Relief for households as inflation falls to 2.1%. Inflation has dropped to its lowest level in almost two years, with falling oil prices and cheap air fares boosting living standards. The consumer prices index fell to 2.1% in the year to December from 2.3% in November. It is the lowest figure since January 2017, when inflation came in at 1.8%. The fall in inflation combined with a period of sustained wage growth suggests that living standards are improving. Wages grew at their fastest pace in a decade in the three months to October and have been outstripping inflation since the beginning of last year. Economists said that the fall in inflation made an interest rate hike less urgent and that the Bank of England would likely wait for more clarity on Britain’s future relationship with the European Union before moving rates from their current level of 0.75%.
Pearson’s optimism fails to impress shareholders. Pearson (PSON) lost about 7% of its value this morning on the back of a further slide in university textbooks, even as the education giant said that it would return to revenue growth next year. John Fallon, chief executive, predicted that turnover would begin growing again for the first time since 2016 as some of the publisher’s investment in online learning begins to pay off and cost savings boost profit margins. “We expect to stabilise underlying revenues this year and see growth from next year onwards,” he said. However, the shares fell 66.4p or 6.8% to 910.2p by 11.09am after the company revealed a 5% fall in sales at its US higher education courseware division, which accounts for about a quarter of revenues. It predicted a similar slide at the business in the current year.
Kapoor to step down as Reckitt boss. Rakesh Kapoor is to step down as chief executive of Reckitt Benckiser Group (RB.) by the end of the year after a challenging period for the consumer goods group. Mr Kapoor, 60, has been at the company for 32 years, eight of them as chief executive, and has been one of the best paid FTSE 100 bosses. There is no replacement lined up, meaning that the board has now launched a formal search for a successor. Reckitt said that it was considering internal and external candidates. Reckitt is based in Slough and is one of the world’s biggest consumer goods groups, operating in more than 60 countries. Under Mr Kapoor it has undergone a major restructuring into two main divisions: health-related brands, which include Durex and Scholl, which make up the majority of its revenues; and its home and hygiene brands, which include Finish and Air Wick. Mr Kapoor has called it the biggest transformation in its history in what he described as “fairly volatile times”.
Exhibitions organiser can relax after selling firm for £200m. The family behind one of Britain’s largest independent exhibition organisers has hit the jackpot after selling the firm for as much as £200 million. Relx plc (REL), the FTSE 100 media group, has acquired the St Albans-based Mack Brooks Exhibitions, an arranger of corporate jamborees. Yesterday’s acquisition will be life-changing for Stephen Brooks, chief executive and son of one of its founders. Mr Brooks, 55, and Sally Brooks, 56, control more than 75% of Mack Brooks, according to filings at Companies House. The pair gave their home address as a six-bedroom, double-fronted period house in Muswell Hill, an affluent suburb in north London. Reed Exhibitions, Relx’s events division, did not disclose the purchase price, but it is understood to be about £200 million. Mr Brooks declined to clarify the size of his holding.
M&S adds 17 stores to closure list. Marks & Spencer Group (MKS) is to close another 17 stores with the potential loss of 1,045 jobs as it continues to cut costs as part of its turnaround plan. The retailer said that it needed to shut the shops to reshape its British store estate, which includes some outlets in prewar buildings or on high streets where shopper visits have been declining for years. The stores listed for closure are in Ashford in Kent, Barrow, Bedford, Boston, Buxton, Cwmbran, Deal, Felixstowe, Huddersfield, Hull, Junction One Antrim, Luton Arndale, Newark, Northwich, Rotherham, Sutton Coldfield and Weston-super-Mare.
Boohoo bucks trend with surprise jump in revenues. In results that will be the envy of bricks-and-mortar retailers up and down the high street, Boohoo.com (BOO), the online seller of affordable fashions, said yesterday that it would report larger revenues than it had expected in the year to February after a strong Christmas. The Aim-quoted company, which owns the Nasty Gal, Pretty Little Thing and Boohoo websites, reported a 44% rise in revenues to £328.2 million in the four months to the end of December. Its revenue grew in all regions, with sales in Britain rising by 33%, in continental Europe by 57% and in the United States by 78%. Sales in the rest of the world were 35% higher. Boohoo said that it now expected its revenue growth for the full year to be between 43% and 45%, up from a previous forecast of 38% to 43%. Mahmud Kamani and Carol Kane, co-founders and joint chief executives, said that they were “delighted” by the results and that the “global growth opportunity is significant and we will be addressing it in a controlled way, investing in our proposition, operations and infrastructure”.
Credit card debts deal fresh blow to battle-scarred Provident Financial. An increase in bad debts meant more turmoil at Provident Financial (PFG) yesterday, sending the troubled sub-prime lender’s shares plunging in their worst day since August 2017. A fall in people paying their credit card bills on time proved to be the spark for shares in the Bradford-based business to fall by a fifth. It warned that annual profits would be at the bottom end of forecasts that range from £151 million to £166 million, blaming impairments at Vanquis Bank, one of its high-cost consumer credit businesses, that had been “modestly higher than expected”. An increase in credit card arrears among Vanquis customers put pressure on a unit that accounts for about 53% of group revenues. In 2017, Provident made adjusted profits of £109 million, down from £334 million the previous year.
Flybe buyers revise deal in bid to ease airline’s cashflow headache. The consortium buying Flybe Group (FLYB) has agreed to snap up its operating assets early and has agreed new emergency funding amid concerns over the troubled airline’s working capital. Connect Airways, a group made up of Virgin Atlantic, Stobart Group Ltd. (STOB) and Cyrus Capital Partners, an American investor, is paying £2.8 million for Flybe Limited, the main trading company, and Flybe.com, its online business. The consortium also has agreed a bridging loan of up to £20 million, with £10 million released yesterday to “support the business”. The terms of the loan were changed after Flybe failed to meet the conditions announced on Friday, sending the bombed-out shares even lower.
