Lenders do brisk business with homeowners and new buyers. Mortgage lenders enjoyed a bumper October thanks to bounces in numbers of first time buyers and of homeowners renewing their deals. Remortgaging came close to a ten-year high as fixed-rate deals expired and households sought cheap deals in what is a highly competitive market, UK Finance, the industry group, said. The Bank of England has signalled that rates are likely to rise in the coming months and homeowners are looking to lock in current rates to keep costs down. Affordability has been a problem, particularly in London where prices are falling, but a slowdown in house price inflation appears to be reinvigorating parts of the market.
Dixons upbeat about turnaround plans despite £440m loss. Dixons Carphone (DC.) has reported an eyewatering first-half loss and will cut its annual dividend amid a shrinking markets and high exceptional costs but it told investors that its turnaround strategy was already under way. The electricals retailer said that it had made a statutory £440 million pre-tax loss, compared to a profit of £54 million last year, on revenue of nearly £4.9 billion in the six months to October 27. The heavy loss came as the group booked nearly £500 million of exceptional charges linked to its struggling mobile business and its UK store estate. Charges included a non-cash impairment charge of £225 million against the goodwill of its mobile business in the UK and Ireland and £113 million impairment of related assets. Dixons Carphone has additionally taken £6 million of onerous lease charges and more than £100 million of charges linked to restructuring costs and “regulatory charges”.
Superdry blames weather forecasts and customer behavior for profit slump. Superdry (SDRY) has issued another warning on profits as unseasonably warm weather continues to hold back sales. Poor trading knocked the clothing retailer’s profits by about £11 million last month. It is bracing for a similar hit in December unless temperatures drop during the crucial Christmas period. Shares in the company fell 32% this morning. Superdry, which began on a market stall in Cheltenham, opened its first shop in Covent Garden 14 years ago. It floated in March 2010 and has more than 550 stores in 49 countries.
Rolls-Royce promises higher profits after engine difficulties. Rolls-Royce Holdings (RR.) picked its shares up from the 18-month lows to which they had dropped, promising investors that profits for the year will come in above £450 million. During months of fretting over the financial impact of Rolls’s problems with its Trent 1000 engines for the Boeing 787 Dreamliner, which has been grounding aircraft fleets operated by the likes of British Airways and Norwegian, the engineering group said that earnings and cash inflow would both be in the upper half of previous guidance. Rolls had previously said that it expected operating profits to be £100 million either side of £450 million and cashflow to come in £100 million either side of £400 million. In 2017, operating profits came in at £321 million and cashflow £273 million.
Oil price volatility means fewer contracts for Wood Group. Shares in Wood Group (John) (WG.), the engineer, fell sharply this morning after it warned that oil price volatility might slow the pace of contract awards and that earnings could be at the lower end of expectations. The company expects revenue to be up more than 10 per cent this year to between $10.9 billion and $11.1 billion. The shares were down 7% at 598.6p at 11am. The group, based in Aberdeen, is best known for its presence in oil services, where it is involved in a variety of areas, from large-scale engineering and design projects through to the building, maintenance and monitoring of pipelines and other infrastructure.
Pensions suffer as retail property values tumble. Fears grow of further falls amid shift in shopping habits. Shops, shopping centres and retail parks suffered one of their sharpest monthly falls in value since the financial crisis in November, highlighting the pressure on the retail industry and dealing a blow to pension funds invested in the sector. CBRE, Britain’s largest valuer, said that retail property values had fallen by 1.9% month-on-month, the biggest drop since May 2009, except for the period immediately after the Brexit referendum in 2016. There are fears that the fall is only the beginning for retail property, which is suffering from a structural shift towards online shopping, an increase in costs from business rates, a higher minimium wage and fragile consumer confidence. Several well-known retailers have collapsed or closed shops this year, including Toys R Us, House of Fraser and Debenhams.
Britain ‘will build ties with China after Brexit’. Financial standards will not be relaxed after Brexit, Philip Hammond pledged as he committed to building close ties with China and India to ensure the City flourishes outside the European Union. Britain will continue to lead “the race to the top” in banking regulation, despite calls by experts to use light-touch regulation as a bargaining chip to draw business to the City. “I reject the idea that laxer regulation makes a jurisdiction more attractive,” the chancellor told a Bloomberg conference.
