The Times 11/07/19 - Vox Markets | Vox Markets

The Times 11/07/19

A sales revival at Superdry (SDRY) will take at least two years, Julian Dunkerton admitted yesterday, after the company swung into the red in the first set of results since its co-founder’s dramatic return. Superdry unveiled an £85 million loss for the year to April 27, in stark contrast with last year’s profit of £65.3 million, after delaying the results by a week because it needed more time to calculate its complex property charges. The fashion retailer has had to take a £130 million writedown on about 114 shops, roughly half its owned store estate, as a result of falling sales in the stores and a “cautious recovery plan” that has forecast even bigger shop sale declines next year.

BT Group (BT.A) has given its clearest warning to shareholders that it could cut the dividend to help to fund investment in full-fibre broadband in Britain. The FTSE 100 telecoms group stopped short of scaling back the £1.5 billion payout in May, when Philip Jansen, 52, its new chief executive, honoured BT’s pledge to hold the dividend at 15.4p per share until the end of its financial year. However, Mr Jansen raised the prospect of cutting the dividend if BT decided to commit to its “ambition” to connect 15 million homes and businesses with full-fibre broadband by the mid-2020s. Addressing investors at its annual meeting in London yesterday, Jan du Plessis, chairman, said that BT remained confident of the dividend payment for its financial year thats ends on March 31, but that connecting 15 million premises, “if the conditions were right”, meant that BT had to find the funds.

Senior executives at Vodafone Group (VOD) have agreed to cut their bonus share awards by a fifth in an apparent attempt to head off a potential shareholder rebellion at its annual meeting. Vodafone said that Nick Read, who became chief executive last October, and Margherita Della Valle, chief financial officer, volunteered that shares granted under a 2020 long-term incentive award be cut by 20%. The announcement came after ISS, an influential shareholder advisory group, urged investors to vote against Vodafone’s remuneration report at its shareholder meeting on July 23. ISS said: “When there has been a material decline in a company’s share price, remuneration committees should consider reducing the size of LTIP awards at the time of grant.”

Britain’s largest housebuilder says that it is on course to announce record profits of £910 million after completing its highest number of homes in more than a decade. Barratt Developments (BDEV) expects annual pre-tax profits to be almost 3% ahead of analysts’ forecasts of £884 million and 8% higher than last year’s £835.5 million. Despite a Brexit-driven slowdown at the end of last year, it said that the market had improved since then. “Our reservations to the end of December were down around 6%. For the full year they are down by about 3%, so clearly in the second half we’ve seen stronger residential trends,” David Thomas, chief executive, said.

A cash-strapped biotechnology company has sold a potential cancer treatment for up to $206.5 million. Redx Pharma (REDX) said that it had signed a definitive agreement with Jazz Pharmaceuticals, an American drugs company, for the sale of a promising oncology research programme to treat tumours. Under the deal, Jazz will pay Redx $3.5 million in cash up front, though the British company could receive up to $203 million more in development, regulatory and commercial milestone payments. It also is in line for “mid-single-digit-percentage” royalties, based on any future net sales. The deal is a boost for Redx, which is recovering from a torrid period a couple of years ago and continues to negotiate with shareholders and specialist investors for longer-term funding.

Global economic uncertainty that is hurting client and candidate confidence has prompted Pagegroup (PAGE) to warn that its profits will be lower than it had expected. The City recruitment specialist cited weakness in its divisions in Britain, Asia, Spain and Italy as it said that its annual operating profit was likely to be towards the lower end of market forecasts of between £156.5 million and £168 million. It is not the only business in its sector to have raised concerns this week. Robert Walters, a rival recruiter, reported an 8% fall in net fee income in the UK in the second quarter. Kelvin Stagg, 47, chief financial officer of Page Group, said: “Fee-earner headcount fell in markets where we saw more challenging conditions, such as France, greater China and the UK. “It is clear that macro-economic conditions in a number of our regions are becoming more challenging and we currently expect 2019 operating profit to be towards the lower end of the range of current market forecasts.”

A soggy summer has done nothing to dampen spirits at Dunelm Group (DNLM), which yesterday defied the wider retail gloom to lift its profit forecast for a third time this year. The home furnishings retailer was started in 1979 by Bill and Jeany Adderley, who sold curtains from a market stall in Leicester. The company now employs 10,000 people and has 172 shops. Mr Adderley is the company’s life president while his son, Will, is its deputy chairman. Dunelm reported a 12.1% jump in like-for-like sales in the 13 weeks to June 29 as the wet weather spurred shoppers to spend more money on home comforts rather than on barbecue food and summer wardrobes. Total sales have grown by 4.8% to £1.1 billion.

The economic risks of a no-deal Brexit have been overplayed, the boss of Wetherspoon (J.D.) (JDW) said yesterday as the pubs operator revealed that sales have risen so far this summer. In a trading update, the company said that like-for-like sales had increased by 6.9%, while total sales were up by 6.6% for the ten weeks to July 7, with the difference being a result of closures. Wetherspoons said that like-for like sales were up by 6.7% in the year to date, a revenue performance that continues to outperform most of its rivals. The business has opened five pubs and closed nine under-performing ones so far this year. The disposals contributed to £3 million of losses.

Polymetal International (POLY) closed down 45½p at 966½p last night after PPF Group, owned by Petr Kellner, one of the Czech Republic’s richest businessmen, sold a 4.5% stake in the company for about $254 million.

Playtech (PTEC) is now more diversified and therefore less risky, according to analysts at JP Morgan. “Structurally, Playtech’s platform represents a defensible competitive advantage that we believe is practically impossible to replicate,” they said.

Micro Focus International (MCRO) retreated 233p to £17.53, its biggest daily slide since March last year, having warned on Tuesday that its revenue would fall by up to 6% this year. Analysts at Investec said that there was “much work still to be done” in terms of integrating Hewlett Packard’s software division, which it acquired in 2017.

WPP (WPP) fell after reports that the advertising conglomerate was preparing to announce the sale of a majority stake in Kantar, its market research unit, to Bain Capital, as part of a push to streamline the company and cut borrowing. The shares suffered last week when the talks with Bain were confirmed.

Bango (BGO), a Cambridge-based mobile payments platform used by technology groups such as Google, Amazon and Facebook, enjoyed a little magic, rising 19p to 99p. It reported revenue growth of 64% to £4.3 million in the first half, boosted by its work with Harry Potter: Wizards Unite, the augmented reality mobile game.

There’s hope again for Purplebricks Group (PURP), whose shares recovered a little lost ground yesterday after it said last week that it would be closing its lossmaking American business. Yesterday the shares surged 11p to 107¾p, as dealers bought in after the recent price fall.

Tempus – FirstGroup (FGP): Avoid. Separation plans look sensible, but releasing value will not be easy and the shares probably will remain under pressure

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Mentioned in this post

BDEV
Barratt Developments
BGO
Bango
BT.A
BT Group
DNLM
Dunelm Group
FGP
FirstGroup
JDW
Wetherspoon (J.D.)
MCRO
Micro Focus International
PAGE
Pagegroup
POLY
Polymetal International
PTEC
Playtech
PURP
Purplebricks Group
REDX
Redx Pharma
SDRY
Superdry
VOD
Vodafone Group
WPP
WPP