Primark hits sweet spot with profit boost. Strong demand for Primark’s low-cost branded fashions during the first half of its financial year has helped to cushion the blow of falling profits from sugar at its parent company Associated British Foods (ABF). The FTSE 100 group told investors yesterday that Primark’s adjusted operating profits had risen by 25% to £426 million during the six months to March 2, driven by a dramatic improvement in its margins and a 4.4% increase in total sales. Primark’s revenues increased by 4% to just over £3.6 billion. Customers had shown strong demand for Primark’s spring and summer fashion ranges and the British division was performing well, AB Foods said, although it noted that the retailer’s underlying like-for-like sales had fallen by 1.5%.
Saudi Arabia’s future is bright, says HSBC Holdings (HSBA). The boss of HSBC has declared that “the future is bright” for Saudi Arabia, only months after withdrawing from a conference in the kingdom amid worldwide anger over the killing of Jamal Khashoggi. John Flint, group chief executive of HSBC Holdings, told a panel event in Riyadh that the banking group had “a lot of confidence” in Saudi Arabia. Larry Fink, chief executive of Blackrock, the world’s biggest fund manager, was also among senior financiers at a conference in the kingdom yesterday. The death of Khashoggi, a journalist and dissident, last October at the Saudi consulate in Istanbul triggered a global outcry. It led a series of high-profile executives, ministers and officials to boycott the Saudi Future Investment Initiative, described as “Davos in the desert”, three weeks later. Mohammed bin Salman, the Saudi crown prince, 33, has been accused of ordering Khashoggi’s murder. Officials have denied such allegations.
Instagram helps Boohoo to snap up a sales increase. The online fashion retailer Boohoo.com (BOO) has unveiled a 48% rise in sales and a 38% rise in pre-tax profits as the Instagram generation drives demand for its clothing. Boohoo, which owns the brands Pretty Little Thing and Nasty Gal, said that revenues had risen to £857 million in the year to February 28, while pre-tax profits had hit £59.9 million. This performance was slightly better than analysts had expected and it helped to send shares in the company up 22¼p to 239¼p. The Manchester-based retailer was founded in 2006 and sells low-cost clothes to 16 to 30-year-olds. It has a strong social media presence, with 5.9 million Instagram followers, and uses celebrities and “online influencers” in its marketing campaigns.
One of Britain’s biggest pension funds is to buy KCOM Group (KCOM), operator of Hull’s distinctive cream phone boxes. The telecoms company has accepted a £504 million offer from Humber Bidco, part of the Universities Superannuation Scheme, a fund with assets of more than £50 billion. KCom was founded as the telephone department of the Hull Municipal Corporation in 1902 and was floated in London in 1999. Hull is the only place in Britain where the phone service is not provided by BT. The fund will acquire KCom for 97p a share, a 34% premium to its 72½p price on Tuesday.
Aviva executive leaves after job snub. A top executive at Aviva (AV.) who led its British business has quit abruptly after missing out on the top job last month. Andy Briggs, 53, stepped down from his role as head of the insurer’s largest division with immediate effect after four years with the FTSE 100 company. He had been considered a frontrunner to become the next chief executive, but Maurice Tulloch, 50, who previously led the international business, was picked for the job.
Landlord given loan delay after aborted takeover. Aviva (AV.) has agreed to give the owner of four regional shopping centres more time to fix a breached loan covenant after a takeover approach for the landlord was abandoned. The FTSE 100 lender has given RDI Reit (RDI), the shopping centre owner, until October to either sell the centres or restructure the debt facility. The £144.7 million outstanding loan, which runs until 2042, relates to shopping centres in Wigan, Northampton, Warrington and Seaham, Co Durham. RDI was found to have breached its covenant on the facility after a fall in the valuation of the centres pushed the debt-to-asset ratio up to almost 90%. As a result of the breach, all net operating cashflows from RDI’s portfolio will go to Aviva.
