Dixons Carphone swings to huge loss after writedowns. Dixons Carphone (DC.) new boss attempted to reassure investors by promising to turn its shops into “magnets for discovery” after the retailer swung to a giant £440m first-half loss on the back of hefty charges associated with its ailing mobile phone business. The company was forced to write down the value of its mobile phone business by £344m as the loss-making division struggles with online competition and a shift in the market, which has seen consumers holding on to their phones for longer and opting for cheaper SIM-only contracts. The retailer, formed from the merger of Carphone Warehouse and Dixons, also took £57m of regulatory charges relating to the misselling of insurance before the deal and £22m of restructuring costs. The business also faces an extra £100m of costs this year, compared to the £30m it previously forecast, including £17m associated with the data breach in June that affected 10m customers. Revenues edged up to £4.9bn in the six months to Oct 27.
Rome warns EU budget rules must be fair after Macron gives in to ‘yellow vest’ protestors. A €10bn (£9bn) package of measures intended to quell civil unrest in France has provoked ire from Italy amid claims of double standards in how eurozone budgetary rules are applied. The two countries are set to have large budget deficits in 2019, both of which clash with finance rules under the Maastricht Treaty. This agreement requires that borrowing remains under 3% of GDP and that debt only reaches 60% of economic output. France’s deficit is set to reach 3.4% of GDP, official figures suggest, after President Emmanuel Macron promised extra money for pension payments in a bid to halt a rash of economically damaging street protests dubbed the ‘yellow vest’ movement. This is well above the previous target of 2.8% and is set to tip the French national debt above 100% of GDP. Politicians in Rome were quick to call for France to be hit with the same budgetary restrictions that have been imposed on Italy.
Rolls-Royce getting to grips with engine problems as it forecasts strong profits and cash. Rolls-Royce Holdings (RR.) has shrugged off continuing worries about the reliability of its engines by confirming it is on track to meet its full-year profits and cash targets. The FTSE 100 engineer used a trading update to say that both measures will be in the “upper half” of the forecast range. The company expects operating profit to come in at £400m and free cash flow to be £450m for the full year. The news lifted Rolls shares almost 5% in early trading to 818p. Chief executive Warren East believes free cash flow – how much money the company generates after essential spending – is the best measure of Rolls’ performance.
DNO sticks to £620m takeover bid despite Faroe Petroleum asset deal. North Sea predator DNO will keep up the chase for Faroe Petroleum (FPM) with a $780m (£620m) takeover offer after a swift management rebuffing. Norwegian oil giant DNO said it is sticking to its 152p a share bid despite Faroe’s recent deal to boost its production. The unsolicited cash offer, according to DNO, is a “rare opportunity” for shareholders to exit the “illiquid” AIM-listed oil company. DNO restated its case just one week after Faroe chief executive Graham Stewart unveiled a fresh asset swap deal with Equinor, the oil company formerly known as Statoil.
Sainsbury’s and Asda demand judicial review of competition probe timeline. Sainsbury (J) (SBRY) shareholders have been spooked after the supermarket and its £12bn merger partner Asda launched a legal challenge against the competition watchdog for refusing to give them enough time to argue their case. The supermarkets, which announced their deal at the start of May, revealed they have applied for a judicial review of the Competition and Markets Authority’s (CMA) investigation into their proposed tie-up after it denied their request for an 11 day extension over Christmas. The move has fuelled concerns that the tie-up could be rejected or the regulator could demand swathes of store disposals, which would weaken the logic of the deal. Shares in Sainsbury fell by 7.2%, or 21.4p, to 275p while Tesco’s shares inched higher.
Superdry shares crash after blaming warm weather for ‘difficult’ trading. Superdry (SDRY) shares crashed by more than a third after the retailer issued its second profit warning in less than two months on the back of warm weather that has left it unable to shift its thick jackets and sweaters. The brand blamed a “lack of innovation” for its reliance on cold weather fashion items and said that its lower sales had hit profits by around £11m in November. There would be a repeat impact this month if trading conditions did not improve, it added. The company reported a 190% lift in statutory pre-tax profit to £26.4m in the six months to Oct 27. However, stripping out one-off gains from ‘financial derivatives’, pre-tax profit fell 49% during the period to £12.9m. Sales slid 3.1% to £414m. As a result pre-tax profits are now expected in the range of £55m to £70m, a quarter lower than consensus estimates of £83m, and 40% lower than last year when Superdry made profits of £97m.
Investors breathe sigh of relief as British American Tobacco sticks to targets. British American Tobacco (BATS) will achieve its profit and sales forecasts this year, the company said, in a rare piece of good news for the struggling cigarette maker. The tobacco giant has had a torrid year, with its share price falling by nearly half amid fears that it will struggle to replace declining sales of cigarettes with next-generation vaping and heated tobacco products, which are growing in popularity. The world’s biggest cigarette maker was dealt a blow in October when it trimmed its vaping targets from £1bn in sales to £900m and warned currency movements would hit profit growth by around 7%
Shares in The Fulham Shore (FUL), the owner of the Franco Manca and The Real Greek restaurant brands, rose 17% to 11p as new openings boosted growth. The company reported that pre-tax profit jumped 35% to £1.5m, compared with £1.1m in the same period last year, while revenues climbed 20% to £33m. It is planning to increase its restaurant-opening programme for 2020. It was another day of good gains for Kier Group, which was up 3.5% to 408p, after Standard Life and Aberdeen, its largest shareholder, increased its holding to 13.3%. Last month, the construction and services group unveiled a surprise £264m rights issue in a bid to to cut debt and boost its balance sheet. The closing share price finished just shy of the discounted offer price of 409p at which the new shares are being issued.
Defence and technology group Ultra Electronics Holdings (ULE) perked up 4.1% to £13.81, lifted by news that Sparton, its US joint venture partner, is being bought by private equity firm Cerberus. In March, mid-capper Ultra’s £170m deal to buy out Sparton from the tie-up collapsed because of competition concerns. Ultra relies on Sparton to produce parts for its submarine-detecting sonobuoys.
