New shops help Primark to stay ahead of high street rivals. Sales and profits have risen again at Primark as the value retailer continues to outperform its rivals on the high street. Associated British Foods (ABF), the parent of the discount chain, said that sales at Primark were 4% up in the 16 weeks to January 5, ahead of last year, as shoppers were drawn to its wide range of on-trend, affordable clothes. Sales growth was largely driven by increased retail selling space as it opened more shops. This was partly offset by a “modest decline” in like-for-like sales. John Bason, finance director at AB Foods, did spook the City in December when he said that a fall in shopper numbers on the high street and unseasonably warm weather had resulted in negative underlying sales at Primark in November. The news sent its share price lower as the City became concerned about volatile consumer sentiment before Christmas. AB Foods said this morning that Primark’s comparable sales had been positive in September and October and negative in November but had outperformed expectations over the Christmas period.
Whitbread cautious as sales weaken outside London. Whitbread (WTB) kicked off life as a focused hotel company with a weak third-quarter trading update and warned investors that its 2020 results would be no better than flat. Shares of the Premier Inn operator, which have been buoyed in recent months by the £3.9 billion sale of Costa Coffee to Coca-Cola, fell by 84p to £46.89 in morning trading, down 1.8%, on the back of its cautious outlook. Alison Brittain, the Whitbread chief executive, said that although trading in London had benefited from inbound tourism, in the regions lower consumer confidence in both the leisure and corporate markets had dampened demand. “We expect the subdued treds to continue in the fourth quarter and into next year, given macro-economic and political uncertainty,” she said. “We are quite cautious and can’t call a recovery in confidence, given everything happening around us.”
Subscription rise sends Sage shares up 8%. Sage Group (SGE) reported a steeper-than-expected rise in subscription revenues over the past three months, sending shares in the software developer as much as 8% higher. The Newcastle-based company said underlying sales rose 7.6% to to £465 million between October and December: the first quarter of its financial year. Sage, which develops accountancy and payroll software for small businesses, reported that revenues from subscription packages rose 27.7% to £237 million in the period. Share rose 34.2p, or 5.8%, to 627.2p by 11.15am on hopes that the company had begun to emerge from a period of turmoil in its boardroom.
‘Fraud’ threat to Patisserie Valerie future. Forensic search at café chain finds more problems. The future of Patisserie Valerie is in doubt after it admitted that a £40 million alleged fraud was more extensive than had been thought and said that it had hired KPMG, the accounting group, to carry out a “review of all options”. The café chain said that its profits were materially below those declared in October as part of a rescue refinancing, casting fresh doubt over its ability to continue trading. Patisserie Holdings (CAKE), the parent company, has been in crisis since it discovered “significant potentially fraudulent accounting irregularities” in October. It said last night that a review of its books had found that its accounts had been “significantly manipulated”.
Break-up talk gets louder as Reckitt boss heads for exit. The chief executive of Reckitt Benckiser Group (RB.) plans to leave by the end of this year in a move that could lead to a break-up of the giant consumer goods group. Reckitt said yesterday that it had begun a formal search for a successor to Rakesh Kapoor, 60, who has led the company for eight years, adding that it was considering internal and external candidates. The City’s reaction to the change at the top was mixed, with shares in Reckitt falling by 4%, or 262p, to £59.90 amid concerns that margins could be hit under Mr Kapoor’s successor. The announcement also led to renewed speculation that the executive’s exit may pave the way for Reckitt to fully separate its consumer healthcare division from its hygiene home business.
Superheroes are the stars at Cineworld. A bold foray into the American market 12 months ago has paid off at Cineworld Group (CINE) with a record year for its box office, although the absence of a Star Wars release put a dent in its British revenues. While revenues in the United States last year grew by 8.6% on the back of movies including Black Panther, Avengers: Infinity War and Incredibles 2, the UK and Ireland was up by only 3%, a 0.6% fall on a constant currency basis. Cineworld operates 790 cinemas with 9,518 screens in Britain and Ireland, central and eastern Europe, Israel and America. A year ago it completed the $5.8 billion acquisition of Regal Entertainment, a US operator, making it the world’s second biggest cinema company behind AMC, which owns Odeon.
Bovis puts problems behind it with record profit. Two years after a scandal that tarnished its reputation and led to the resignation of its chief executive, said yesterday that it was on course to deliver record annual profits. The FTSE 250 housebuilder said in a trading update before full-year results next month that it expected 2018’s profits to be ahead of market expectations of about £165 million. That will be comfortably better than the £114 million it made in 2017, a year in which it was embroiled in a row about customer service and building work, with buyers complaining of poor workmanship, including floors that bounced and leaks, and of being handed homes before they had been finished. The results reveal the success of its turnaround since the arrival of Greg Fitzgerald, an industry veteran, as chief executive. He joined Bovis 18 months ago after David Ritchie had resigned from the top job in the wake of a profit warning that had followed the company’s widely reported problems.
