Thomas Cook's former bosses criticised; Boeing and Caterpillar profits fall - business live
Manny Fontenla-Novoa and Harriet Green are appearing before the BEIS committee
- Summary: Don't blame us, we're only the bosses
- Green: Failure to embrace digital caused collapse
- Fontenla-Novoa denies responsibility despite MyTravel merger
- Latest: Thomas Cook inquiry underway
- 11m fees run up since collapse
5.18pm BST
With the weaker pound lifting multinationals' shares, the FTSE 100 had closed 48 points higher at 7,260.
Brexit fatigue, and the prospect of another extension, kept traders subdued, says David Madden of CMC:
UK politics remains in limbo as there is speculation the UK's exit from the EU will be pushed back to early 2020, and there is also chatter of a general election.
The possibility of a no-deal Brexit seems to have been greatly reduced, which is music to dealers' ears. While there remains a lack of clarity in relation to Brexit, stock markets are likely to meander. Things haven't gone exactly according to plan for Prime Minister Johnson, but the fact that he managed to strike a deal with the EU, and get support for it, suggests that things are heading in the right direct.
4.13pm BST
Over in Congress, Mark Zuckerberg is facing questions over Facebook's Libra digital currency plan.
Follow it here:
Related: Libra: Mark Zuckerberg testifies before Congress about embattled cryptocurrency - live
3.19pm BST
At the risk of turning into Auditing Today, we're happy to report that Sports Direct has appointed an auditor -- RSM UK Group.
This ends a long search for a firm willing to audit Mike Ashley's retail chain. None of the Big Four could be tempted, after Grant Thornton declined to be reappointed this year.
3.05pm BST
Despite posting a sharp fall in profits, Boeing's shares have jumped by 3% in early New York trading.
This takes them to the top of the Dow leaderboard.
2.47pm BST
Another US company has reported weak results too.
"Our top priority remains the safe return to service of the 737 MAX, and we're making steady progress.
"We've also taken action to further sharpen our company's focus on product and services safety, and we continue to deliver on customer commitments and capture new opportunities with our values of safety, quality and integrity always at the forefront."
2.05pm BST
Over in the US, mining and construction equipment firm Caterpillar has given investors a nasty fright.
*CATERPILLAR LOWERS 2019 EPS GUIDANCE; SHARES DROP
The slowdown in manufacturing is no blip, and Caterpillar just confirmed it (via @bopinion) https://t.co/zyeinYPIGh
2.03pm BST
Here's my colleague Rob Davies on this morning's hearing into Thomas Cook's collapse:
A former chief executive of Thomas Cook has insisted his successors were wrong to blame him for racking up the debts that capsized the company, as MPs continued their inquiry into the tour operator's collapse.
Speaking before the business select committee, Manny Fontenla-Novoa, who presided over the much-criticised 2007 merger with MyTravel and a series of debt-fuelled acquisitions, said: "I just believe on the major decisions I got them right and I'm sorry the way it turned out."....
Related: Ex-Thomas Cook boss denies responsibility for tour firm's collapse
1.59pm BST
Rachel Reeves MP just told Sky News that it's very disappointing that none of Thomas Cook's former managers have taken responsibility for its collapse.
She points to Manny Fontenla-Novoa's failure to accept blame today, even though his successors said that the debt run up under his leadership "hamstrung the company" and drove up debt servicing costs.
What struck the committee most of all is the lack of humility, and the lack of taking responsibility
With huge rewards should come huge humility, and that was lacking today.
1.20pm BST
Here's a video clip of Rachel Reeves, chair of the Business committee, laying into Thomas Cook's former management for not taking responsibility for its collapse:
As Reeves says:
Everyone we've seen from Thomas Cook have blamed everyone apart from themselves. They never look at themselves, the decisions they've made, and reflected on those.
It's the volcanic ash, the hot weather in the UK, the depreciation of sterling, the debt acquired by someone else....
Thomas Cook's former bosses keep blaming everything and everyone except themselves for its collapse. It's just excuse after excuse.
With huge reward should come responsibility and perhaps even some humility. pic.twitter.com/O7bprUVvQe
1.07pm BST
Success may have many parents, but the failure of the world's oldest holiday firm is certainly an orphan, if you believe Thomas Cook's former bosses.
