Downbeat Amazon outlook takes gloss off record profit. Shares slip as first-quarter estimates disappoint analysts. Amazon posted another record profit last night as it beat Wall Street’s fourth-quarter forecasts but gave investors cause for concern with a disappointing outlook. The company blamed unfavourable foreign exchange rates for first-quarter sales guidance that undershot analysts’ estimates. After rising by about 3% in after-hours trading, Amazon shares dipped into the red. Amazon has been vying with Microsoft of late for the title of world’s largest public company. When the closing bell sounded on Wall Street yesterday, Amazon was valued at $840 billion and Microsoft $802 billion. Amazon said last night that it expected sales of $56 billion to $60 billion in the first quarter, below analysts’ estimates of $60.8 billion.
Conflict of interest fear over Patisserie bosses. The executive chairman and chief executive of Patisserie Holdings (CAKE) did not disclose a possible conflict of interest to investors arising from their ownership of a shop of its collapsed café chain. Luke Johnson, 56, and Paul May, 59, are landlords of the Patisserie Valerie’s Tunbridge Wells store, which is leased to the business for £45,000 a year. They bought the building in 2014, three months before the café opened, through a vehicle called Tunbridge Freehold Ltd, which they jointly own. The site is one of the 122 Patisserie Valerie cafés continuing to trade while KPMG, the administrators to Patisserie Holdings, attempt to sell the business. KPMG has shut 71 outlets.
Metro Bank changes its story over £900m error. Metro Bank (MTRO) came under new selling pressure yesterday after changing its account of the discovery of a £900 million accounting misstatement that led its share price to crash last week. Shares in the fast-growing challenger bank fell 11% to £10.87 amid speculation that it was scrambling to raise fresh capital and coming under pressure to strengthen its board. Before last week’s bombshell, they were trading at £22 and touched a high of more than £40 less than a year ago. The bank, which has more than 1.5 million customers, admitted the concerns that it could be misreporting its capital strength originated from its regulator, the Bank of England’s Prudential Regulation Authority.
Big four face huge bill as Asda staff win landmark ruling on equal pay. Asda has lost a key battle in its fight against an equal pay claim by thousands of shopworkers — mostly women — who want to be paid the same as warehouse workers —mostly men. The Court of Appeal ruled yesterday that the shopworkers could compare their jobs and pay with higher paid employees in distribution centres, reaffirming decisions by lower courts and dismissing a challenge by the grocer. Although leave to appeal was denied, Asda plans to petition the Supreme Court directly to contest the ruling. Asda had argued that different departments run the shops and the distribution centres and there were different methods for setting pay, so no comparison was possible. Asda serves about 18 million people a week with a staff of 145,000. The ruling by Lord Justice Underhill means workers have moved one step closer to winning a battle that could have significant and costly ramifications for the supermarket industry. Leigh Day, a law firm co-ordinating claims against Asda, as well as Tesco (TSCO), Morrison (Wm) Supermarkets (MRW) andSainsbury (J) (SBRY) said that if the shopworkers were successful it could cost the sector £8 billion. Other industries could also find themselves subject to similar claims.
Unilever’s new chief warns of headwinds that will hit growth. Less than a month into his role as chief executive of Unilever (ULVR), Alan Jope has warned that sales this year could be hit by higher commodity costs, currency fluctuations and challenging markets. Mr Jope, 54, who took over from Paul Polman, said underlying sales growth in 2019 would be somewhere in the 3 to 4% range — at the lower end of its 3 to 5% “multi-year target” — because of “headwinds we are facing that are not going to clear up overnight”. The new Unilever boss made the forecast as he reported the group’s full-year results which showed that sales growth had slowed more than expected in the fourth quarter to 2.9%, below expectations for a 3.5% uplift, hurt in particular by a hyperinflationary market in Argentina.
Cheers as Diageo (DGE) gives £660m back to investors. The drinks giant behind Johnnie Walker Scotch whisky and Guinness stout is to return a further £660 million to shareholders via a share buyback programme on the back of forecast-beating half-year results. Diageo, which also owns brands including Tanqueray gin and Smirnoff vodka, said that the latest cash return would be on top of the £2.34 billion buyback programme already declared for the year to the end of June, lifting the total return to £3 billion. Ivan Menezes, 59, chief executive, said that the buyback would be funded from the £1.3 billion of cash generated in the first half, but rejected any suggestion that it could restrain its growth ambitions. “We have the capacity with our balance sheet to make acquisitions of a decent size whenever we want so I don’t see that as a constraint.”
