China cuts taxes to bolster economy. China has moved to quash market fears over its weakening economy by announcing measures to bolster growth and restore confidence. The world’s second largest economy will reduce value-added tax rates and hand out rebates in certain sectors to deal with a domestic slowdown. Chinese exports suffered their worst fall in two years in December, heightening concern over global growth. Leading stock indices and commodity prices retreated Asia, Europe and America yesterday after the poor December reading, which showed a 4.4% drop in China’s exports and a 7.6% slump in its imports. Confidence that the country will take action to revitalise its economy helped markets to recover this morning. The SSE Composite rose 1.4 per cent in Shanghai and the Hang Seng advanced 2% in Hong Kong.
Provident Financial shares hit by credit card arrears. A slump in people paying their credit card bills on time has helped push down shares in Provident Financial (PFG), the doorstep lender, by a fifth as it warned that annual profits would be at the lower end of expectations. Provident said that profits for 2018 would be at the bottom end of market forecasts in the £151 million to £166 million range, blaming higher impairments at Vanquis Bank, one of its high-cost consumer credit businesses. An increase in credit card arrears among Vanquis customers put pressure on the unit, which accounts for about 53% of group revenues. In 2017 Provident made adjusted profits of £109 million, down from £334 million the previous year.
Boohoo has plenty to shout about as revenues soar. Boohoo.com (BOO), which sells affordable fashion for teenagers and young adults, has raised its full-year profit guidance after avoiding the troubles on the high street to report strong Christmas sales. The Aim-listed company, which owns the Nasty Gal, Pretty Little Thing and Boohoo websites, reported a 43% rise in revenues to £328.2 million in the four months to the end of December. Group revenue grew in all its regions, with Britain up 33%, the rest of Europe up 57%, the United States up 78% and the rest of the world 35% higher. The retailer said that it expected revenue growth for the full year to be between 43% and 45%, up from its previous forecast of 38% to 43%.
Fears of global slowdown as China’s exports shrink. Growth fading in most richer economies, OECD warns. There were renewed fears over the strength of the global economy last night after a leading think tank said that growth was slowing in most influential countries and China shocked traders with poor exports. Alarm bells have started ringing for the United States, Germany, France, Canada and Britain, according to the Organisation for Economic Co-operation and Development, underscoring recent warnings of a global slowdown from institutions such as the International Monetary Fund.
Former Barclays bankers deny fraud charges. Four former senior Barclays (BARC) bankers have appeared in court to deny fraud during the 2008 financial crisis. John Varley, ex-chief executive, Roger Jenkins, ex-chairman of Barclays in the Middle East, Thomas Kalaris, former head of wealth management, and Richard Boath, a former senior investment banker, denied conspiracy to commit fraud by false representation in relation to a June 2008 capital-raising.
JD Sports shows struggling rivals a clean pair of heels. Britain’s biggest sportswear retailer has upgraded its profit outlook after outperforming its rivals over Christmas. JD Sports Fashion (JD.) said that its like-for-like sales had risen by more than 5% in the 48 weeks to January 5, helped in part by strong sales generated during the Black Friday sales and the holiday period. This was up from a 3% rise in comparable sales in the first half. The chain said that although many retailers had engaged in short-term “reactive” discounting, particularly over the festive period, it had held firm on its pricing strategy and had maintained its profit margins. It expects its profit before tax to be at the upper end of analysts’ forecasts of between £325 million and £352 million.
Oliver defends ‘hypocritical’ Shell deal. Jamie Oliver has defended his decision to sign a reported £5 million deal with Royal Dutch Shell ‘B’ (RDSB) despite years of campaigning for action on climate change. The television chef said that he had anticipated the accusations of hypocrisy that he has faced since news leaked of his agreement to design a range of deli food for the oil major’s British petrol stations. Oliver said that he had “thought a lot” before signing the deal, but had reached the conclusion that “there are pitfalls working for any client and they all have their own baggage”. He argued that the partnership “was absolutely worth it” if it meant that people had access to better-quality food. The chef, who was named an “environmental champion” by the UN Environment Programme in 2015, has created a range of 80 wraps, sandwiches and salads to be sold at more than 500 service stations across the UK.
Soldiers are costing Capita a fortune. The head of Capita (CPI) has told MPs that the outsourcing company will lose “a considerable sum of money” on its Ministry of Defence contract to recruit soldiers into the British Army. Jonathan Lewis told the Commons public accounts committee yesterday that the company’s previous management had put too much emphasis on “chasing revenues” rather than setting realistic targets. “We were more interested in booking additional contracts versus really being a true partner to, in this case, the army,” Mr Lewis said. A combination of financial penalties imposed by the MoD for missing targets and a £60 million investment in technology meant that the contract was now likely to make a loss.