Return of King to try to restore M&S crown. Justin King is set to return to Marks & Spencer Group (MKS), 15 years after he left it to run the Sainsbury’s supermarket chain. Mr King, right with his partner Claire Lenighan, will join the retailer’s board in January as a non-executive director. He ran M&S’s food business between 2001 and 2004 and helped to develop its Simply Food shops. He ran Sainsbury’s for ten years, revitalising the group and helping to re-establish it as the second biggest grocery retailer behind Tesco. Since then Mr King, 57, has been working in private equity at Guy Hands’ Terra Firma vehicle. However, he stepped down from a full-time role this month.
WPP cuts 3,500 jobs to fight tech giants. The need to compete more effectively with Facebook and Google has forced WPP (WPP) to announce 3,500 job cuts in an attempt to reduce overheads by £275 million a year. Mark Read, chief executive of the advertising conglomerate, said that “painful steps” were unavoidable as he laid out a three-year plan to reboot the company for the digital era. Most of the job losses are expected to be in back- office and finance teams as Mr Read simplifies WPP’s sprawling empire. “As an industry we are facing tremendous changes from technology and we have to change the way we work. We need to return the company to growth and unfortunately some painful steps will be necessary over the coming years,” he said.
Anglo American production growth gets the Minas touch. The promise of more for less lifted investors’ spirits and Anglo American (AAL) to the top of the FTSE 100 leaderboard yesterday. The global mining giant said that production should grow by more than expected this year and would rise again next year — and would do while the company kept a lid on costs. Shares in Anglo rose by 5.5% to close 86½p up at £16.61½ as it outperformed a rally in the mining sector sparked by higher copper prices. Anglo American, which is dual-listed in Johannesburg and London, mines commodities including copper, platinum and diamonds. It reported profits of $3.2 billion last year.
Sales hit floor as bad publicity at Carpetright spooks shoppers. Publicity over its restructuring has been blamed by Carpetright (CPR) for a slump in its sales and deepening losses. The flooring retailer sank to a £11.7 million pre-tax loss in the six months to October 27, compared with a loss of only £600,000 in the same period a year earlier. It has been closing dozens of poorly performing stores since agreeing a company voluntary arrangement, an insolvency procedure, and launching a capital-raising to shore up its finances earlier in the year. Wilf Walsh, chief executive, said that coverage of its financial difficulties had knocked “customers’ confidence in our brand”, suggesting that some shoppers had been unwilling to put down deposits for fear that their money would be at risk.
Mysale goes down under pressure of tax reforms. A profit warning from Mysale Group (MYSL), the online retailer part-owned by Sir Philip Green and Mike Ashley, has wiped out almost half the value of the company. In a trading update yesterday, the group said that full-year profit for 2019 would be “significantly below market expectations”, with a loss in the first half of the financial year before picking up in the second half. It will review its operations in Britain and southeast Asia. Its London-listed shares promptly fell by almost 50% to 17½p, wiping £27 million off the value Mysale. Sir Philip, who owns Topshop, has a 22% stake in Mysale via Shelton Capital Management. Mr Ashley has 5% via Sports Direct.
Ashtead sings the praises of America. Robust results in the United States helped Ashtead Group (AHT) to defy the sceptics yesterday by unveiling a 19% rise in revenue and a 25% increase in pre-tax profits. Shares in equipment rental group have been one of the worst performers in the FTSE 100 index amid concerns about a slowdown in the American economy as President Trump embarks on a trade war and as the Federal Reserve prepares for further increases in interest rates. The stock had fallen from £24.38 ten weeks ago to £16.06½p. However, the shares rose by more than 3.5% yesterday on the back of its half-year results, closing up 57½p at £16.64 and valuing Ashtead at £8 billion.
