Royal Mail has shocked the City by warning that profits will be lower than expected after missing key cost-saving and productivity targets and suffering from a decline in the volume of letters being sent. Shares in Royal Mail (RMG) fell by almost 18% on the back of the profit warning, erasing £860 million from its market value. The company warned that annual profits will be £100 million to £150 million less than expected. It partly blamed the shortfall on a row with its staff over the closure of its final-salary pension scheme that has had a lasting impact on its productivity. A greater than expected decline in letters has also hurt the business.
Strikes across Europe, higher oil prices and staff compensation costs have triggered a profit warning at Ryanair Holdings (RYA) that sent its shares to a two-year low. The airline, led by Michael O’Leary, cut its annual profit forecast by 12% and warned of a potential further downgrade if disruption continues. The City was taken by surprise with analysts at Goodbody, the stockbroker, noting that Mr O’Leary had stuck by the company’s guidance only two weeks ago.
Tesco (TSCO) – Tesco Bank has been fined £16.4 million after a cyberattack in 2016 left its customers vulnerable to fraud. The Financial Conduct Authority said yesterday that the incident could have been avoided and that the penalty showed that it had “no tolerance” for banks that did not properly protect customers. It is the first fine that the FCA has imposed on a bank for a specific cyberincident and reflects the growing view among regulators that this area presents one of the biggest risks to the banking system.
has sacked the senior management team at House of Fraser, including the chief executive Alex Williamson, as it continues to make its mark on the struggling department stores chain. In a brief announcement to the stock exchange late yesterday afternoon, Britain’s largest sportswear retailer said: “Following the collapse of House of Fraser on August 10, 2018, and subsequent calls for an investigation into the circumstances of that collapse, the company today announces that we have dismissed the former directors and senior management of House of Fraser.”
Tesco (TSCO), Sainsbury (J) (SBRY), Morrison (Wm) Supermarkets (MRW) – More than a million new customers and sales breaking the £10 billion barrier for the first time have added up to a record year of trading at Aldi. The discount grocery chain said that sales had jumped by 16.4% to £10.2 billion in the year to December 31. This is equivalent to an extra £100 million of sales every month and is a higher growth rate than the 13.5% uplift recorded in 2016. Operating profit rose by 26% to £265.9 million. Aldi said that it was growing more than five times faster than the overall grocery market.
Standard Chartered (STAN) is facing a fine of about $1.5 billion, higher than expected, for again violating American sanctions against Iran, according to a report. Shares in the emerging markets bank fell by more than 3% after Bloomberg reported the possible size of the penalty, citing a preliminary assessment based on communications between the bank and regulators. Standard Chartered was fined $667 million in 2012 for secretly moving billions of dollars through the United States on behalf of Iranian clients and it has been under the shadow of a deferred prosecution agreement ever since.
Schroders has come out against Unilever’s plans to relocate to the Netherlands, delivering a further setback for the consumer goods group. Jessica Ground, global head of stewardship at Schroders (SDR), a top 30 shareholder with a stake of about 0.8%, said that it “understood the company’s desire for simplification, but we do not believe this is the right decision for Unilever (ULVR) shareholders”. The asset manager added: “We have previously expressed our concerns about the moves in the Netherlands towards protectionism, which undermines shareholder rights. In addition, our clients will be forced sellers of Unilever plc as a result of it exiting the FTSE UK indices.”
J Sainsbury is planning to take on Boots, Superdrug and Debenhams by launching a revamped beauty range that will be sold “department store-style”, with dedicated beauty assistants. Sainsbury (J) (SBRY) said that its new range would double in size, with up to 3,000 items, including more than 1,500 new products from brands such as Revlon, Mane ‘n Tail and Burt’s Bees. As part of its beauty makeover, initially in eight supermarkets, Sainsbury’s is also running a trial on Fragrance Shop concessions in two stores and will relaunch its own-brand Boutique cosmetic range in 300 stores and online. The 100-strong range is predominantly vegan and includes products such as long-lasting brow tattoos, bronzer bricks and highlight and contour sticks.
Theresa May’s announcement of plans to introduce an additional levy on foreign buyers of British homes sparked a sell-off among housebuilders, with Berkeley Group Holdings (The) (BKG) to the fore. Berkeley, which is particularly exposed to London, the most popular British city for overseas residential investment, fell 124p to £35.55. The government has proposed an additional stamp duty levy of between 1% and 3% for individuals and foreign-based companies buying homes in the UK. It is estimated that the additional tax would raise between £40 million and £120 million a year. Lucian Cook, head of UK residential research at Savills (SVS), said: “I suspect this will mean that the developers who have been selling to overseas buyers are likely to be a bit more flexible on pricing.” He said that the stamp duty receipts the government expected to raise were only a fraction of the receipts raised at present from the wider additional homes surcharge, and added that the government’s Help to Buy policy and domestic demand were more significant sale drivers for housebuilders. Jittery investors sent the wider sector lower as dealers wait to hear if there will be any further surprise housing policy announcements at the Conservative Party conference. Persimmon (PSN) fell 47p to £23.18, Taylor Wimpey (TW.) dipped 3½p to 168½p and Barratt Developments (BDEV) closed down 8¾p at 558¼p.
Airlines encountered turbulence after Ryanair Holdings (RYA) downgraded its earnings guidance by 12%. Ryanair tumbled 12.8% to €11.43, easyJet (EZJ) fell 92p, or 7%, to £12.22, and Wizz Air Holdings (WIZZ) landed down 227p, or 7.9%, at £26.50.
It was a day of split fortunes for retailers. Marks & Spencer Group (MKS) fell 5p to 284p after announcing that Vindi Banga, a non-executive director since 2011, would stand down in a reshuffle of board responsibilities. Analysts at Shore Capital welcomed the changes as a signal of broader streamlining and cultural change at the retailer. However, they issued a “hold” recommendation, reiterating expectations of flat earnings in the near term. Superdry (SDRY) fell to its lowest level since May 2015 amid wider uncertainty about autumn clothing sales as temperatures have only just started to cool. Its shares closed down 40p at £10.46. John Stevenson, an analyst at Peel Hunt, said: “When there are concerns around the apparel market, Superdry tends to get hit more than other stocks. Superdry’s trading performance has been pretty solid, or at least in line with the sector.” Boohoo.com (BOO) continued its ascent from last week when it reported interim results ahead of expectations. It closed up 10¼p at 244½p. Debenhams (DEB) fell to a fresh low after The Sunday Times reported that a leading credit insurer had pulled the plug on the cover it provides to the department store chain’s suppliers. The retailer’s shares closed down 4.9% at 9¼p.
Tempus – Computacenter (CCC): Buy. Computacenter consistently delivers and its expansion into the giant American IT market makes sense
Tempus – Petro Matad Ltd. (MATD): Avoid. Risky gamble on make-or-break drilling campaign
