What to watch: Boost for Direct Line, Pizza Express closures, BP halves dividend

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Direct Line posts better-than-expected results

Direct Line (DLG.L), the UK’s largest car insurer, said on Tuesday that operating profits in its motor business climbed by more than 43% to £220.5m ($288m) in the six months to 30 June, beating expectations and allowing it to declare a special dividend payout.

Overall operating profits fell by 3.4% to almost £265m, beating analyst expectations of £239m.

The insurer cited a sharp drop in motor insurance claims during the coronavirus pandemic for the better-than-expected results.

Claims notifications fell by as much as 70% in April, when widespread lockdown measures prompted drivers to stay at home.

Direct Line said that it would boost its interim dividend payout by 2.8% — to 7.4p a share — and issue a special payout of 14.4p per share to investors in light of the strong results.

“Across the group the impact of COVID-19 on operating profit was broadly neutral, as the additional travel and business interruption claims, alongside a reduction in investment asset returns and higher operating expenses, were offset by favourable claims frequencies in Motor and Commercial,” the company said.

Pizza Express puts 1,100 jobs at risk

Pizza Express said on Tuesday that a sweeping restructuring process could lead to it closing around 67 of its UK restaurants, putting up to 1,100 jobs at risk.

The chain said that it expected to launch a company voluntary arrangement (CVA) process, which would allow it to negotiate its debts and potentially reduce its rents, in the “near future.”

The company cited the “significantly more challenging environment” caused by the coronavirus pandemic, which forced it to close all of its restaurants on 23 March.

Pizza Express said that, while the outcome of the CVA process had yet to be determined, the move may result in the closure of 15% of its 449 restaurants across the country — or around 67 restaurants.

“This decision is a very difficult one; however, against the current unprecedented backdrop, Pizza Express believes reducing the size of its estate will help it to protect 9,000 jobs,” it said in a statement.

BP halves dividend as it swings to record $6.7bn loss

BP (BP.L) has halved its dividend as it swung to a record loss in the second quarter, predicting its oil and gas production will fall by at least one million barrels a day by 2030.

BP said in its second-quarter results published on Tuesday that it saw losses — on its preferred measure of underlying replacement cost — of $6.7bn (£5.1bn), compared to a profit of $2.8bn a year earlier, but broadly in line with analysts’ expectations.

BP put the losses down mainly to $6.5bn in post-tax write-offs on its oil and gas exploration assets, and pointed to lower current and expected prices, “very weak” refining margins, lower demand for fuels and lubricants, and BP’s changing strategy.

On a reported basis, it swung from a $1.8bn profit a year ago to $16.8bn of losses.

It also announced a new strategy as part of plans to reach net zero emissions, saying it would increase its annual investment in low-carbon energies tenfold within a decade, to around $5bn a year.

Diageo sales down as global spirits demand falls

Drinks giant Diageo (DGE.L) on Tuesday reported that net sales had fallen in all its global markets apart from North America in the 12 months ending 30 June, as demand for whisky, vodka, and gin weakened as bars and restaurants closed across the world due to the pandemic.

The world’s biggest spirits company posted a bigger-than-expected 8.4% drop in organic net sales for the year. Sales in Asia fell 16% after governments in Thailand and India banned alcohol sales as part of their coronavirus lockdown measures, and China effectively cancelled Chinese New Year celebrations.

Supply-chain disruptions also had an effect on sales in European, African, and Latin American markets.

However, the North American Market saw 2% net sales growth, where, Diageo said, demand for its tequilas and pre-mixed drinks were was high.

The owner of Johnny Walker whisky and Tanqueray gin said in its preliminary results for the year ending 30 June, that operating profit declined by 47.1% to £2.1bn ($2.7bn), while as sales fell by almost 9% to £11.8bn.

Hays Travel axes almost 900 jobs

Hays Travel is to cut up to 878 jobs because of new coronavirus travel restrictions, the company announced.

Owners John and Irene Hays said hundreds of thousands of holidays were cancelled after the UK government re-imposed restrictions on travel to Spain including and advising against all non-essential travel to the popular tourist destination and a 14-day quarantine for all people travelling from the country.

The company employs 4,500 people including 2,000 former Thomas Cook employees it took on when the world’s oldest travel firm went bust in October last year.

Hays Travel took over 555 Thomas Cook shops across the UK, preventing thousands of staff from losing their jobs.

Hays Travel said it has “made every possible effort” to avoid job losses, “including those who were employed when Hays Travel took on the Thomas Cook shops last October.”

European stocks mixed as investors assess surging coronavirus cases

European stocks were mixed on Tuesday as investors weighed positive economic data against surging coronavirus cases across the world.

While the number of infections appeared to slow in several US hotspots on Monday, Australia’s second-largest city, Melbourne, announced fresh restrictions designed to curb a spike in cases.

Brazil and India continue to see a high caseload, while Spain, Belgium, and Luxembourg have also seen an uptick in infections.

Stocks had risen on Monday in the wake of broadly positive data from Europe’s manufacturing sector. New orders in the UK and Germany grew sharply in July, suggesting a continued rebound across the continent.

The pan-European STOXX 600 index (^STOXX) fell by around 0.3% after earlier gains, while London’s FTSE 100 (^FTSE) was 0.1% in the red.

Germany’s DAX (^GDAXI) fell by around 0.4%, while France’s CAC 40 (^FCHI) climbed by more than 0.3%.

What to expect in the US

Futures were also pointing to a lower open for stocks in the US, where investors will be watching talks about fresh stimulus measures.

Democratic lawmakers hinted on Monday that they were closer to agreeing a deal with the White House. But they are still at loggerheads over an unemployment benefit extension.

Futures on the S&P 500 (ES=F), which on Monday closed within 3% of the record high it set in February, fell by around 0.3%. Dow Jones Industrial Average futures (YM=F) fell 0.1%. Nasdaq futures (NQ=F), meanwhile, were down by around 0.3%.

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