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| Tuesday November 23 2021 |
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By Richard Fletcher
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Good morning: Profit warnings come in threes goes the old city adage. The online retailer AO World warned shareholders last month that today’s interim results would miss City forecasts.
Alongside those results we have a fresh profit warning with the retailer noting “meaningful supply chain challenges with poor availability in certain categories”. The company also warns that “shipping costs, material input prices and consumer price inflation remain challenging uncertainties”.
“As a result of these factors, the all-important current peak trading period is significantly softer than we anticipated only eight weeks ago,” AO World states.
The group now expects adjusted earnings of between £10 million to £20 million, having cut forecasts to £35 million to £50 million just eight weeks ago.
John Roberts, AO founder and chief executive, said: “We're working hard to solve some of the current challenges that our industry is facing. We've recruited 500 new drivers and are working closely with our manufacturer partners so that customers can get what they need.
Shares in AO World fell more than 25 per cent on the back of last month’s profit warnings. They continued to slide and are now almost 70 per cent down since the start of the year. A fresh profit warning is unlikely to halt the slide.
We’ll have a full story shortly from Ben Martin on thetimes.co.uk/#section-business.
Catering giant Compass Group has forecast a return to growth as it posts full year results. The world’s largest catering group – which runs office canteens and catering at major sporting events – said it expected revenue growth of between 20 per cent and 25 per cent this year as companies increasingly outsource.
The actual numbers show that underlying operating profit rose 44.6 per cent to £811 million in the year to the end of September, up from £561 million in 2020, but still below the pre-Covid £1.85 billion reported in 2019. Revenue over the period was £18.1 billion, down almost 10 per cent from £20.1 billion last year (and £25.1 billion in 2019).
Dominic Blakemore, chief executive, said: “Looking ahead we are now focused on growth, driven by encouraging market trends and our ability to provide more bespoke, digital and sustainable solutions that meet the evolving needs of clients in a post-pandemic world.”
We’ll have a full story shortly from Dominic Walsh on thetimes.co.uk/#section-business.
Elsewhere this morning:
- Water company Severn Trent has reported that pre-tax profits rose 20.4 per cent to £146.9 million in the six months to the end of September. Revenue over the period rose 8 per cent to £958.2 million.
- Daily Mirror owner Reach has reported that digital revenue grew by 17.2 per cent between June 28 and November 21. Print revenue over the period fell by 3.5 per cent.
- Retailer Pets At Home has told investors that it continues to expect underlying annual pre-tax profits to be at the top end of expectations after posting increases in first-half revenues and earnings. The group has been boosted by the expansion of pet ownership during Covid-19 lockdowns. Total group revenues in the 28 weeks to October 7 rose 18 per cent to £677.6 million, and statutory pre-tax profits climbed 81.3 per cent to £70.6 million.
- Others updating include Bodycote, the specialist engineer, Caledonia Investments, the Cayzer family’s listed investment vehicle, and Cranswick, the pork and poultry producer.
On the economics front we get the flash PMI data for November. Economists expect a composite reading of 57.5, down from 57.8 in October.
Later (3.00pm) Andrew Bailey, governor of the Bank of England, and his deputy Sir Jon Cunliffe will appear in front of peers on the Lords Economic Affairs Committee as they take evidence on central bank digital currencies and quantitative easing.
Finally, the CBI conference continues with Thierry Garnier, chief executive of B&Q owner Kingfisher, and Lutz Schüler, chief executive of Virgin Media O2, among the speakers. Though it is hard to see them upstaging the prime minister’s speech yesterday – you can read Quentin Letts verdict on that speech here.
I'll be on Times Radio just after 4.30pm today to talk through the day's market action. Listen online, on DAB radio, your smart speaker or via the Times Radio app.
Please do keep sending your thoughts, observations (and corrections) to me at richard.fletcher@thetimes.co.uk and don’t forget to follow me on Twitter @fletcherr.
Richard |
| Richard Fletcher |
| Business Editor |
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Ten things you need to know
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1 An energy supplier with 1.6 million household customers has become by far the biggest such company to collapse amid soaring wholesale gas prices. Bulb, Britain’s seventh biggest energy supplier, is the 23rd to collapse since the start of August as wholesale gas prices have soared to record highs.
2 Kensington, in association with Rothesay, an insurer, is offering a mortage that will allow borrowers with a 40 per cent deposit to fix their mortgage at an interest rate of 3.34 per cent for 40 years. The deal is aimed at cashing in on growing public insecurity about the cost of living.
3 Boris Johnson’s cabinet was urged to “wake up” and demand changes to his Downing Street operation after his “shambolic” speech to business leaders at the CBI conference in South Shields intended to promote opportunities of the “coming industrial revolution” in green energy included an extensive tribute to Peppa Pig.
4 An investigation by Which? found that 98.5 per cent of items promoted as a “Black Friday deal” at Amazon, AO, Argos, Currys, John Lewis and Richer Sounds last year were cheaper or the same price at some point in the six months after the event.
5 Flexible working has tempted many women back into the labour market and persuaded those in employment to increase their hours, according to the Resolution Foundation, a think tank.
ADVERTISEMENT6 Atom Bank, the smartphone-based bank that employs 430 people, is moving staff from a five-day week of 37.5 hours to a four-day week of 34 hours, with no loss of pay.
7 President Biden has nominated Jerome Powell, a Republican first tapped by the Trump administration, for a second term as chairman of the Federal Reserve after a “trial by fire” during the pandemic to provide “stability and independence” at the central bank.
