Balfour Beatty shares rise as it ends year on positive note. Balfour Beatty (BBY) is close to the successful end of a four-year turnaround and says that its profit margins are back to industry norms, that the business is performing better than expected and that it has more cash in the bank than hoped. An end-of-year trading update from Britain’s largest construction company sent its shares up by 11¾p to 257¾p in early trading today, a rise of more than 4.7%. That helped to claw back a 12% slump in the stock this month after the shock rights issue fundraising by its smaller rival Kier, which was accompanied by a warning that lending banks had slapped a moratorium on financing the construction industry.
Express merger is good news for profits at Mirror publisher Reach. The owner of the Mirror newspapers said that annual profits would top forecasts after its takeover of the Express titles from the publishing tycoon Richard Desmond. Reach Plc (RCH), which until recently called itself Trinity Mirror, said that the cost-cutting efforts involved in merging two news operations with diametrically opposed political views were ahead of schedule. The national newspaper advertising market had also proved to be more resilient than anticipated and advertisers were turning to “trusted brands”, according to Simon Fox, Reach chief executive.
High street takes fright at Christmas slowdown. Mike Ashley warns that trading is ‘unbelievably bad’. Fears are growing that Britain’s retail industry is on course for a miserable Christmas that could trigger a slew of high street collapses. Twelve days before Christmas Mike Ashley, the founder of , the country’s biggest sportswear retailer, said that last month had been “unbelievably bad”. He said no retailer could have budgeted for just how poor trading was, adding that it would be hard for most to catch up lost trade. “Retailers cannot take that kind of November,” Mr Ashley said. “It will literally smash them to pieces.” His remarks came on the same day that Bonmarche Holdings (BON) lost almost half its stock market value after it issued a profit warning, for which it blamed poor trading, heavy discounting and Brexit uncertainty. Helen Connolly, its chief executive, said that the deterioration in trading was “unprecedented” and “significantly worse even than during the recession of 2008-09”. Sports Direct and Bonmarché are the latest retailers to warn about tough conditions in the run up to Christmas. Superdry (SDRY) said this week that an “unseasonably warm” November had affected sales of its jackets as it issued its second profit warning in less than two months. Debenhams (DEB) warned about it profits three times before reporting its biggest statutory loss in 240 years in October. McColl’s Retail Group (MCLS), the convenience stores chain, has issued two profits warnings in the past six months, while Associated British Foods (ABF) – Primark, which typically outperforms most retailers on the high street, said that its like-for-like sales were “just positive” in September and October but had turned negative in November. “If Primark say it’s bad, then you know it’s bad,” Mr Ashley said as he presented Sports Direct’s first-half results to the City yesterday.
G4S ready to cash in with £2bn collections unit float. G4S (GFS) has taken the first steps to unlocking what it regards as the unappreciated value of its cash collections business by demerging the unit with a market value of up to £2 billion. The security services company has begun a review that could result in it spinning out its smaller cash-handling operation, probably with its own stock market listing, by this time next year. The decision comes after a poor showing by G4S shares in recent months. The stock is trading at half the level it was in the summer of last year and is down by a third from its peak this year to date. The shares closed up 12½p at 195¾p yesterday.
Ambitious Purplebricks dives deeper into the red. Losses at Purplebricks Group (PURP) more than doubled in its first half as the online estate agency poured its cash into increasing its market share. Despite a 75% surge in revenue to £70.1 million in the six months to the end of October, the agency unveiled an annual operating loss of £25.6 million, sharply up from a £11.4 million loss the previous year. Its profitable British business was offset by challenges in overseas markets. The agency reported a £10.2 million loss in Australia, where the company said that it had suffered from difficult market conditions and operational issues. Operating losses also widened to £20.5 million in the United States, which it entered last year, in part because of spending on marketing and administrative costs.
Watchdog puts off verdict on Sainsbury’s/Asda tie-up. The Competition and Markets Authority is delaying publishing its initial findings on the merger of Sainsbury (J) (SBRY) and Asda from early next month to early February. The regulator reported the change to the merger inquiry timetable a day after it emerged that the grocers were seeking a judicial review of its decision to refuse their request for an 11-day extension. They had asked for an extension over the Christmas period so that they could “respond to a large amount of material recently provided to us”. The watchdog said that the change to the timetable was unrelated to the legal action under way and that its final statutory deadline to make a ruling still remained March 5. The delayed publication of the provisional findings also does not help Sainsbury’s and Asda, which face December deadlines for their submissions and want more time to respond to the CMA.
