Housebuilder Crest Nicholson Holdings (CRST) said profits fell 15% as a slowdown in the London market and Brexit uncertainty have taken their toll. The housebuilder said pre-tax profit fell to £176.4million in the year to the end of October from £207million a year earlier. This comes after the company warned on profits in October in an unscheduled update, when it said it had seen a slowdown in property sales in London and the South during the traditionally strong autumn months. Many UK housebuilders have enjoyed a boom in profits over recent years as they have cashed in on a shortage of new homes across the country and the taxpayer subsidised ‘Help to Buy’ scheme. This latest update suggests that for some housebuilders at least, the boom times are over for the time being. Crest chief executive Patrick Bergin said: ‘We have faced some challenges in London and with sales at higher price points where political and economic uncertainty has adversely impacted customer demand, and this is likely to continue pending Brexit resolution.’ He also said he expected the first half of this year to be ‘difficult’ considering that Brexit is still ‘unresolved’.
Domino’s Pizza Group (DOM) sold more than 535,000 pizzas in the UK on the Friday before Christmas, helped by the popularity of its cheeseburger pizzas, but it has struggled to have the same success abroad. The company said in the UK, where it opened 59 new stores, like-for-like sales rose 4.5% in the last quarter of 2018, helped by a spike in orders on the night of Strictly Come Dancing Final and during the week before Christmas. But its international division, which however counts for just 10% of the sales, is expected to post annual losses of between £3million to £4million due to ‘growing pains’, especially in Norway.That means the company now expects full-year pre-tax profits to come in at the lower end of consensus range of £93.9million to £98.2million.
Shares in Royal Mail (RMG) plunged this morning after the company said that a continued decline in letter volumes is likely to get worse than previously expected and trimmed its profits expectations. The company, which was kicked out of the FTSE 100 last year, saw continued growth at its parcels business, helped by a ‘busy Christmas season’. But the decline in letters deepened, with volumes down 8% and revenues down by 6% in the nine months to December 23. Royal Mail said it now expects letter volumes to decline by about 7 – 8% this year and by more than the 4 – 5% decline previously expected for 2019/20. That’s partly down to the long-standing and unstoppable trend of shunning traditional mail for emails, as well as restrictions on marketing mailing introduced last year. The postal giant now expects to deliver operating profits before transformation costs to come in between £500million to £530million for the full year – broadly in keeping with analyst expectations but lower than previous guidance. This marks a hefty fall on the £694 million reported last year.
Investing supermarket Hargreaves Lansdown (HL.) bemoaned ‘geopolitical uncertainty, market volatility and weak investor confidence’ as it reveals the total amount of assets under its watch has slipped. For the six months to 31 December, assets under administration slipped 0.2% compared to the same period a year earlier and saw a 6% fall since 30 June to sit at £85.9 billion. Net new business dropped 24% year-on-year to £2.53 billion. Despite the declining top-line assets under administration number, profits increased. Pre-tax-profit grew 4% to £153.4 million on a 9% rise in revenue to £236.4 million. The company also lifted its interim dividend by 2% to 10.3p a share.
Mike Ashley plots to add to his rapidly expanding High Street empire with a bid for collapsed cafe chain Patisserie Holdings (CAKE). The founder is understood to be weighing a bid for the cafe chain after it crashed into administration last week in the wake of an accounting scandal. Such a move would give him yet another slice of the High Street where a string of store chains are struggling in the face of rising costs, crippling business rates and an onslaught from online rivals. Ashley is already bidding for beleaguered music shop HMV after buying struggling stores including House of Fraser, Evans Cycles and Agent Provocateur in cut-price deals.
Fresh boost for Ocado Group (OCDO) bosses as speculation about a tie-up with M&S lifts shares. Ocado’s shares jumped as much as 6.4% in early trading yesterday amid reports of a potential deal with Marks & Spencer Group (MKS). The stock eventually closed up 2.1%, or 19.6p, at 966p as investors cheered speculation that a tie-up could see Ocado provide its online delivery service to the High Street retailer. The share price boost lifted the fortunes of chief executive Tim Steiner and chairman Lord Rose, who between them own more than 24m shares. Steiner, 49, who owns 23.5m shares in Ocado, now has a stake worth £227million after the latest share price jump. Former M&S boss Rose, 69, has an £11.6million fortune tied up in Ocado. Reports of a partnership between M&S and Ocado will come as a blow to Waitrose whose contract with the online firm is due to expire next year. M&S still does not offer home delivery to its food customers, maintaining it is too expensive to run. A deal with Ocado could be the boost it needs, as it continues to close 100 stores across the country to slash costs amid falling sales.
