Black Friday took the sparkle out of Christmas for retailers. Shoppers cut back on their spending last month after splashing out on Black Friday bargains in November. Retail sales dropped 0.9% by value and volume in December, compared to a jump of 1.4% in November, data from the Office for National Statisitcs show. Economists had expected a fall of 0.8%. The official statisticians said that the data pointed to a shift in Christmas shopping from December to November, as the retailers adopt the American tradition of Black Friday promotions. Howard Archer, chief economic adviser at the EY Item Club, said the drop in December volumes was a disappointment for retailers. “This pointed to Black Friday-related promotions primarily bringing retail purchases forward to November from December rather than lifting sales overall,” he said, with savvy shoppers taking advantage of discounts.
Sophos shares cut by a quarter after slump in demand. Sophos Group (SOPH) lost about a quarter of its value this morning after the cybersecurity firm revealed a sharp slowdown in orders and warned that demand would remain subdued over the coming months. The company, which counts Ford and Toshiba among its customers, said that billings grew by 2% between October and December, down from a 14% rise a year earlier. It said that growth would remain muted over the coming months and that it had braced itself for a modest decline in orders for its financial year, which ends in March. The warning marks the third time that the company has downgraded since July, sending its shares tumbling 85.58p or 23%, to 290.02p.
£1 shopping centre reveals retail crisis. Giveaway price shows many centres ‘are obsolete’. A shopping centre has been put up for auction with a starting price of £1 in a move underlining the crisis facing retail landlords. Columbia Threadneedle Investments, the large City fund manager, is selling the Postings Centre in Kirkcaldy, Fife, on behalf of a pension fund. The shopping centre receives £152,005 rent each year but 13 of its 21 shop units are vacant as a result of retailers pulling out of the town or closing down. Tesco quit as the centre’s anchor tenant in 2015. The £1 reserve price allows Allsop, the auctioneers, to pitch the asset as having a gross initial yield of 15.59 million per cent. However, the running cost more than offsets its income and buyers are expected to see the site as ripe for demolition and redevelopment. Miles Gibson, of the property consultancy CBRE, said: “It’s an extreme case. It’s the first time I can remember a starting price so low for a property of this type. But it is symptomatic of the difficulties facing the sector.”
Tobacco firms lose millions on Palmer & Harvey. Two tobacco groups that supported Palmer & Harvey will receive less than a third of the amount that they paid to shore up the wholesaler before it collapsed into administration. The latest administrator’s report shows that although the main lenders, including Barclays, HSBC Invoice Finance, PNC Business Credit and Royal Bank of Scotland, will receive the full £187.4 million that they are owed collectively, Japan Tobacco International (JTI) and Imperial Brands (IMB) will not fare as well. The two companies are likely to receive between £59.5 million and £66.1 million in total, far less than the £250 million they are owed.
Mike Turner throws in the towel at Babcock. A torrid year for one of Britain’s leading captains of industry has been capped by Mike Turner’s decision to step down as chairman of Babcock International Group (BAB), the stumbling defence contractor. Mr Turner, one of the great boardroom bruisers of his generation, was chairman of two FTSE 100 companies — Babcock and GKN, the automotive and aerospace engineer — but this time last year he became embroiled in a highly contentious hostile takeover. It ended when GKN lost 350 years of independence and fell into the hands of Melrose Industries, an acquisitive but smaller conglomerate. Mr Turner was criticised both for his handling of the company before the bid and GKN’s defence during the battle. He is now set to lose his other chairmanship with the announcement that he is to stand down as Babcock’s top non-executive director in the summer.
Hammond and Clark must go, say Brexiteers. Brexiteers have called on the chancellor and the business secretary to resign after they tried to reassure company bosses that a no-deal Brexit could be blocked. Philip Hammond and Greg Clark set out how the departure from the European Union could be delayed and pledged to help ensure Britain maintains close ties with the bloc, during a teleconference call with business leaders this week. Senior executives who took part in the call welcomed their remarks. However, those who argue that Britain has nothing to fear from a hard Brexit described Mr Hammond and Mr Clark as “lackeys” of big business. Lord Lilley, the Conservative former trade secretary and deputy party leader, described their assurances as “hugely irresponsible”.
