Services sector shrinks amid political uncertainty. Growth stalled in the first three months of 2019 as the powerhouse services sector contracted in March for the first time in two-and-a-half years, according to a closely watched private sector activity survey. The purchasing managers’ index for the services sector paints a dismal picture, with the reading for last month dropping from 51.3 to 48.9 in February, below forecasts for 50.9. Anything under 50 indicates contraction. Services accounts for four fifths of the economy but the PMI data excludes about half of that.
Stagecoach picks up speed as ministers dither. The signal failure at the heart of government over the future of the railways has turned into good news for Stagecoach Group (SGC). The company, once the largest train operator in the country, has been one of the big losers in the rail industry in recent years. It lost its contract to run South West Trains, a franchise it had operated since privatisation in the 1990s, and its Virgin Trains East Coast joint venture to run services between London Kings Cross and Edinburgh failed. Its portfolio has been slimmed down to the west coast main line between London Euston, Birmingham, northwest England and Glasgow, which it runs in a separate joint venture with Virgin Trains, and East Midlands Trains, which runs from London St Pancras.
Superdry board resigns after ‘Dunkerton putsch’. Founder scores narrow victory in battle for control of retailer. Directors of Superdry (SDRY) resigned en masse yesterday after Julian Dunkerton narrowly won his campaign to be re-elected to the board of the fashion retailer he co-founded. The entrepreneur, 54, secured 51.75% of shareholders’ votes after a bitter seven-month campaign marked by an increasingly acrimonious war of words between the parties. The appointment of Peter Williams, 65, former chairman of Boohoo, to the board of Superdry was backed by a similar margin and paved the way for what Pirc, the shareholder advisory group, described as the “Dunkerton putsch”.
Wizz Air rises above turbulence. The eastern European budget airline, which is listed in London, said that trading in the final quarter of the year to March 31 had been in line with expectations amid robust demand. Shares of Wizz Air Holdings (WIZZ) rose by 137p to £30.17, valuing it at about £2.2 billion, after it said that net profit would be at the upper half of its previous guidance range of between €270 million and €300 million. It added that the new financial year had started well. Although it serves British airports including Luton, Gatwick and Glasgow, Wizz Air relies much less heavily than Easyjet on the UK, enabling it to avoid much of the Brexit softness that has hit its bigger rival. It said its load factors in March had increased from 91.5% to 94.1% year-on-year.
Diageo (DGE) gives British staff 52 weeks parental leave. Until now, one of the best perks of working for the world’s biggest spirits company was a “product allowance” — free samples of famous brands such as Johnnie Walker Scotch whisky, Smirnoff vodka and Tanqueray gin. From today, however, Diageo’s 4,500 employees across the UK, including 3,100 in Scotland, will be raising a glass to a new policy, open to men and women, granting them 52 weeks of parental leave, the first 26 on full pay. The company said that all parents would be eligible for the same fully paid 26 weeks, retaining benefits and bonuses “regardless of gender, sexual orientation or whether they become parents biologically, via surrogacy or adopt”.
Offer for Bonmarché puts store jobs at risk. The billionaire owner of Edinburgh Woollen Mill has tabled a £6 million takeover offer for Bonmarche Holdings (BON), potentially putting hundreds of jobs at risk at the women’s fashion retailer. Philip Day, 53, yesterday pounced on the chain, snapping up a 52.4% stake and making a mandatory offer for the shares that he does not own. At 11.445p a share, the offer is well below Monday’s closing price of 18p and values Bonmarché at £5.7 million. Mr Day put staff on notice that there would be a “material reduction in headcount across Bonmarché”. He plans to conduct a store-by-store review of the group’s estate, shutting outlets that do not make what he deems to be an acceptable return. Taking the company private would generate additional cost savings at its central office, Spectre Holdings, Mr Day’s Dubai-based bid vehicle, said.