Cold weather and low inflation sent a chill through the grocery sector this autumn, but it could prove to be the calm before a storm of spending over the festive period. Shoppers spent £27.5 billion at the tills in the 12 weeks to December 2, a 2% increase on the year before, according to Kantar Worldpanel, the market researcher. This increase represents the slowest growth in the grocery market since March 2017 as price inflation dropped to 1.6% compared to 3.6% in December last year. Aldi, Lidl and the Co-op were the only leading retailers to grow their market share during the period. Aldi grew from 6.9% of the market a year ago to 7.6%, with the Co-op up from 6% to 6.2% and Lidl expanding from 5.1% to 5.6%. As the German discounters and the Co-op grew, Tesco (TSCO) and Sainsbury (J) (SBRY), the UK’s biggest grocery retailers, suffered declines in sales and market share. Tesco’s market share dropped from 28.2% to 27.6% while Sainsbury’s declined from 16.4% to 16%. The worst performer in the industry was Waitrose, where sales fell by 0.7%
The European competition regulator is investigating the €18.4 billion takeover of Liberty Global’s cable businesses in Europe by Vodafone Group (VOD). The European Commission said that it feared the deal could reduce competition in Germany and the Czech Republic, two of the four territories where Vodafone is buying Liberty assets. Margrethe Vestager, the competition commissioner, said that the investigation would look to ensure that the deal “will not lead to higher prices, less choice and reduced innovation in consumers’ telecoms and TV services”. Vodafone has operations in 25 countries and works with networks in 44 other territories. It aims to bolster its position in Europe with the takeover of Liberty’s cable businesses in the Czech Republic, Germany, Hungary and Romania.
Few swallow latest talk of Morrisons and Amazon. Morrison (Wm) Supermarkets (MRW) has long been talked about as a potential takeover target. It lags behind the likes of Tesco (which has added Booker, the wholesaler, to its ranks) and Sainsbury’s (in mid-merger with the Walmart-owned Asda) in terms of scale and market share. Moreover, it has already agreed wholesale supply deals with Amazon, which is moving into bricks-and-mortar retailing after its takeover of Whole Foods. Amazon, meanwhile, has been rapidly acquiring warehouse space across Britain as it builds a sophisticated last-mile delivery logistics network that could make it a serious competitor in new areas of retail such as food. All the ingredients were in place, therefore, when the rumour (re)surfaced yesterday on the FT Alphaville market blog. Cue a rise in Morrisons’ shares, which closed up 2¾p at 226¼p. Mind you, that 1.3% increase hardly reflected a widespread buying of takeover talk.
Miners topped the premier index as optimism of a breakthrough in trade relations between the United States and China boosted commodities prices. Anglo American (AAL) rose 86½p to £16.62, Antofagasta (ANTO) gained 34¾p to 774½p and Glencore (GLEN) climbed 9¼p to 283¾p.
Stocks heavily sold in a risk-off market regained some ground. Indivior (INDV), the opioid addiction treatment maker that has been unloved since a court ruling last month paved the way for a rival to sell a generic version of its treatment, leapt 8¼p to 84¾p. Kier Group (KIE), the outsourcing and construction group carrying out a heavily discounted rights issue, rallied 18p to 394½p.
Standard Life Aberdeen (SLA) fell almost 4½p to just under 225p after RBC downgraded the global investment company to “sector perform” from “outperform”, saying that its dividend was less secure now that the business had moved away from its insurance roots.
888 Holdings (888) edged up 2p to 156p after the gambling group said that it had acquired the 53% interest in the All-American Poker Network joint venture that it did not already own for $28 million.
Superdry (SDRY), the casual clothing retailer, fell sharply for a the second consecutive trading session after Berenberg downgraded it to “hold” from “buy” the day after Julian Dunkerton, the brand’s co-founder, had taken a swipe at the present management’s strategy in an interview with Liberum. On the day before interim results from the fashion retailer, Berenberg cut earnings forecasts for the next three financial years by as much as 13% “to reflect ongoing weakness across the UK retail market, as well as our understanding that the current strategy could take another 12 months to come to fruition”.
Cash is out of fashion at Asos. Claims that ASOS (ASC) is “burning cash” and can no longer self-finance its expansion sent shares in the online fashion retailer down by 5.6% yesterday. Morgan Stanley’s analysts said that Asos could find itself uncomfortably tight on liquidity within two years and that it may have to reduce its spending and growth ambitions. The stock market darling has spent £400 million on capital expenditure in the past two years, which is more than in the previous 15 years put together, the analysts say. Only one third of that sum is going on warehouses.
Tempus – Travis Perkins (TPK): Hold. Management has taken the right strategic steps but now needs to deliver
Tempus – Scottish Inv Trust (SCIN): Buy and hold. A shareholder-minded trust that should deliver over the long term