Primark sales boost puts ABF’s fears to bed. Primark has reported a rise in sales and profits as its mix of on-trend affordable clothing drew in shoppers in defiance of the gloom on the high street. Associated British Foods (ABF), parent of the discount chain, said that sales at Primark rose by 4% in the 16 weeks to January 5, ahead of the same time last year. The uplift in total sales came despite a torrid November when the chain’s like-for-like sales were negative as fewer people bought coats and spending was diverted to other retailers offering Black Friday discounts. Despite rising comparable sales in September and October and better-than-expected Christmas trading, the November sales fall was enough to leave Primark with a “modest decline” in like-for-like sales during the period.
Glitter comes off N Brown despite the sequins. The retailer behind Jacamo, Simply Be and JD Williams may have recorded strong sales of luxury nightwear and “all things sequin” but it failed to offset a fall in sales over Christmas, sending its shares down by almost 12%. Brown (N.) Group (BWNG), which specialises in clothing for plus-size and mature customers, said that its product revenue had fallen 6% in the 18 weeks to January 5. The steepest fall in sales, of 22.9%, was in its catalogue-focused business, which includes brands such as Marisota, Figleaves and High & Mighty. Its power brands — Jacamo, Simply Be and JD Williams — performed better, with online sales rising 6.4%. Overall group revenue fell by 1.6%. While the group’s international revenue was down 5%, the company said that it had begun to “better re-engage with its target customer base”.
Banks braced for big fall in consumer borrowing. Demand for mortgages and credit card lending is expected to fall sharply in the next three months, according to a survey by the Bank of England. In a further sign that consumers are reining in their spending before Brexit, the Bank said lenders expect demand for credit card loans to fall by the largest amount since records began in 2007. Demand for mortgages will be at an eight-year low. Growth in consumer credit has been slowing since it peaked at almost 11% in November 2016, prompting fears of another debt bubble and leading the Bank to demand tougher affordability standards for borrowers. The survey of credit card lending will help to calm concerns at the Bank about excessive borrowing, but economists said that there was a risk of too sharp a reverse.
Taxpayers risk loss from RBS buyback. Royal Bank of Scotland Group (RBS) will seek approval from investors to spend more than £1 billion buying back its own shares from the government, creating a further loss for taxpayers following its rescue in 2008. The government took an 84% stake in RBS through its £45.5 billion bailout of the bank a decade ago to prevent it from collapsing. That has fallen following sales of shares to institutional investors in 2015 and last year. A new sale of shares would stir new controversy for the government, which would almost certainly suffer another large loss on its holding, for which it paid on average 502p. RBS will hold a meeting for shareholders at its Gogarburn headquarters in Edinburgh where it will ask for permission to buy back up to 4.99% of its share capital, which would currently cost about £1.4 billion. It requires approval from 75% of votes cast. The government will not take part.
Life’s a grind for Whitbread after Costa sale. Whitbread (WTB) kicked off life as a focused hotel company with a weak third-quarter trading update and warned investors that its results for 2020 would be no better than flat. The Premier Inn operator’s shares, which have been buoyed in recent months by the £3.9 billion sale of Costa Coffee to Coca-Cola, fell by 32p to £47.41 yesterday on the back of its cautious outlook. Alison Brittain, 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.
Ladbrokes owner GVC jumps ahead of forecasts with strong last quarter. Shareholders of GVC Holdings (GVC) were counting their winnings last night after the FTSE 100 gambling operator raised its full-year earnings forecast. The Ladbrokes and Sportingbet owner said that after a strong final quarter it expected underlying earnings to be between £750 million and £755 million, ahead of the previous consensus of £739 million. The positive full-year update sent GVC’s shares up 14p to 687p, a rise of 2.1% — a welcome return to form after a sharp fall since August from a record high of £11.75. Kenny Alexander, GVC chief executive, said that the company was winning market share in all its main territories, notably the UK and Germany, performing particularly well in the fourth quarter against tough comparative trading. “We shot the lights out,” he said. Asked how the group was managing to outperform his peers, he said: “Our brands are very strong, our marketing and technology are better than our rivals and we have the best management in the sector.”