Britain’s biggest telecoms company is still planning to use Huawei as a supplier for its 5G network despite the security concerns over the Chinese telecoms company. Gavin Patterson, delivering his final set of results on his last day as BT’s chief executive, said that the company would not prejudge the results of a government review into the future of the country’s networks and will continue to work with Huawei until there is a change in the situation. “Huawei has been a good supplier to us for ten years,” Mr Patterson said. “We continue to believe they will be going forward, until we discover or see something otherwise.” BT Group (BT.A) generated annual revenues of £23.7 billion last year and employs more than 100,000 people. Its businesses include the mobile operator EE, BT Sports television channels and the Openreach broadband network. Security worries around Huawei increased this week after US prosecutors filed a series of criminal charges against it, including the theft of trade secrets, bank and wire fraud.
Shell delivers on buyback promise after profits double. Resurgent oil and gas prices helped Royal Dutch Shell ‘B’ (RDSB) to double its profit to almost $24 billion last year, the highest since 2012. Ben van Beurden, chief executive of the Anglo-Dutch energy group, said it was “delivering on pretty big promises” to investors as it embarked on the latest tranche of its $25 billion share buyback. Mr van Beurden, 60, also became the latest voice in big business to warn against a no-deal Brexit, saying that it would be “a very bad outcome”.
AO World founder John Roberts spins back into top job. The founder of AO World (AO.) has resumed his position as chief executive after Steve Caunce decided to step down with immediate effect. In a surprise move, John Roberts, 45, said he was “re-energised” and looking forward to running the white goods and electricals online retailer, reclaiming a role that he only handed over to Mr Caunce two years ago. Mr Caunce, 50, said that he simply wanted a different work-life balance after 13 years at AO. He will still remain involved in the business on a part-time basis as an adviser to Mr Roberts and the board for the “foreseeable future”.
US rival gatecrashes Apollo’s £3.3bn takeover bid for RPC. RPC Group (RPC) is at the centre of a £3.3 billion takeover battle after Berry Global, its American peer, said that it was poised to challenge its former owner Apollo Global Management and make a rival bid. Shares in RPC climbed 29p to close at 795p — above Apollo’s offer of 782p — after Berry revealed that it was considering a cash bid for the FTSE 250 business and wanted to conduct due diligence. RPC said that it would engage with its new suitor “in order to advance discussions in the interests of delivering best value to shareholders”. It comes after Apollo, the American private equity firm that previously owned Berry with Graham Partners, lodged a firm offer for RPC last week that it declared “final”, meaning it cannot raise its bid under UK takeover rules.
Morgan Stanley took the wind out of Standard Life Aberdeen (SLA) sails yesterday as a downgrade from analysts at the bank sent the fund manager’s shares back to where they started the year. The rebound in markets last month has boosted shares in the fund management sector, including Standard Life Aberdeen. However, Morgan Stanley said recent growth in the company’s assets was coming largely from low-margin money-market products, while outflows had continued to accelerate for the higher-margin multi-asset offerings. Limited visibility on when fund flows and performance will improve, combined with uncertainty around the potential disposal of listed stakes, led the bank to forecast Standard Life Aberdeen would miss 2019 and 2020 consensus expectations by about 20%. The downgrade from “overweight” to “equal weight” added fuel to bearish investors who have questioned the benefits of the merger between Standard Life and Aberdeen Asset Management, which completed in August 2017.
The long-awaited approval by the US Food and Drug Administration for a generic version of GlaxoSmithKline (GSK) bestselling lung disease treatment sent shares in the pharmaceutical company down 3½p to £14.77¼. Glaxosmithkline has generated about$100 billion in revenue from Advair, its blockbuster asthma treatment, since launching it in 2001. Consort Medical (CSRT), one of the companies behind the new generic version of the drug, shot up 100p, or 12.1%, to 930p. Consort has teamed up with Mylan, the Dutch pharmaceutical company, to produce the new inhaler, called Wixela.
Miners were supported by the Federal Reserve’s indication on Wednesday night that it would not rush to raise interest rates, as well as a weaker dollar. Antofagasta (ANTO) added 37¼p to 869¾p; Fresnillo (FRES) rose 32¼p to £10.05; and Evraz (EVR) gained 11½p to 498¼p. Ferrexpo (FXPO) surged 27¼p to 258½p after Bank of America Merrill Lynch and Deutsche Bank upgraded the iron ore pellet producer to “buy”, following the mining disaster at Vale’s Córrego do Feijão iron ore complex in Brazil last week, which has increased iron ore price forecasts because of the loss of production.
The water utilities companies Severn Trent (SVT) and United Utilities Group (UU.) were boosted by the decision of Ofwat, the energy regulator, to approve their business plans for the next five years. Severn Trent added 49½p to £19.98½; United Utilities rose 11p to 830¾p.
Tempus – Halma (HLMA): Long-term hold. Consistent and sustainable growth in revenues, profits and dividend, offset only by its premium valuation
Tempus – Inchcape (INCH): Buy. Highly cash-generative model undervalued but works