8 Alvarez & Marsal, the administrator of NMC Health, the former FTSE 100 private hospitals company embroiled in a “massive” fraud scandal, has generated more than £70 million in fees.
9 Hochschild Mining, the precious metals miner, has vowed to fight what it called “illegal” plans by the Peruvian government to shut down its mines in the country. These include its Inmaculada and Pallancata mines, which analysts said accounted for about three quarters of the company’s value.
10 Luis Gallego, the boss of International Consolidated Airlines Group, which operates British Airways and Virgin Airlines, has claimed that its transatlantic bookings were almost back to 2019 levels after the United States dropped restrictions this month.
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| Market snap |
The Nikkei was closed for a public holiday. At the midday break, the Shanghai Composite was trading 0.43 per cent higher at 3,597.53 points. The FTSE 100 is forecast to open 27 points lower.
At 6.39am the pound was trading at $1.338 against the dollar, down 0.09 per cent over the session, and at €1.190 against the euro, down 0.09 per cent. The yield on the UK’s benchmark 10-year gilt is 0.93 per cent.
Brent crude was trading at $79.06 a barrel, down 0.8 per cent over the session. Gold was trading at $1,805.81 an ounce, up 0.04 per cent.
On Wall Street, delight that Jerome Powell is set for a second term as Federal Reserve chairman was replaced by fears about interest rates, erasing gains earlier in the day. The Dow Jones Industrial Average closed at 35,619.25, up only 17.27 points, or 0.05 per cent. The S&P 500 slipped 15.02 points, or 0.3 per cent, to 4,682.94. The Nasdaq lost 202.68 points, or 0.1 per cent, to close at 15,854.76.
The FTSE 100 closed up 0.44 per cent or 31.89 points to 7,255.46. The FTSE 250 dropped 0.27 per cent or 62.79 points to 23,429.7. Katherine Griffiths’ market report has more on yesterday’s market movers
Yesterday’s biggest FTSE movers
Diploma (+8%) strong results
Harbour Energy (+7.8%) Seen as one of the sector’s winners
Antofagasta (+5%) Optimism in global economy
Petropavlovsk (-5.48%) Drop in confidence
AO World (-5.7%) Fear of profit warning
Hochschild Mining (-27%) Problems in Peru
Brokers’ recommendation
Peel Hunt sees the potential for a recovery of Capital & Counties, the owner of large swathes of Covent Garden. The shares remain “very good value”, analysts said, as they reiterated their “buy” recommendation.
Jefferies recommended investors “buy” National Express, pointing to its exposure to the high-growth US student transport market.
Tempus
Diploma is one of those class acts where the shares always seem expensive but the price keeps going up. Elsewhere, shares in Brighton Palace Pier, which runs indoor mini-golf amusements, a children’s theme park and eight upmarket Eclectic bars, are a bet on the UK consumer’s urge to resume something like normality. Read Tempus in full. |
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The big read
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“Posing for the camera, the party raised their wine glasses with Michael Davis, NMC’s chief executive, at the head of the table The photos posted on Davis’ Instagram account have raised questions over the independence and impartiality of Alvarez & Marsal, which has generated fees of about £73 million from the administration.”
Insolvency practitioners deny being too close to NMC bosses during the battle to save the group, Alex Ralph writes. |
Read the full story
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Elsewhere in The Times
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“Some governments end up at the mercy of events, and then they are usually doomed. This one is not yet in that position. It is still in charge of its own destiny. For the country’s sake, let’s hope it chooses to be a success.”
Ministers can put missteps behind them. There’s still time for the Tories to get a grip, argues William Hague.
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Read the full story
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The day’s front pages
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The Times
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Atom Bank is moving staff to a four-day week with no loss of pay, making it the biggest UK employer so far to shift away from the traditional five-day week
The administrator of NMC Health, the former FTSE 100 private hospitals company embroiled in a “massive” fraud scandal, has generated more than £70 million in fees
President Biden has nominated Jerome Powell for a second term as chairman of the Federal Reserve after a “trial by fire” during the pandemic
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Read the full update
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Financial Times
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Joe Biden has nominated Jay Powell to serve a second term as chair of the Federal Reserve, opting for continuity at a delicate moment for the US economy as it confronts persistently high inflation and a patchy labour market recovery
The energy crisis has claimed its biggest victim after Bulb, Britain’s seventh-largest supplier, agreed to enter special administration backed by taxpayer money
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Read the full update
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The Daily Telegraph
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TAXPAYERS face a bill of potentially hundreds of millions of pounds to keep collapsed energy supplier Bulb operating through the winter after it went bust and rivals balked at taking on its 1.7m customers
THE spectre of new lockdowns in the eurozone helped sterling reach its highest level against the single currency since the pandemic struck
FEDERAL Reserve chairman Jay Powell will serve another four years as the world’s most powerful central banker after Joe Biden ended months of dithering by appointing the Republican to a second term
AFINITI, the embattled technology company, has appointed a former Enron prosecutor to investigate sexual assault claims against its founder
BRITISH Airways customers revealed their dismay over renewed IT failures at the airline after its loyalty website was offline for nearly 10 days
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Read the full update
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The Sun
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BRITISH AIRWAYS owner IAG will consider cutting flights from Heathrow if proposed hikes in charges come in
M&S shares ticked up yesterday on the back of reports that US private equity giant APOLLO had started evaluating a potential bid
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Read the full update
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richard.fletcher@thetimes.co.uk
@fletcherr