Mike Ashley blows whistle on Game Digital (GMD) switch. Mike Ashley’s has shot down attempts to move Game Digital’s listing to the junior Aim market. The computer game retailer, which sells titles such as Stifled and Wreckfest, said that 37.3% of voting investors had opposed its switch from the main market at a shareholder meeting yesterday. Under listing rules, Game needed the approval of more than 75% of voting shareholders. Sports Direct, which has become Game Digital’s biggest shareholder with just over 25% of the stock, according to filings, is understood to have opposed the plans. Its rejection of the scheme comes despite the two companies striking a partnership a year ago under which Game outlets or its new Belong arenas for gamers will be introduced in Sports Direct stores. The collaboration has been backed by a £55 million loan from Sports Direct.
Chemring takes hit after fatal explosion at factory. Chemring Group (CHG), the defence company, has suffered a £105 million loss after the death of one of its workers in an explosion at its factory in Salisbury. Last summer’s explosion at the plant, which produces countermeasures from unstable chemicals almost exclusively for the Ministry of Defence and BAE Systems, the jet fighter manufacturer, was the fourth in 19 years at Chemring factories around the world. The company was founded in 1905 as the British Foreign & Colonial Automatic Light Controlling Company to make street lighting. By the 1950s it specialised in a silver-coating process used to make radar reflectors that was adapted for chaff systems used by aircraft to stop missiles locking on to them. Chemring reduced revenues by £22 million and profits by £17 million in its countermeasures divisions in its latest annual results. In addition, the company booked nearly £13 million of legal costs from the regulatory investigations into the death and safety at the Salisbury plant.
Swann to fly company nest on a high. Kate Swann looks set to go out on a high when she hands over the top job at SSP Group (SSPG), despite disruption to its French operations caused by the yellow vest protests. The transport catering group, which she has run since 2013, said that it had made a good start to the financial year, reporting total first-quarter revenue growth of 7.7%, up 7.6% at constant currency. It said that the increase was formed of like-for-like growth of 2.5% and slightly better-than-expected net contract gains of 3.8%, while the acquisition of Stockheim, a German business, added a further 1.3% to sales. The company, formerly part of Compass Group, runs about 2,600 concessions at 140 airports and 280 railway stations in 33 countries. It operates under 500 brands including franchises such as Burger King, Starbucks and Yo! Sushi, and under its own brands such as Upper Crust and Caffè Ritazza. It employs more than 37,000 workers.
Patisserie Valerie’s Lee Ginsberg joins the exodus. Patisserie Holdings (CAKE) suffered another setback yesterday when Lee Ginsberg, its deputy chairman and former head of its audit committee, resigned with immediate effect. Luke Johnson, the executive chairman, is the only board member to have remained in post since the café chain was plunged into crisis in October, when it revealed a £40 million hole in its accounts and potential fraud. Mr Ginsberg is the second Patisserie director to leave this week after James Horler resigned on Monday. Chris Marsh, Patisserie’s finance director, resigned in October after he was arrested amid an investigation by the Serious Fraud Office, which continues, and was released on bail. Paul May, the chief executive, left in November. The company has since hired Steve Francis, the former boss of Tulip, the pork processor, as chief executive and appointed Jeremy Jensen, a restructuring specialist, as chairman of the audit committee.
Rising defaults take gloss off Funding Circle’s lending boom. Funding Circle (FCH) reported robust loan and revenue growth for last year, although it admitted that default rates among borrowers had risen substantially. The peer-to-peer lender said that its loans under management and turnover both rose 55% last year, beating targets set when it floated in September. The lender said loan originations increased 40% to £2.3 billion. However, evidence of stress among its customers took the shine off the trading figures, stoking fears that Brexit uncertainties could squeeze small and medium-sized businesses. Funding Circle revealed that between 3% and 3.8% of loans arranged last year would default. Its previous target range was 2.5% to 3.5%. Funding Circle is one of the fast-growing British financial technology companies hoping to displace the established banks. Its float was seen as a litmus test for the sector but its shares have fallen by more than a fifth since its debut. The company was set up in 2010 in London by Samir Desai, chief executive, and two friends from the University of Oxford. Its platform pools investors’ cash to provide loans to small and medium-sized companies. Funding Circle earns a fee on each loan it originates.