Glaxosmithkline pay is tough pill to swallow, says adviser group. GlaxoSmithKline (GSK) faces potential opposition from shareholders at its annual meeting next month after an investor advisory group recommended voting against its pay report. Glass Lewis has taken issue with the remuneration of Iain Mackay, the drug company’s new chief financial officer. The salary of Mr Mackay, 57, the former finance boss at HSBC, is £850,000, 10% higher than Simon Dingemans, 55, his predecessor. Glass Lewis noted that the total pay of Mr Mackay, who formally took on the role at the start of the month, was up to £5.95 million, including performance share bonuses and benefits, and was higher than the £5.39 million he potentially could have received at HSBC. “We would expect such a rise to take the form of phased increases across the lifespan of Mr Mackay’s term,” Glass Lewis said.
Deutsche Bank propelled Land Securities Group (LAND) the developer behind its new London headquarters to the top of the FTSE 100 yesterday after issuing a bullish note on the capital’s office market. It is a sign of furious levels of pre-letting activity by businesses seeking to secure high-quality space in a market with a limited supply. Deutsche’s research has found that, despite Brexit-related uncertainties, active demand for new office space in London is at 8.9 million sq ft, about 10% ahead of the ten-year average. The bank’s analysts identified a trend for tenants becoming more demanding about the quality of office space, willing to pay more for the right product if they think that it will help them to attract and retain top talent. “Landlords that have a track record of either creating differentiated buildings, or have an incumbent portfolio of assets that largely fulfil the above criteria, will, in our view be the ‘winners’ over the coming years,” the analysts said. With much of the leasing activity driven by relocations at a time of rent renewals, they said that the perceived Brexit risk had been overplayed and that developers of the best office space were in a strong position to achieve rental growth in the next two to three years. “We think that the equity market is looking at London’s office market through a too simplistic lense,” the analysts said. It identified Landsec, Derwent London (DLN) and Great Portland Estates (GPOR) as its top picks deserving of a “buy” rating.
Anglo American (AAL) fell 84½p to £20.80½p after JP Morgan Cazenove downgraded the miner to “neutral” after rating the shares “overweight” for three years. Analysts at the bank said that the miner’s valuation no longer looked cheap compared with its peers. They also estimated that 20 per cent of 2020 earnings before tax and other charges were at risk if its Minas Rio iron ore project did not receive a required permit by the end of this year.
Restaurant Group (RTN) added 4¾p to 137¾p after Stifel and Investec both issued “buy” recommendations for the operator of the Frankie & Benny’s and Chiquito brands. Stifel argued that the shares had been oversold last year on the back of the £559 million acquisition of the Wagamama chain, which initially was poorly received by investors when they were tapped for £315 million to help to fund the deal. Investec said that “high-growth” areas of the business now accounted for about 70 per cent of earnings before interest, tax, depreciation and amortisation and were growing.
Gama on an upward trajectory. A private jet company rose by more than 30% yesterday, despite its chief executive describing its annual results as “disappointing”. Gama Aviation (GMAA) shares added 22p and thus returned to 91½p, the price they were at in late January before a profit warning triggered a sharp fall. The company reported revenue of $234.8 million, an increase of 10.5% on the previous year. However, it swung from a $16.3 million profit before tax to a loss of $30.8 million because of administrative expenses and other costs, including $1.5 million from High Court dispute with Dustin Dryden, 42, a former partner. Gama said that it expected growth in its American division to continue in 2019, but that market conditions in Europe would be more challenging, amid Brexit uncertainty and foreign exchange volatility. For the Middle East and Asia, excluding any acquisitions, it expected “very modest” organic growth.
Tempus – Hargreaves Lansdown (HL.): Hold. Impressive market leader with plenty of room to grow but facing considerably higher competition
Tempus – Entertainment One Limited (ETO): Hold. Highly quality and diverse but yield is meagre
