Michael O’Leary share options that could be worth almost 100 million euros if he doubles Ryanair’s net profit or share price by 2024. Though the target looks demanding, it’s well within reach.

Breakingviews - New Look makeover is bad trend for UK high street

14 Jan 2019

LONDON (Reuters Breakingviews) - New Look is leading a hot trend on Britain’s high street: hefty debt restructurings. The ailing retailer is writing off three-quarters of its debt in an effort to repair its finances. Like rival Debenhams, it can only survive if stores enjoy a revival. But after a bleak Christmas and with Brexit looming, a rosy future looks far from certain.

Breakingviews - Tesco festivities will spill into 2019

10 Jan 2019

LONDON (Reuters Breakingviews) - Tesco had a good holiday. Britain’s biggest grocer sold more than rivals over a difficult Christmas period, doing better across the gamut of food, clothing and general homeware. The company is also managing to launch cheaper offerings to fight off discounters like Lidl without jeopardising its operating margin targets. Its successes merit a higher valuation.

Breakingviews - Hapless oil bets will drive airline M&A

04 Jan 2019

LONDON (Reuters Breakingviews) - Ropey bets on the price of oil will drive European airline M&A in 2019. The price of a barrel of crude is unusually volatile heading into the New Year. The majority of airlines are heavily hedged against sky-high values, but it’s equally possible Brent will bottom out far below its 2018 peaks. How things pan out will dictate how many weaker outfits get taken out. The cost of refuelling is crippling Europe’s airlines. Over the past three years, the cost of a barrel of jet fuel has doubled to nearly $75, according to data from the International Air Transport Association (IATA). For the year ahead airlines are bracing for further strain, with easyJet, Ryanair, IAG, Deutsche Lufthansa and Air France KLM having already warned that their fuel bills will crank up by hundreds of millions of euros. Although rising fuel prices are hardly a new phenomenon, they follow increased competition from increasingly larger planes. This makes it harder for carriers to raise airfares to shoulder some of the pain. For 2019, a number of big carriers have decided to pay up to take the risks off the table. Michael O’Leary’s budget airline Ryanair has hedged 90 percent of its fuel bill. Similarly, German carrier Lufthansa has hedged 77 percent of its fuel costs. Contrast that with highly levered players like Norwegian Air, which has no such buffer – it has only hedged 15 percent. Smaller airline Wizz Air also looks exposed having only hedged 41 percent. With Brent having fallen precipitously in the last few months of 2018 to below $60 a barrel, these companies willing to take a chance currently look smart. Those who have bought pricey hedges, meanwhile, risk having spent precious shareholder funds for nothing. Still, if President Donald Trump decides to enforce Iranian sanctions in earnest, oil prices could snap up again as a chunk of supply is removed from the market. If so, Ryanair will look well placed to pounce as unhedged peers get into trouble. Its shoestring budget and jam-packed planes will deliver an operating margin of 25 percent in 2019, according to Refinitiv data, and its debt is relatively low. As costs rise, it can take on new routes and even buy up smaller airlines as they collapse. Lufthansa, although on a lower margin, is hoping to charge more for first class passengers to manage extra costs, and says it is also on the prowl for acquisitions. If oil prices do snap back up, opportunities will appear.

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