Fears grow over merger ‘distraction’ as Asda leapfrogs rival Sainsbury (J) (SBRY). Asda has overtaken J Sainsbury to become Britain’s second biggest supermarket by market share, in a sign that the troubled merger between the two companies may be distracting the management of the FTSE 100 grocer. Asda, which is owned by Walmart, the giant American retailer, achieved a 0.1% rise in sales that took its share of the market to 15.4% in the 12 weeks to March 24, according to data from Kantar. In contrast, Sainsbury’s suffered a 1.8% fall in sales, the worst performance of any of the grocers tracked by the research group. That pushed its market share down to 15.3% and put it in third place.
Singapore slings fresh spanner in Rolls’ works. The pressure on Rolls-Royce Holdings (RR.) over its troubled Trent engines rose yesterday when Singapore Airlines revealed that it had grounded two Boeing 787-10 jets. The carrier said that “routine inspections” on its fleet had found “premature deterioration” in Trent 1000 Ten turbine blades, forcing it to remove two aircraft from service while it replaced the affected engines. The announcement was a fresh setback for Rolls. A problem with parts wearing down more quickly than expected in Trent 1000 engines powering about 300 Boeing 787 Dreamliner aircraft has been exacerbated by uncertainty — fuelled by yesterday’s announcement — over the reliability of the latest version of the motor, the Trent 1000 Ten.
Dividends were illegal, claims Provident. Provident Financial (PFG) suggested yesterday that its predator may have paid dividends illegally as their war of words intensified still further. Non-Standard Finance (NSF) declared that more than 50% of the £1.3 billion sub-prime lending group’s shareholders had formally accepted its offer, but that was overshadowed by its target’s suggestions that it had breached the Companies Act when it paid dividends in 2016 and 2018. Advisers close to Non-Standard Finance dismissed the accusations as a desperate distraction, while Provident insisted that its concerns deserved a full response because they could have an impact on the future value of shares. Analysts said that the allegations, if true, might require Non-Standard Finance shareholders to repay the money.
An analyst downgrade was a bitter pill for AstraZeneca (AZN) to swallow yesterday, but in the event a weaker pound provided the spoonful of sugar that helped the medicine go down. UBS advised its clients to sell them after the company had closed a deal for access to a potentially transformative cancer drug. That was all well and good: what the analysts didn’t like was the $3.5 billion equity-raising that went with it. UBS said that the equity-raising, carried out in part to fund the deal, was “a reflection of ongoing limited cash generation in the near term and a sign of slow margin recovery”. They liked the acquisition, but said that the fundraising, relative to the upfront cost of $675 million, suggested that Astrazeneca’s estimates of underlying cash generation of the business may not be enough to pay a $1.6 billion bond due in 2020. Also that the company’s high valuation also did not take into account the level of competition in cancer treatment, UBS warned. Alongside its “sell” note, it cut its 12-month price target for the stock by 500p to £54.
Financial companies with a significant presence in Asia were buoyed by the positive economic data from China. Standard Chartered (STAN) closed up 21p 632½p; Prudential (PRU) rose 48½p to £16.06.
Fevertree Drinks (FEVR) edged up 20p to £30.30 after Bank of America Merrill Lynch gave it a “buy” rating and a £42.90 target price in its first report on the tonic water maker. “Essentially, Fevertree is rather unique and while we understand that valuation may put off some investors, we think it should not deter those with long-term horizons,” its analysts said. They expect compound annual revenues to grow by 25% in the next five years as sales in America and Europe offset a moderation in Britain.
Kier Group (KIE) closed down 15¾p at 344½p after Jefferies, covering the construction and maintenance company for the first time, gave it a “hold” rating, citing limited cash generation. The company, whose share price has fallen by 11.7% since the start of the year, still has its supporters, though. A filing yesterday showed Woodford Investment Management had increased its stake from 16.2% to 17.1%, becoming Kier’s largest shareholder.
Hostelworld Group (HSW) rose 4½p to 187p after the online booking platform reported 4 per cent growth in bookings under its own brand and full-year results in line with expectations. Analysts were positive about the group’s investment stategy, announced in November, in which it plans to invest more in its main platform and to try to make good use of its data.