Manny Fontenla-Novoa, who ran the company from 2003-2011, was categorical that he's not to blame, telling MPs that his merger with rival operator MyTravel made sense.
Thomas Cook execs at the Select Committee (paid 20m+ between them) have thus far blamed their predecessors, their successors, the global financial crisis, the Icelandic ash cloud and the 2018 heatwave for the company's failure. Impressively thorough!https://t.co/Jv83anD3f0
12.39pm BST
Here's some reaction to Harriet Green's comments about her exit from Thomas Cook, from Joanna Partridge of ITV News (but joining us soon :) )
Former Thomas Cook CEO Harriet Green finally set the record straight to MPs about her departure from the travel firm in 2014. Says she was summoned very early by the firm's Chairman and told her "services were no longer required" & the firm wanted a "traditional travel person"
At the time, was suggested Harriet Green chose to leave Thomas Cook as her turnaround strategy was complete. MPs asked about seemingly sexist press reports about her and her departure: "It's on the record I earned less than the previous male CEO and the one after me," Green said
12.12pm BST
Q: What responsibility do you have for the collapse?
Manny Fontenla-Novoa says he feels sad, but doesn't feel responsible for the demise of Thomas Cook - eight years after he left.
My responsibility is that I failed to complete that.
It was a business worth 2bn and would have got stronger. But being prevented from completing that, everyone has to think about what happened.
12.04pm BST
Q: Looking back at your time at Thomas Cook, what do you regret and would have done differently?
Former CFO Bill Scott says The company should have moved online faster [as Harriet Green was arguing].
11.55am BST
Back to Manny Fontenla-Novoa, and his pay package.
Q: You took a 5m bonus for the MyTravel merger - was that a huge incentive to do other deals.
11.51am BST
Q: Why did Thomas Cook fail?
Harriet Green says the entire industry changed to a digital environment, with less need to own assets, and where a huge group of potential clients take their entire vacation online and don't visit a travel agent.
11.47am BST
Peter Kyle presses Harriet Green about rumours on her departure in 2014:
Q: Were there personality clashes?
11.45am BST
Labour MP Peter Kyle turns to the issue of how Thomas Cook was run by Manny Fontenla-Novoa and Harriet Green - and why the firm eventually failed.
Q: It looks like there was a series of new turnaround plans and operating models, a fresh approach every two years. Was this a company in constant change that never found its feet?
11.29am BST
Q: We heard yesterday that your auditors warned that there was "potential for manipulation" in your goodwill reporting....
Bill Scott says he wouldn't use that term himself, but it recognises the the fact that different people can approach this issue in different ways.
11.23am BST
Q: Are the accounting standards around goodwill fit for purpose?
Harriet Green, who succeeded Manny Fontenla-Novoa in 2012, says there was "quite intense" discussion at Thomas Cook about how to address risk, and whether there should be a different approach.
11.18am BST
Q: Why did Thomas Cook write down goodwill in 2011-12?
Former chief financial officer Bill Scott says he started in 2012, and found the UK business wasn't making any money. Thus, the goodwill wouldn't be justifiable.
11.08am BST
Q: Were you using your suppliers as a bank, by paying them late and not declaring those liabilities on your balance sheet?
Fontenla-Novoa says the firm's net debt figure takes this into account.
11.06am BST
Q: You also merged with Co-op Travel in 2010, what impact did that have?
Fontenla-Novoa says it was a non-cash deal, which improved profitability. The Co-op was strong in early-season, full-price sales of package holidays.
10.59am BST
Q: Did Thomas Cook's problems all stem from the takeover of MyTravel in 2007, and the debt you took on to finance the deal?
Manny Fontenla-Novoa defends his big deal, saying it gave Thomas Cook thre
10.50am BST
Now for the main course -- two former CEOs of Thomas Cook.
Manny Fontenla-Novoa ran the company from 2003 to 2011, and was followed by Harriet Green (2012-2014).
10.48am BST
Rachel Reeves MP says there is an urgent need to reform the oversight of the audit industry, following the collapse of Thomas Cook and other problems at firms such as Carillion.
10.44am BST
Antoinette Sandbach MP says the FRC should have heard "alarm bells" ringing, when Thomas Cook left so much goodwill on its books every year (as an intangible asset) - regardless of trading conditions, currency moves.
Surely if Thomas Cook was seeking fresh finance, its goodwill couldn't be as valuable as it claimed?