Spire blames NHS for hit on earnings. One of Britain’s biggest private hospital companies has cut its expected annual earnings owing to the funding pressures being felt by the NHS. Spire Healthcare Group (SPI) said yesterday that earnings in 2018 before interest, tax and other charges and excluding exceptional items were set to be about £120 million. In September Spire had forecast earnings in a range of £120 million to £125 million, already lower than the £150 million generated the year before. Shares in Spire fell by almost 14p, or 11.9%, to 102¾p, extending declines over the past 12 months to 57% and valuing the company at £412 million. Spire, which operates 39 hospitals and 11 clinics, employs about 8,400 full-time staff. Its customers include self-pay patients, private medical insurance and referrals from the NHS.
Greene King seeks magic ingredient from Merlin. Greene King (GNK) is banking on an executive from Merlin Entertainments to weave some magic as its next chief executive. The FTSE 250 brewer and pub operator said that Nick Mackenzie, 50, managing director of Merlin’s Midway Attractions division, would take over from Rooney Anand at the conclusion of its financial year on May 1. Mr Anand, one of only a handful of black, Asian and minority ethnic bosses of big publicly quoted companies, said in November that he was calling time on almost 14 years at the top of the 220-year-old company. An external successor had been widely expected after the departure of the leading internal candidate. Clive Chesser, managing director of brewing and brands at Greene King, resigned in June last year to become chief executive of Punch, the tenanted pubs company.
Housebuilding increase pays off for Persimmon (PSN). Building more homes and raising selling prices has put Persimmon on course to beating profit expectations, the builder said yesterday as it tried to move on from the row over the pay of its former chief executive. However, it said that it was cautious about buying new plots for development “until the smoke clears on Brexit”. Britain’s second biggest housebuilder said that full-year profits for the 12 months to December would be slightly ahead of market expectations of about £1.1 billion and comfortably ahead of the £966.1 million of 2017. In its first trading update since the removal of Jeff Fairburn as chief executive in November, Persimmon said that it had completed sales of 16,449 homes last year, a 3% increase on 2017. Its average selling price increased by 1% to £215,560. Revenues rose 4% to £3.7 billion.
Sainsbury’s finance chief adds Centrica board seat. The chief financial officer at Sainsbury (J) (SBRY) is to take on a non-executive directorship at Centrica (CNA) as the supermarket chain embarks on a complex merger with Asda. Kevin O’Byrne, who joined Sainsbury’s two years ago after serving as chief executive of Poundland, will assume the role at Centrica on May 13. He will be paid £72,500 a year to attend ten Centrica board meetings annually, in addition to the £1.4 million package he receives at Sainsbury’s. The appointment comes at a critical time for Sainsbury’s, which is seeking regulatory approval for its proposed takeover of Asda. The deal, between Britain’s second and third biggest grocers, was announced last April and since then the supermarket chain has been scrambling to respond to inquiries from the Competition and Markets Authority. Observers fear that the deal could be in jeopardy after the supermarkets group took the regulator to court last month to buy itself more time to file paperwork. It also comes after a disappointing Christmas for Sainsbury’s, which reported the weakest sales figures of the sector’s Big Four.
Britain’s biggest gambling companies have spent heavily on expanding into the American market, but yesterday what had seemed to many to be an odds-on bet suddenly lengthened. The US Department of Justice published a legal opinion stating that online gambling across state borders was illegal under federal law and investors immediately braced themselves for the fallout. The legal opinion said that a previous interpretation of the Wire Act, which banned only sports betting, was a misinterpretation. It is unclear how the justice department will apply this ruling and it is expected to be tested in court. Last May the US Supreme Court made it possible for states to legalise gambling on sports including basketball, American football and baseball. “The apparent change of heart is unsettling to an already thoroughly unsettled sector,” analysts at Peel Hunt said. However, they also said that the implications were unlikely to become clear until the US government had returned from its present shutdown. Shares in fell 50p, or 0.8%, to £62.10; Ladbrokes’s owner GVC Holdings (GVC) retreated 19½p, or 2.8%, to 675½p; 888 Holdings (888), the online gaming group, tumbled 13½p, or 7.5%, to 164½p; and William Hill (WMH), which has a strong sports betting presence in America but no casino or bingo products, fell 5p, or 2.9%, to 163¾p.
Invesco has reduced its stake in Debenhams (DEB) in an apparent volte-face after Martin Walker, the fund manager, told the Daily Mail in August that he believed the shares could soon be on the up and that Sports Direct’s Mike Ashley, the biggest shareholder in the department stores chain, would have to cough up a lot more for the business than its trading price at that time. The shares have since have fallen by more than 75% to 3p. Invesco has reduced its stake in the troubled business from 5.5% to 4.8%, according to a stock exchange regulatory filing. The share sale comes after engineered a coup last week in which the chairman and chief executive were voted off the board.
Spirent Communications (SPT) shot up 17½p, or 13.9%, to 142½p after saying that it expected to deliver an adjusted operating profit for 2018 of between $75 million and $77 million, 17% ahead of consensus forecasts.
Watkin Jones (WJG) rose 7p, or 3.3%, to 220p after it reported a 25.6% price in profit before tax to £54.3 million in its full-year results. The developer said that revenue had risen by 20.3% year-on-year to £363.1 million. It has benefited from strong institutional investor demand for the stable, income-producing student accommodation sector.
Tempus – Vodafone Group (VOD): Avoid. A dividend cut is a real possibility
Tempus – The Gym Group (GYM): Buy. No signs that it’s running out of puff