Metro Bank (MTRO) ‘to tap investors for another £300m’ after accounting error blew a hole in its balance sheet. The High Street lender realised last week it had underestimated the amount of reserves needed to guard against the risk of commercial and buy-to-let property loans going sour. Analysts are braced for Metro to ask for £300million so the gap this has created can be plugged – possibly as soon as next month when it reports annual results. If the fundraising goes ahead, Metro will have sucked in an extra £850million since the beginning of 2018. Shares have fallen nearly 60% over the same period, knocking £1.8billion off the value of the bank. Meanwhile, hedge funds are increasingly taking bets against Metro. The percentage of shares being short-sold – meaning investors make money if the stock price falls – has risen from 0.55% to 7.86% in the past year. Any further fundraising is likely to pile pressure on Metro’s boss Craig Donaldson. Last year Metro raised £250million on the debt markets, and Donaldson vowed it would not have to seek further cash from shareholders.
Tesco confirms 9,000 staff across its stores and head office are at risk of the chop as part of drastic business overhaul. Tesco (TSCO), the UK’s biggest supermarket, has confirmed reports that it will swing the axe on thousands of jobs across its stores and head office. It said today that up to 9,000 jobs are at risk as it attempts to ‘simplify’ the business and battle what it described as a ‘competitive and challenging market’. Tesco’s UK and Ireland boss Jason Tarry said: ‘In our four years of turnaround we’ve made good progress, but the market is challenging and we need to continually adapt to remain competitive and respond to how customers want to shop. ‘We’re making changes to our UK stores and head office to simplify what we do and how we do it, so we’re better able to meet the needs of our customers. This will impact some of our colleagues and our commitment is to minimise this as much as possible and support our colleagues throughout.’ Sources said it is likely many counters will only be available from Thursday through the weekend, leaving them closed Monday to Wednesday. Tesco said it hopes to redeploy around half of the impacted staff to new roles.
Shares in Petra Diamonds Ltd.(DI) (PDL) plunged as prices dropped at its South African mine which produced diamonds for the crown jewels. It made revenue of £157million in the six months ending December 31, up 8% on the previous year but below analysts’ expectations of £175million. Production grew by 10% year-on-year to 2m carats. But Petra said the prices for stones from its Cullinan mine fell to £73-per-carat from £106 the year before. Shares fell 9.34p, to 35.6p.
Dixons Carphone (DC.) is still in bargain-basement territory, according to analysts at Morgan Stanley, notwithstanding the fact the shares have advanced by around a quarter since January 8. The London arm of the US investment bank turned positive on the stock yesterday. Its analysts reckon the owner of the Dixons electrical chain and Carphone Warehouse is worth 240p, which would represent a further advance of more than 60% from the current price of 146.7p. ‘Given that the Dixons side of the business has performed better than we were forecasting, and the Carphone Warehouse side is now likely to generate strong cash flows, we think this has left the shares looking very oversold,’ the broker said in a note to clients.
German investment bank Berenberg turned positive on the builders with ‘buys’ on Barratt Developments, Bellway and Taylor Wimpey. Unfortunately for Berenberg, the market refused to play ball, with the shares off at Barratt Developments (BDEV) by 0.2%, or 1p, at 535.4p; at Bellway (BWY) by 1.5%, or 44p, at 2844p; and at Taylor Wimpey (TW.) by 1.3%, or 2.15p, at 163.65p. The Hamburg-based house’s analysis echoed that of Bank of America Merrill Lynch, which pinned its colours to the mast earlier this month.
Funding some of the deal flow in the building sector was Paragon Banking Group (PAG), which posted a 41% rise in net lending, driven by demand from professional landlords. ‘We remain confident in the outlook, but will maintain our capital, liquidity and broader risk disciplines in case the external operating environment should deteriorate,’ chief executive Nigel Terrington said.