10.40am BST
The Insolvency Service says it won't examine whether the government acted appropriately over Thomas Cook, and whether it should have rescued the firm rather than letting it fail.
Following @Vernon_Coaker question the Insolvency Service confirms it is NOT the role of official receiver to examine if the government could & should have done more to support #ThomasCook and does not know any official regulator would look at this #ThomasCookCollapse #NeverAgain pic.twitter.com/eqyvGDpSmj
10.37am BST
MPs now turn to the Financial Reporting Council, which regulates accountancy firms.
Elizabeth Barrett, their Executive Counsel and Director of Enforcement, reveals that the FRC was already looking into Thomas Cook's last audit.
Elizabeth Barrett of accounting regulator the Financial Reporting Council says the FRC was already looking into Thomas Cook's 2018 audit when it went down. It was "identified as being in a risky area that merited inspection".
They select more than 100 such firms per year though.
10.29am BST
Q: Will the bonuses paid to Thomas Cook directors be clawed back?
Insolvency Service CEO Dean Beale says the Official Receiver is looking into this issue.
10.23am BST
Some early reaction to the Thomas Cook hearing:
Official Receiver's CEO Dean Beale asked about suggestions Thomas Cook Airlines was profitable and didn't need to be put into liquidation.
"The court was satisfied that that entity was insolvent under the legislation."
Turns out Hays Travel only paid 6 million for the 555 Thomas Cook stores it bought. So just over 10,000 per shop.
Insolvency Service tells @CommonsBEIS select committee that special managers KPMG and Alix Partners have already received 11m in fees for liquidation of #ThomasCook in first 4 weeks since the company collapsed #ThomasCookCollapse #NeverAgain #PayUpNow https://t.co/VYzzsDfGPy pic.twitter.com/8dUZZYEESY
10.21am BST
MPs are also raising concerns that Thomas Cook Airlines shouldn't have been put into liquidation, as it was actually still profitable.
Dean Beale says "The court was satisfied that that entity was insolvent under the legislation."
10.15am BST
Over in parliament, the BEIS committee has begun another hearing into the collapse of Thomas Cook. You can watch it live here.
Dean Beale, chief executive officer of the Insolvency Service, has told MPs that Thomas Cook was facing an "urgent cash flow crisis" when it went into liquidation a month ago.
"It's been a huge undertaking in those first couple of weeks, but it's reducing rapidly now".
Our third evidence session on the collapse of Thomas Cook starts in 15 minutes. In the first half we will question the FRC and the Insolvency Service on the role of regulators. You can watch live here https://t.co/w6GCXd7QNV
10.03am BST
The Office for National Statistics has reported that people in Northern Ireland have become more anxious, ending a long run of improvement.
Northern Ireland had previously reported lower levels of anxiety than the rest of the UK, but in the 12 months to March it fell back to the UK average.
It's official, people in the UK got slightly happier in year to March... but sharp rise in levels of anxiety in N. Ireland... @ONS: https://t.co/NobV7RkMf0 pic.twitter.com/go0GkGgf7f
9.43am BST
Credit rating agency Moody's has is also concerned about the economic damage which Brexit uncertainty could cause.
Colin Ellis, Moody's managing director, says it has a knock-on impact on the UK's fiscal strength:
"The vote in favour of the withdrawal agreement bill indicates that the likelihood of the UK leaving the EU with an exit arrangement in place is higher than it has been for some time.
That said, significant uncertainties remain around the timing and eventual outcome of Brexit, which is likely going to weigh on spending, investment and hiring decisions in the UK for some time, a clear credit negative."
9.33am BST
John Hardy, head of foreign exchange strategy at Saxo Bank, fears that another Brexit delay will hurt business investment - which would be bad for the pound.
The vote in favour of Boris Johnson's deal with a reasonable 329-299 majority, given that the Northern Irish DUP government coalition partner of voted against. But the 322-308 vote against the compressed timetable to get Brexit delivered before the October 31 deadline means at least another few weeks of political fighting over amending details of the Brexit deal and possibly a UK general election.
It seems clear that Brexit will happen, but the further delay could inflict additional damage on an already struggling UK economy if investment decisions are held back. Sterling got no boost from the first vote and saw a fairly orderly consolidation on the second vote.
