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There comes a point in life when waking up without a massive headache is worth more than a night on the booze. But shareholders in Diageo, the world’s largest distiller, have evidently not got there yet. Thursday morning’s news that teetotal US President Donald Trump and his less-so EU counterpart Jean-Claude Juncker had agreed to avoid a trade war— and rethink tariffs on bourbon whiskey — was not met with clear-headed relief. In fact, Diageo shares sold off slightly. Investors seemed far more interested in how much US drinkers were downing in their local bars. Why might this be? Two reasons emerge in the cold light of day.First US-EU tariffs are not of great importance to a company that trades in 180 countries. Some analysts had feared the impact of a 25 per cent EU tariff on North American whiskey brands, such as Bulleit, because they accounted for 9 per cent of Diageo’s sales. However, most of those sales are inside North America, and import tariffs have little impact on premium spirits, anyway: net sales in India grew 9 per cent despite a 150 per cent tariff on proper Scotch whisky. Second, US domestic sales and volumes can be of importance as a hedge against adverse moves in the sterling exchange rate. So, with Diageo warning that average rates of $1.33 and €1.13 could cut £70m from sales and £10m from operating profit, investors will not have wanted to see dollar sales falling, as well. But Diageo reported a 1 per cent decline in reported net sales in North America, led by an 8 per cent fall in Smirnoff vodka revenues as US drinkers embraced new brands. However, like a responsible drinker on a big night out, Diageo has enough money in its pocket to get to where it needs to be. Healthy operating profit and margin growth means it can invest more in US marketing and still afford a £2bn share buyback. Sometimes there is a virtue in being sober and reliable. Let’s hope Messrs Juncker and Trump keep remembering that.

Intu: the hot seat

David Fischel has seen several property crashes in his 33 years with shopping centre owner Intu, writes Daniel Thomas. So, as he announced his decision to step down as chief executive, he will have known better than most that there is not much his successor can do in the face of a vertiginous drop in retail property values. Intu’s portfolio is now worth £650m less than it was in December — the sort of fall last seen a decade ago. This has reduced net asset value per share by 12 per cent to 362p, pushing debt as a percentage of assets up to 48.5 per cent — and just short of the company’s 50 per cent ceiling.What happens next is largely out of Intu’s hands. Investors are unlikely to change their minds about the diminishing worth of shopping centres, as consumer spending slows and moves online. And Intu’s erstwhile suitor, Hammerson, is not helping by putting £1.1bn of property up for possible sale.Based on the company’s own models, it would need to inject about £18m to make up the shortfall in certain asset-linked debt covenants should values fall by another fifth and net income drop 10 per cent. That could be easily covered by existing facilities but it is telling that the company feels such thought experiments are needed.Intu can point to a portfolio of mainly prime shopping centres and active management that has kept vacancies low and rents steady. Like-for-like rental growth of 2-3 per cent is still expected in the medium term, even if full-year guidance is lower. But investors will be nervously looking at the fall in property values. Whoever takes over from Mr Fischel will need to take a similarly long-term view before they see light at the end of the tunnel.

Brexit: it’s quiet, too quiet

Voices from the business world warning of Brexit risks have been getting louder of late, writes Oliver Ralph. Engineering and manufacturing companies, worried about their supply chains, have been particularly vociferous. Airbus, BMW, Jaguar Land Rover and Rolls-Royce have all had their say. Financial services companies have been quieter. At Parliament’s Brexit committee, it was the City of London Corporation’s Catherine McGuinness and the Association of British Insurers’ Huw Evans speaking up for the City. In this newspaper, former Lloyd’s of London chairman John Nelson aired his concerns. These are all well respected people and organisations, making valid points. But the impact would be more forceful if, as in manufacturing, the companies themselves spoke up. Perhaps the financial services chiefs are confident that their plans will withstand the hardest of Brexits. Or perhaps they don’t want to worry staff, annoy the government or encourage competitors by speaking too loudly. Still, if they really want to influence the debate, they have to find their voices.

Intu: dan.thomas@ft.com
Brexit: oliver.ralph@ft.com

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