The United States is poised to cut tariffs on Chinese imports and cancel a new round of levies after reaching “a deal in principle” to resolve the 17-month trade war with Beijing. Last night President Trump held a meeting with his senior trade advisers and a written agreement is expected shortly. Mr Trump tweeted yesterday that America was “getting VERY close to a BIG DEAL with China”, adding: “They want it, and so do we!” Wall Street hit new highs as optimism grew that a phase one trade deal would be signed by the end of the year.
Dixons Carphone (DC.) has insisted its recovery is on track despite a sharp fall in mobile phone sales dragging the retailer’s profits down by 60%. The company yesterday reported a 10% fall in like-for-like mobile phone sales for the half-year to October 26, pushing the division to a £49 million loss on an underlying basis. As a result of the mobile losses, underlying profits for Dixons Carphone fell from £60 million in same period last year to £24 million. However, Dixons Carphone claimed that it had been a “trough year” for mobile losses and that the division will break even by 2022. It kept its guidance for a £90 million full-year loss for the mobile business and stuck to its forecast of a 30% drop in group adjusted pre-tax profit to about £210 million.
Hopes of an imminent recovery at Superdry (SDRY) were knocked yesterday after the retailer posted another heavy fall in sales and the group sank to a loss on the back of an accounting error. As it reported a £4.2 million loss in its half-year results yesterday, Mr Dunkerton, 54, said that the company was “only eight months into a process that will take two to three years”. The loss, for the six months to October 26, was a sharp fall on the £26.4 million profits that it recorded a year ago.
Costain Group (COST) has issued its second profit warning in six months because of increasing costs from a delayed road building contract in south Wales. Yesterday Costain said that after a dispute over the cost of changes to the design of the A465 Heads of the Valleys contract with the Welsh government, an arbitrator has split responsibility. It partly reverses an earlier adjudication in favour of the company. Costain is in talks with the Welsh government in an attempt to reach a financial settlement but yesterday said that its annual underlying operating profit was expected to be between £17 million and £19 million. That is down from the £38 million to £42 million range issued in June when Costain also issued a profit warning. It expects its cash position to be hit by about £40 million.
M&C Saatchi (SAA) is the subject of a preliminary investigation by the City watchdog over the accounting crisis that has reduced its share price by 70% and precipitated a board revolt. The Financial Conduct Authority has asked the advertising agency for information into the accounting irregularities that came to light in August. The request could be the prelude to a formal investigation. The inquiry will put further pressure on the remaining boardroom directors at the London-based network of advertising and public relations agencies.
The maker of Imperial Leather soap has pushed out its boss after 13 years as it struggles to revive its fortunes. PZ Cussons (PZC) said that Alex Kanellis, 54, was to “retire” as chief executive at the end of January with no successor in place and an £800,000 exit deal, including a payment at the advice of its lawyers to settle “any potential claims”. His departure is understood to have come at the suggestion of the board, whose chairwoman, Caroline Silver, said it was “ready to move on to the next chapter under new leadership”. Yesterday it warned that continued “challenging market conditions” had led to a decline in its revenues and operating profits in the six months to the end of November and were likely to lead to “modestly” lower full-year profits. It had previously expected annual profits in line with last year.
Purplebricks Group (PURP) will test a new pricing model in Britain next year as it seeks to grow market share at home after an embarrassing retreat from its costly expansion overseas. The online estate agent, which was founded in 2012, has disrupted the industry with a hybrid concept that involves no physical branches and charges a fixed fee of £999, or £1,499 in London, regardless of whether a home is sold. The agency said it would start offering a wider range of prices from January, including paying part of the fee up front and part on completion. It increased its fixed fee by £100 per home in October. Vic Darvey, 47, chief executive, said he believed that the new pricing would help Purplebricks to increase its share “in a market that is clearly declining, where consumers are less confident about selling their homes or even putting their homes on the market”.
Ocado Group (OCDO) has said that Marks & Spencer Group (MKS) can now substitute the majority of Waitrose’s groceries at the same price or cheaper with its switch in food partners due next year. The online grocer set up a £750 million joint venture this year in a move that calls an end to its two-decade relationship with Waitrose and hands Marks & Spencer a 50% share in Ocado’s retail business. Duncan Tatton-Brown, Ocado’s chief financial officer, said that Ocado Retail had completed a range review and Marks & Spencer had either developed product or changed pack size to fill any gaps in its range. “Marks & Spencer has a lot more products than Waitrose so customers should find matching products of the existing range at the same or cheaper price and a few things they didn’t know they needed”, Mr Tatton-Brown, 54, said.
George Soros has made a £15.5 million bet against the owner of the Daily Mail, it emerged last night. Mr Soros has taken a significant short position in Daily Mail and General Trust A (Non.V) (DMGT). Mr Soros, 89, who oversaw a $28 billion hedge fund at the height of his power, has long sparred with the Mail over his position on Brexit. He has donated to Best for Britain, a campaign group that seeks to keep the country in the European Union, leading to calls from the newspaper for him to “butt out” and keep his “tainted money”. As well as the Daily Mail and Mail on Sunday, DMGT owns the Metro and i newspapers. The £1.7 billion group is chaired by Lord Rothermere, who owns a majority of the voting rights and has a 36% economic interest in the company. SFM UK Management, the London outpost of New York-based Soros Fund Management, has taken a net short position in DMGT of 0.91%, a Financial Conduct Authority document, published last night, showed.