Brexit fizzles, too little sizzle elsewhere -> Today's FX Update: https://t.co/fU6h5GIWgT pic.twitter.com/902jmkrQ3j
9.17am BST
Heineken, the world's second-largest brewer, has also underwhelmed this morning.
We are seeing increased volatility across a number of our markets, which we assume to continue for the rest of the year.
9.08am BST
Here's those falling chip stocks:
European chipmakers: Earnings de "Texas Instruments" pisent ... pic.twitter.com/YijFNNuALu
9.00am BST
The Stoxx 600 index, which tracks a swathe of European companies, has dropped by almost 0.5% this morning, to 392.9 points.
Economics blogger Jeroen Blokland points out that the Stoxx 600 has struggled to get through these nervous 390s in the past:
Fourth time is a charm? The Stoxx Europe 600 Index is hitting its resistance level again. (chart via @business) pic.twitter.com/UNL33ROWLi
8.55am BST
The weaker pound is propping up the FTSE 100 this morning, but shares in some UK-focused companies are dropping.
Housebuilders Persimmon and Berkeley Group are both down 1.2%, on fears that another Brexit delay will deter people from moving house. Anxiety about consumer spending has also pushed Autotrader, the classified car adverts firm, down 1.8%.
8.43am BST
Mark Haefele, chief investment officer at UBS Global Wealth Management, hasn't lost faith in the pound -- pointing out that a disorderly Brexit still looks unlikely.
"The likelihood of a Brexit deal has risen, but crucially the outcome that investors feared the most, a no-deal Brexit that could have pulled the pound down to $1.12, seems less likely now than at any time in the last few months.
We retain our overweight position in sterling versus the US dollar in our FX strategy. If, as now seems likely, we move in the direction of a general election, we expect GBPUSD to settle in a 1.26-1.32 range. If the Brexit deal eventually passes, we would expect GBPUSD to rally to 1.35."
8.39am BST
The French, German, Italian and Spanish stock markets have all opened lower, as investors face up to another Brexit delay.
The Dallas-based group was one of the first chipmakers to warn last year of softer demand in the sector, amid weaker economic growth globally and US-China trade tensions....
Texas Instruments' outlook for revenue in the fourth quarter, at $3.07bn to $3.33bn, was softer than the $3.59bn analysts expected. Revenue from the third quarter also fell shy of estimates.
8.30am BST
The last 14 hours have been quite volatile for the pound, as traders around the globe watched the events in parliament.
It scampered towards $1.30 as MPs voted in favour, in principle, of Johnson's Brexit deal (a Second Reading, in Westminster jargon).
8.20am BST
Global mkts slip on Brexit limbo & as investors continued to watch earnings reps for signs of health in global econ. Semiconductor stocks tumbled after Texas Instruments raised alarms w/Q4 rev forecast. Pound extended its slide to $1.2863. Bonds gain w/US 10y 1.75%. Bitcoin <$8k. pic.twitter.com/bu3x3FCAQH
8.09am BST
Asia-Pacific stock markets had a weak day, as Texas Instrument's gloomy outlook hit confidence.
Very disappointing revenue warnings from Texas Instruments after the bell, alongside the negative tone from the Brexit developments saw significant losses for equity markets in Asia overnight and for European and US futures markets.
8.03am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
There's an air of disappointment in the markets today, as Brexit hits another pothole and fresh signs of economic slowdown appear.
Related: MPs reject Boris Johnson's attempt to fast-track Brexit deal
European Opening Calls:#FTSE 7211 -0.02%#DAX 12692 -0.49%#CAC 5623 -0.61%#MIB 22398 -0.40%#IBEX 9331 -0.53%#STOXX 3585 -0.54%#SA40 49454 -0.31%
Importantly, Boris Johnson said that the UK would leave the EU with this deal come what may, but did not stick to his Oct 31st do-or-die mantra.
This could be an important, indeed key, shift in the government's position as it may indicate a willingness to extend and then seek to get the bill through Parliament. My initial thoughts are that the government will let the EU offer the extension to get the bill through, and Boris can square the circle later with amendments etc.
The Texas Instrument that's playing is the sad trombone pic.twitter.com/BmkUc4cGOz
It is due to macro events, and specifically, the trade tensions, and if you think about when there's tensions in trade and obstacles to trade, what do businesses do?
They become more cautious and they pull back, and we are at the very end of a long supply chain.
Related: Accountancy profession 'complicit in Thomas Cook failure'
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