Tui in cruise control as it brushes off holiday headwinds. Investors in TUI AG Reg Shs (DI) (TUI) breathed a sigh of relief yesterday when the travel company said that it had largely avoided the turbulence hurting Thomas Cook and was maintaining its growth targets. Shares in the Anglo-German company rose by 51p to £11.90 after Fritz Joussen, its chief executive, claimed that it had been “more or less immune” to the trends that had hit some of its rivals. It reported a 10.9% increase in underlying earnings before currency translation to €1.22 billion in the year to September 30, meeting its target of achieving double-digit growth, and maintained its guidance for further double-digit growth in the coming year.
Debenhams is refusing my money, complains Ashley. Mike Ashley launched an extraordinary attack on Debenhams (DEB) yesterday for refusing his offer of a £40 million loan, even though the department stores group “was going to run themselves out of money”. The billionaire founder of Sports Direct — which is the largest shareholder in Debenhams, with just under 30 per cent — said that he was “very cross” that the chain had “lost £150 million of Sports Direct’s money” after a steady decline in its share price. Mr Ashley claimed that the Debenhams board, chaired by Sir Ian Cheshire, not only had rejected his help but also his repeated pleas to cut the dividend to conserve cash as “things are not going to get any easier [on the high street]”. He said: “There’s no need for that business to fail and wipe out shareholder value — I find it ‘blow-your-brains-out’ stuff. The management can save Debenhams, but they won’t. I really want to help them, but they don’t want our help.”
‘Fantastic’ House of Fraser dents Sports Direct profits. claimed yesterday that its purchase of House of Fraser was a “fantastic opportunity”, even though the department stores chain had lost £31.5 million in the first 11 weeks of its ownership. The sportswear group said that the losses were a result of significant disruption that had followed its purchase, with House of Fraser’s website and warehouse out of commission for several weeks. Sports Direct said that it had had to pay some suppliers in advance to convince them to provide stock for 50 stores and had injected £70 million of working capital into the supply chain. Since the early difficult days, however, it said that it had begun to make headway with a recovery plan and that it hoped House of Fraser would break even next year.
Bonmarché floored by a ‘Brexit slump’. Brexit has been blamed for a slump in trading at Bonmarche Holdings (BON) that the troubled fashion retailer described as “significantly” more severe than the recession after the financial crisis. The company lost as much as half its stock market value at one point yesterday after warning that it could tumble into the red in its current financial year. In a bleak trading update that came only three weeks after it had reported interim profits of £3.3 million, Bonmarché said that sales over the Black Friday weekend had been “extremely poor”. Despite offering extensive discounts, trading had not recovered since. It now expects to suffer a loss of as much as £4 million in the 12 months to the end of March, compared with previous forecasts for a £5.5 million profit. “The current trading conditions are unprecedented in our experience and are significantly worse even than during the recession of 2008 and 2009,” Helen Connolly, chief executive, said.
Online boom set to deliver over Christmas, says Ocado. Ocado Group (OCDO) said yesterday that it was looking forward to its best ever Christmas, despite uncertain consumer sentiment and a turbulent political and economic landscape. The online retailer, which sells Waitrose and Morrisons groceries, expressed optimism for the next few weeks as it reported a “good finish to the year”, with its retail revenue increasing by 12% to £390.7 million in the 13 weeks to December 3. This was driven by a 13.1% increase in average orders per week to 320,000. Ocado’s average order size dipped, however, by 1% to £104.91 during the fourth quarter as more people shopped more often for fewer items.