John Laing Group (JLG) has warned that the pound’s rise on currency markets will cut £50 million off the value of its portfolio of trains, roads and renewable energy projects. In a gloomy trading update, it said falling power prices and macroeconomic jitters had carved a further £47 million from its collection of greenfield investments. As a result, net asset value would be “marginally below market expectations”, John Laing admitted.
Balfour Beatty (BBY) raised annual profit and cash forecasts yesterday after offloading overseas infrastructure assets. In a trading update for the year to December 11, the construction group said it expects annual profit from operations to be broadly level with last year’s £205 million, ahead of previous expectations of £200 million. Balfour Beatty said it expected cash to be about £310 million, ahead of previous guidance of £280 million to £300 million, and for revenue to be about 5% higher than last year’s £7.8 billion. Investors welcomed the update ahead of its full-year results in March.
Serco Group (SRP) will give “serious consideration” to paying its first dividend in six years after raising its forecasts. Serco lifted City expectations after winning several large contracts, predicting a revenue increase of 14% to £3.2 billion in the year to February. Executives expect to post organic revenue growth of 7% after particularly strong trading in the second half. Underlying profits before tax, excluding any one-off costs, is set to grow by almost a third this year to £120 million and continue to expand in 2020. The acquisition of an American naval systems unit from Alion, the engineering firm, has handed Serco a foothold in the growing US navy supplies market. Rupert Soames, chief executive, said there was “still a way to go”.
The boss of Fuller Smith & Turner (FSTA) has called on the new government to overhaul business rates and rein in wage inflation to ease the pressure on pubs. Simon Emeny, the pub company’s chief executive, also called for an immigration system that allowed the industry to continue recruiting the employees it needs. In the half year to September 28, rising rates and wage costs reduced the operating margin on its managed pubs and hotels division from 15.1% to 14.1%, with operating profits down 2% to £22.1 million, despite like-for-like sales growth of 2.7%. Mr Emeny, 54, said that industry-wide operating costs had risen by 6%: “We have been anticipating and flagging these cost pressures for the last two years and the impact can now quite clearly be seen.”
Pure Gym Group (WI) (PGYM) is buying Fitness World Group, a company with 240 gyms across Denmark, Switzerland and Poland with a total of 600,000 members. The combined business will have 1.7 million members and almost 500 gyms with revenues of £426 million. The sellers are FSN Capital, a Norwegian private equity firm, and Kirkbi, the investment vehicle of the family that controls the Lego toy empire. Humphrey Cobbold, Pure Gym’s chief executive, described yesterday’s acquisition as a “transformational deal” that would accelerate its international expansion, which includes plans for trial sites in the US.
JD Sports Fashion (JD.) stumbled earlier in the week when it was revealed that its largest shareholder had sold a big chunk of its holding. Pentland Group, which is run by the Rubin family, the biggest tax-payers in the UK, pocketed £177.6 million as it offloaded a 2.5% stake, although it still controls 51% of the stock. The sale spooked the market and sent JD’s shares tumbling by almost 10%, but analysts at Berenberg reckon that fall has created an “attractive buying opportunity”. “With no changes to JD’s fundamentals, we believe Wednesday’s negative reaction to the Pentland placing is overdone,” said Graham Renwick, a retail analyst at the bank, and his team. Mr Renwick poured cold water over concerns that the company had run its course, while dismissing suggestions that it was “just another Foot Locker” — an American peer that trades at a massive discount compared with JD. “We think that JD deserves to trade at a healthy premium to Foot Locker. Its greater diversification across product, brand and geography makes it a better-positioned business that is less volatile, faster growing and fundamentally more profitable.” In particular, Mr Renwick is a fan of JD Sports’ move into the US with the acquisition of Finish Line last summer, which he argues offers a “compelling growth opportunity”. The analysts remain “enthusiastic buyers” and they increased their price target to 860p after inching up their profit forecasts for the next couple of years.
A full-year trading update from SThree (STHR) left investors disappointed as it blamed Brexit for a slump in UK revenues. Net fees in Britain fell 9% year-on-year, while the fourth quarter was particularly bad for the group as a whole, with fee growth of only 1%. That was below expectations of about 3% and well shy of the 9% it recorded in each of the first two quarters.
made a solid start to life as a listed company. Shares in the business, which provides a range of services to fund managers and institutional investors, started trading on Aim yesterday. They were floated at 57p ahead of the initial public offering, but closed 2p higher on their debut. The IPO valued MJ Hudson at just shy of £100 million and the company raised £29.3 million of new money which it will use to expand the business in the UK, Europe and the US. Dankse Bank, the largest bank in Denmark, now owns 5.1% of the stock, while Canaccord Genuity, which had backed the company before, increased its holding to 16.7%. Matthew Hudson, the founder and chief executive, chose not to cash in any of his shares, although several employees did, making a combined £2.1 million. Mr Hudson and his wife, Katherine, still own a 27.9% stake in the business he set up in 2010 and which had more than 750 clients.
Tempus – Relx plc (REL): Hold. Little to suggest that its reliably predictable earnings increases are likely to end anytime soon
Tempus – Babcock International Group (BAB): Buy. Undervalued, with an improving balance sheet and plenty of prospects