Smoke signals reveal pressure on Page. Febrile political atmospheres on both sides of the Channel have taken a toll on the most recent performance of Pagegroup (PAGE). The listed recruitment specialist reported a 15.4% rise in profit to £211.1 million in the fourth quarter yesterday, but that disguised disruption in both the British and French markets. Page said that its profits in the UK were up by only 2.1%, reflecting “continued Brexit-related uncertainty” that in turn had affected “candidate and client confidence” in a market that accounts for 16 per cent of its revenues. There was evidence, too, of a knock-on from the gilet jaunes protests in France, in which demonstrators in high-viz yellow jackets have taken to the streets demanding fairer fuel prices and tax reforms and a lower cost of living. Page’s profits grew by 10% in France, below a Europe-wide figure of 13.9%.
Rival’s reduced takeover bid is too low, says Ophir. Ophir Energy (OPHR) has rejected a £340 million takeover bid from an Indonesian oil company. The London-listed oil and gas business said that its board had “unanimously rejected” the offer, arguing that it was too low. Medco Energi had revised down two previous, higher approaches as crude prices fell and Ophir lost the rights to a gasfield in Africa. Ophir Energy was founded in 2004 and was listed in London in 2011. At one point its shares were trading above 600p after it made gas discoveries off the coast of Africa. It was hit by the collapse in oil prices from 2014 and yesterday its shares were up by nearly ¼p, or 0.3%, at 45¼p.
Goals takes a tumble as it chases customers. Higher British costs and disappointing trading in the United States are set to deliver a costly one-two for profits at Goals Soccer Centres (GOAL). The company said yesterday that a combination of Brexit-related uncertainty, the introduction of food and drinks services in the UK and slower business at two new sites in Los Angeles would trip up its immediate progress as it downgraded its profit expectations for this year. Goals, which runs 46 sites in Britain and four in California, has been listed on Aim since 2004. Sports Direct is its largest shareholder, with an 18.92% stake. The leisure company has been going through a turnaround, in which many pitches have been revamped, with new lighting.
The bar is lowered at Revolution. Investors in Revolution Bars Group (RBG) had reason to drown their sorrows after its shares fell by a fifth. Rob Pitcher, chief executive of the bars operator, warned that economic and political uncertainties were expected to knock its profits. The group expects annual earnings of £12 million, down from £15 million, after like-for-like sales fell 4% in the first half. Yesterday its shares fell by 21%, or 25¾p, to 96p.
Simon Irwin, a Credit Suisse analyst has downgraded Next (NXT) from “neutral” to “underperform”. Next defied gloomy forecasts for the retail sector to report better Christmas trading than had been expected this month, helped by stellar online sales that offset its weaker store division. Results for the fourth quarter demonstrated the strength of Next’s management and the resilience of the brand, Mr Irwin said. However, he did not believe that would be enough to prevent continued pressure on profit margins from foreign currency effects. Amid worries over consumer confidence, the analyst saw better value in stocks with “structural growth”, pointing to Asos and Zalando for online retail, B&M and Primark for discount plays and Adidas and JD Sports Fashion for sporting goods.
Miners were among the biggest fallers as the price of copper fell by more than 1% amid concerns about softer demand from China, the world’s largest metals consumer. Antofagasta (ANTO), the Chilean copper group, closed down 21¾p, or 2.6%, at 814½p.
JP Morgan Cazenove said that it was time to re-enter UK domestic stocks as it believed that the probability of a no-deal Brexit had “sufficiently reduced”. Reversing its bearish call on British housebuilders, it upgraded the sector from “underweight” to “overweight” as it said that house prices could stabilise if Brexit tail risks kept reducing. Persimmon (PSN), which will give a trading update today, was named as the top pick on the basis that “recent share price pressure looks illogical” and the analysts saw scope for upgrades and further returns in the near term. The bank’s property team named Land Securities Group (LAND) as its top stock in the sector, thanks to its loan-to-value ratios at close to historical lows while occupancy rates are close to 100%. They believe that recent weakness in Landsec’s share price has been tied to Brexit, giving it the potential to rally.
Gambling stocks were weak after Barclays warned that increased regulation would suppress growth in the short term. It downgraded to “equal weight” after lowering its earnings estimates. Paddy Power tumbled 270p to £62.60.
Restore (RST), an office services provider, dropped 49p, or 12.7%, to 338p as worries over lower shredding volumes overshadowed a trading update that reported full-year results broadly in line with expectations.
Crossword Cybersecurity plc (CCS), a technology and consulting company, shot up 62½p to 332½p, despite no specific news related to it. It released research last week showing the value of the cybersecurity research market, with reported funding of EU projects at more than €1 billion.
Sales rise is shot in the arm for Dechra. Strong trading in Europe and North America have helped to lift sales and revenue at Dechra Pharmaceuticals (DPH). The London-listed maker of veterinary medicines yesterday reported revenue growth of 18% over the past six months, adding that sales in North America had been bolstered by the expansion of its direct sales force in the United States. In a trading update, the FTSE 250 company said that it had completed its acquisition of Venco, a Brazilian rival. It expected the South American business to lift group revenue in the second half of its financial year. Dechra said that its Brexit contingency preparations were on track.
Tempus – Smiths Group (SMIN): Hold. Having returned to growth last year, there should be lots more value to come
Tempus – Aberforth Smaller Companies Trust (ASL): Avoid. Too exposed to the UK economy given uncertainties