The man who did not get the top job at Compass has been named as chief executive of Diploma (DPLM), the £1.4 billion specialist distribution company. Johnny Thomson, 46, resigned as finance director of Compass, the FTSE 100 caterer, in the summer when the chief executive’s job went to Dominic Blakemore, a boardroom rival. He has been given a pay package at Diploma that could be worth £2.8 million a year if he hits bonus targets. He also must pick up the pieces of Diploma’s disastrous chief executive appointment last year. Bruce Thompson, the architect of the company’s rise to the FTSE 250, retired in 2018. Richard Ingram, who replaced him, had been a divisional director at Smiths, the conglomerate, but lasted only four months. “Cultural issues” around his leadership were cited.
Pearson (PSON) struggles to retain its slice of the all-important American pie. A further slide in sales of university textbooks sent the value of Pearson down by nearly 6% yesterday, despite the education group saying that it would return to revenue growth next year. John Fallon, chief executive, predicted yesterday that turnover would begin growing again for the first time since 2016 as some of the publisher’s bets on online learning began to pay off and as cost savings lifted profit margins. “We expect to stabilise underlying revenues this year and see growth from next year onwards,” he said. Nevertheless, the shares fell 58½p, or 6%, to 918p after the company revealed a 5% fall in sales at its US higher education courseware division. Pearson said that revenues at the business, which accounts for about a quarter of its turnover, were likely to slide by a similar amount this year.
Saga reveals writedown in ships’ value. With new cruise ships on the horizon and set to come into service within two years, Saga (SAGA) has taken a £6 million hit on the value of its existing vessels. The company, which sells insurance and holidays to older people, reported promising numbers for its pair of larger replacement liners that go into service this year and next. Bookings for Spirit of Discovery, which takes paying customers from July, have reached 69 per cent of targeted sales for 2019-20 departures, up from 64% reported in September. Spirit of Adventure, which will be launched in August 2020 and for which tickets were not on sale in September, has achieved 34% of its sales target. The over-50s specialist aims to greatly expand its cruising business and the new ships will increase its capacity by 71%
Wagamama may be known for its ramen and donburi dishes, but the value assigned to the business by Restaurant Group (RTN) wasn’t to Citigroup’s taste yesterday. Its analysts declared that TRG had overpaid for the noodle bar chain when it bought Wagamama for £559 million in November. While Wagamama’s like-for-like sales have been “remarkably strong”, Citi expects that to change after the departure of Jane Holbrook as chief executive and as Brexit issues affect consumers’ appetite for dining out. It said that growth could slow from 12% in the most recent quarter to about 3%. The analysts didn’t appear to like the £315 million rights issue that TRG had used to help to pay for what Andy McCue, its chief executive, had called a “transformative” deal, nor the sharp share price fall that greeted it.
M Winkworth (WINK) rose 5p, or 4.5%, to 115p after it said that it expected full-year profits to be ahead of market expectations of £1.4 million, despite a slowdown in London’s housing market. It said that it had been encouraged by a “sharp increase” in applicants on its website for property purchases and rentals in December.
Van Elle Holdings (VANL), a Nottinghamshire-based ground engineering contractor, issued a profit warning. The company cited issues including project delays and said that its full-year results would be “significantly below its previous expectations”. Analysts at Peel Hunt, its broker, said: “Operational and commercial improvements are being implemented by the new chief executive and in order to rebuild confidence investors will now need to see delivery against the revised guidance.” The profit warning wiped out nearly a fifth of the company’s market value as it tumbled 14½p, or 18.2%, to 65p.
Yellow Cake plc (YCA), the uranium stockpiling company, advanced after it said that the net asset value of its physical uranium holdings was now at 253p per share, representing a premium to its share price. Dealers moved to close that cap, sending the shares up 7¼p to 228p.
Finsbury Food Group (FIF) tumbled 9¾p, or 10.5%, to 83¼p after it reported an 8 per cent fall in like-for-like overseas sales in the second half and a paltry 1.7% growth in UK sales. The company cited “a difficult macro environment”.
Pressure piles on floor group. A group that claims to be Europe’s largest distributor of floor coverings has warned that its profits in the next financial year will be lower as a result of a weak housing market and higher costs. Headlam Group (HEAD), based in Birmingham, said that although its 2018 results would be in line with the City’s expectations of about £708 million of revenue and pre-tax profits of £43.6 million, profits for the coming financial year would be lower, at between £39 million and £41 million, while revenues would be flat. Headlam was founded in 1946 as a supplier to the footwear industry. Since 1992 it has focused on floor coverings after the acquisition of a business from Hickson, the chemicals group.
Tempus – The City Pub Group (CPC): Buy. Good trading prospects with an expanding asset base