Nigeria sues Shell and Eni over 2011 ‘oil bribes’. Nigeria is suing Royal Dutch Shell ‘B’ (RDSB) and Eni for $1.1 billion that it claims it missed out on as a result of alleged corruption in a 2011 oil deal. The country said that it had lodged the claim in the High Court in London against the companies to recoup payments they made for an offshore oil exploration block. It alleges that the oil majors knew that much of the $1.3 billion they had paid to the Nigerian government to secure ownership of the OPL 245 licence ultimately would be paid in bribes. The allegations are already the subject of criminal proceedings in Italy and Nigeria. Both Shell and Eni deny any wrongdoing. Shell is an Anglo-Dutch group that employs about 80,000 people in more than 70 countries and generated net profits of $12 billion last year, primarily from producing and selling oil and gas. Eni, of Italy, also has global oil and gas operations. It reported net profits of €2.4 billion last year and employs about 33,000 people.
Serco provides a source of optimism. Serco Group (SRP) proved yesterday that there is still life left in the outsourcing sector when it predicted both revenue and profit growth for this year and next. The forecast of a 30% to 40% rise in underlying profit this year was enough to lift its shares by 10%, making the company the second largest riser on the FTSE 250 index. The outsourcing sector has been under an almost constant spotlight since Carillion, the contracting and construction giant, collapsed at the start of the year. Shares in Kier, the infrastructure specialist, have been under pressure since it announced a fundraising rights issue last month, while those of Interserve tumbled after it revealed last week that it was seeking a potential rescue deal.
Deals keep on coming for growing Bunzl. The ever-acquisitive Bunzl (BNZL) said yesterday that it expects its underlying revenues to grow by up to 9% this year as it confirmed yet another deal, this one to buy a Danish food packaging group. The FTSE 100 distribution group grew out of the haberdashery and paper sector to become a British champion in the global business of distributing till rolls, plastic bags, paper cups and other workplace consumables. It has spent hundreds of millions of pounds a year buying up smaller rivals, typically family-owned operations. It employs 16,000 people around the world sourcing and delivering goods and is valued by the stock market at more than £8 billion.
Less than five years after its stock market flotation, Game Digital (GMD) is planning to seek demotion to the junior alternative investment market. The company said that it was seeking shareholder agreement to cancel its listings on the London stock exchange’s main market and the premium segment of the official list and would be applying for admission to Aim. The board said it believed that Aim was “a more appropriate platform to enable Game to deliver value more effectively to all of its stakeholders, including shareholders”. To pass, the resolution must be approved by 75% of those voting.
PZ Cussons (PZC) was on a slippery slope yesterday after the maker of Imperial Leather soap and Carex handwash warned of weaker consumer confidence across its main markets. The consumer products company said in a trading update that it expected consumers to remain “under pressure” in all of its markets in Europe, Asia and Africa. In a first-half update ahead of interim results in January, the Manchester-based company said that Europe and Asia had recorded good performances on the back of new product launches, but it warned that trading in Africa had been challenging due to a weakened economy and currency in Nigeria, its single largest market. That outweighed a particularly good performance from its St Tropez fake tan brand in the United States.
A Barclays downgrade for Ultra Electronics Holdings (ULE) overshadowed a trading update from the defence technology group in which it said that full-year trading remained in line with expectations. The bank analysed Ultra’s performance and accounts between 2013 and 2017 and concluded that its underlying profits included low-quality items and excluded significant costs. It also noted that its acquisitions track record had disappointed, with impairment losses and a lack of evidence that many earnout targets had been met. Barclays cut its rating to “underweight” from “equal weight” with an £11.20 target price. The shares closed down 84p, or 6.1%, at £12.97.
In an early Christmas present for senior employees of Standard Life Aberdeen (SLA), who have seen the value of their shares fall by 44% since the start of the year, Martin Gilbert and Keith Skeoch, co-chief executives of the company, helped to boost the share price by 4.7% after each spent more than £115,000 buying 50,000 shares a head. The shares rose almost 11p to 244p.
Spire Healthcare Group (SPI) fell sharply after JP Morgan cut its target price for the private hospitals group from 256p to 146p. Analysts warned that policy progress at the NHS was unlikely while the government was distracted by Brexit. Fewer referrals from the NHS has hampered earnings growth. “Overall, we find it difficult to construct a positive near-term outlook, other than the shares are cheap,” the analysts said.
Tempus – Standard Life Aberdeen (SLA): Buy. It might take two years to work through, but the rationale for the deal still makes sense