Sage has faith in wisdom of shift towards subscriptions. The software developer Sage Group (SGE) reported a steeper rise in subscription revenues than expected over the past three months, sending shares as much as 8% higher yesterday. The Newcastle-based company, which develops accountancy and payroll software for small businesses, said that underlying sales rose 7.6% year-on-year to £465 million between October and December, the first quarter of its financial year. This included a 27.7% jump in revenues from subscription packages to £237 million in the period. Shares in Sage closed 32p higher, or 5.4%, at 625p on the back of the trading update because of hopes that the company was emerging from a period of turmoil in its boardroom.
Demand for data adds up for Experian (EXPN). The world’s largest credit rating agency has said that demand for its data services is growing as businesses look to harness customer information more effectively. Experian, a FTSE 100 company, reported a 5% revenue increase between October and December, with a slide in its Latin American division more than offset by a further surge in the US. In the same quarter a year ago, sales rose 8%. Brian Cassin, chief executive, said profits for its financial year would meet targets, sending Experian stock up 33½p to £19.08. Experian, registered in Dublin and with its main base in Nottingham, has more than trebled in value to £17 billion since 2006, when it spun out of Great Universal Stores, the conglomerate that spawned Burberry and Littlewoods. It employs 16,500 people in 39 countries and made a profit of $470 million in the six months to the end of September.
ITV (ITV) was at the bottom of the FTSE 100 index yesterday after analysts at Bank of America Merrill Lynch told investors what they already knew: young people aren’t watching a lot of television. Specifically, TV viewing is declining by 8% among adults under 35 year on year. With these “digital natives” making up more than 50% of the workforce by 2020, up from 35% in 2015, advertisers are going to be less keen on paying for broadcasting space. Advertising on online video channels, where younger people are spending more of their viewing time, costs between 30% and 40% less, the analysts reckon, so spending on TV advertising could fall by between 2% and 3% by 2025. The bank downgraded ITV to “underperform” from “buy”, which triggered algorithm-driven trades and sent the shares down 8p to 129p.
Energy was the worst performing sector after Opec forecast demand for its oil would be almost 1 million barrels a day lower in 2019 than last year, while production from outside the cartel was likely to rise by 2.1 million barrels a day. Wood Group (John) (WG.), the oil services company, fell 26½p to 541¼p. BP (BP.) lost 5p to 511p; Royal Dutch Shell ‘B’ (RDSB) dipped 25½p to £23.05.
Housebuilders were down after their sales outlook reached its weakest level in at least two decades, according to the estate agents survey by the Royal Institution of Chartered Surveyors. Persimmon (PSN) fell 5p to £23.15. Taylor Wimpey (TW.) dipped 2p to 162p. Berkeley Group Holdings (The) (BKG) edged down 20p to £37.80.
NewRiver REIT (NRR), the property company that is trialling pubs in shopping centres and “click and collect” points in pubs, rose ½p to 212p after it said it had secured 119 leasing deals in 378,000 sq ft of its retail property in the third quarter. The shopping centre, retail park and pubs owner said it was in a strong position to offer retailers average rents of £12.37 per sq ft, or about half the market average.
Workspace Group (WKP), the flexible office space landlord, added 6p, or 0.7%, to 888½p after it said inquiries from new tenants were coming in at a rate of 907 a month, compared with 858 a year earlier.
Assets at wealth manager slip. Analysts are expected to trim their full-year profit forecasts for Charles Stanley Group (CAY) after the wealth manager disclosed a £2.2 billion fall in assets under management and said client trading volumes dived by 17% in the December quarter. Shares in Charles Stanley fell 19p to 249p as it said total funds under management or administration dropped by 8.8% to £22.8 billion in the three months because of tumbling markets. Inflows of £200 million from discretionary clients, customers who delegate investment decisions to the firm, were equally matched by outflows in other parts of the business. Commission income fell by 14.6%, or £2.1 million. Paul Abberley, chief executive, described conditions in the quarter as difficult. Fee income was up by 5.1%, however. Cannacord Genuity, the company’s broker, said it expected consensus forecasts for full-year profits to March to be cut by about 10% from the current £11.7 million.
Tempus – Menzies(John) (MNZS): Hold. Menzies looks set for growth but uncertainty over how Brexit will affect aviation may act as a drag on shares
Tempus – Tritax Big Box Reit (BBOX): Buy. Big modern warehouses with big sticky tenants
