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FTSE 100 Live: Borrowing at £22.9bn on record interest bill, ECB rates

·10-min read
 (Evening Standard)
(Evening Standard)

A record £19.4 billion of interest payments were made on government debt last month as inflation surged, official figures revealed today.

Public sector net borrowing reached £22.9 billion, the second highest for June since monthly records began in 1993 and up by £4.1 billion on a year ago.

The release from the Office for National Statistics comes a day after it emerged that inflation reached 9.4%, with economists expecting 12% later this year.

FTSE 100 Live Thursday

  • European Central Bank rates decision

  • FTSE 100 weaker, Howden Joinery up 2%

ECB raises interest rates by higher than expected 0.5%

13:40 , Jonathan Prynn

The European Central Bank has raised its main interest rate by a higher than expected half point piling more pressure on the Bank of England to follow suit next month.

The hike from zero to 0.5 per cent on its main refinancing rate was the first for 11 years and the biggest since 2000 from the central bank for the Eurozone, which has Christine Lagarde as its President.

All three of the ECB’s key lending rates were reaised by the same amount. Many market commentators had been expecting a more cautious 25 basis point rise.

In a statement the ECB’s Governing Council that “further normalisation of interest rates will be appropriate” over the coming months with finacial markets now pricing in a further 0.6% rise in September.

It added: “The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting.

Frasers rockets 20% as Sports Direct flourishes

12:58 , Simon Hunt

Mike Ashley’s booming retail empire Frasers Group expects profits of between £450 million and £500 million in its current financial year as budget-conscious shoppers flock to its Sports Direct outlets.

The company, which also operates the House of Fraser department stores and the Game chain, reported adjusted profit of £344 million for its last financial year, which ended on April 24, in line with forecasts.

The results were the first during the tenure of Michael Murray as chief executive, who took over from the former Newcastle United owner earlier this year. The firm’s founder is now an executive director.

Frasers issued the profit forecast — which it called “conservative” —in the face of “challenging economic conditions with inflationary pressures and supply chain disruption causing challenges for many businesses.”

It also attacked the business rates system as “fundamentally flawed” as it reported a rise in UK sports retail revenue of more than 31% as customers returned from lockdowns.

Shares went up 20% in early trading.

Starling Bank turns first profit

12:08 , Simon Hunt

Starling Bank today recorded its first full-year profit, a result for the founder and CEO Anne Boden.

The former RBS and ABN Amro banker has led the digital lender since its inception in 2017.

While competition has been intense, Starling was always regarded by many as the one of the most likely of the new-players in banking to succeed.

For the year to March it made a profit of £32 million, compared to a £30 million loss the year before. That puts it ahead of rivals such as Monzo.

Pfizer slapped with £63 million fine by CMA

11:45 , Simon Hunt

The Competition and Markets Authority has slapped US pharma giant Pfizer with a £63 million fine after it was accused of overcharging the NHS.

The CMA said the company had charged unfairly high prices for phenytoin sodium, an epilepsy drug, for over 4 years.

Pfizer charged the NHS prices between 780% and 1,600% higher than previously over those four years, according to the CMA.

A Pfizer spokesperson said the company disagreed with the decision and would be appealing against it.

Sales at Franco Manca double - investors want a pizza the action

11:34 , Simon Hunt

Shares in Franco Manca pizza owner Fulham Shore soared 11% after the restaurant group posted a doubling in revenues, led by strong growth from sales of its vegan and vegetarian menu options.

The London-based hospitality firm, which also owns The Real Greek restaurant chain, reported revenues of £83.7 million in the year to March, while profits more than doubled to £19.5 million.

Fulham Shore executive chairman David Page said: “There’s a trend towards vegan and vegetarian eating — if it’s done well it’s really popular.

“Our new halloumi pizza sold three times as much as planned.”

The company opened 10 new restaurants during the year, and set up its first franchise in Greece. Six new sites are in the process of being fitted out, while a further 16 sites are “in solicitors’ hands.” The group now has 82 sites in the UK and 84 globally.

Page said the firm had put wages up 25% to plug labour shortages, but increases in labour and utility costs had been offset by falling high street rents.

Ocado plunges £211m into red as online customers orders slump

10:53 , Simon Hunt

Online supermarket Ocado fell £211 million into the red in the first half of the year as soaring grocery inflation and the end of lockdown restrictions led to a slump in customer orders.

Revenue for the first six months of 2021 fell 4.4% to £1.3 billion, led by a more than £100 million drop in retail sales as customers abandoned home delivery of groceries as Covid rules relaxed. The average shopping basket fell 13% on last year.

The results come just two days after the grocery delivery and logistics firm announced the departure of retail CEO Melanie Smith at the end of July, with deputy CEO Lawrence Hene taking over as interim CEO until a successor is found.

Smith oversaw a 52% drop in the Ocado share price since the start of the year after the company reported stagnant growth. Ocado group CEO Tim Steiner said Smith’s departure was not related to the firm’s current trading.

Ocado shares fell 5% to 736p today.

The company is betting its heavy investment into robotics and machine learning for its logistics and distribution operations will be enough to reassure investors that long-term profitability will supplant short-term losses. The company says it is already working with 11 leading grocers to provide the technology for their online grocery operations.

Shares crash at Sorrell’s S4 Capital

10:33 , Simon English

SIR Martin Sorrell, the advertising giant who built WPP, suffered a setback today when his S4 Capital agency issued a profit warning that alarmed the City.

The shares almost halved, down 108p to 116p, after the company told the stock market that costs were racing ahead of revenue growth.

The statement said the board “has decided it would prefer to lower expectations” for year-end profit to £120 million, down from a range of between £154 million and £165 million.

S4 said: “Significant cost reduction measures, including a brake on hiring and discretionary cost controls have been introduced already to better balance the growth in revenue, gross profit / net revenue and costs.”

Earlier this year S4 had to delay results due to auditing issues.

Sir Martin built WPP into the world’s biggest advertising group until he was ousted in 2018.

S4 has grown apace thanks to a deal spree that saw it do 30 takeovers in four years.

The shares are down 80% in the last year. First half results will come out in September, when investors will be looking for signs of stability.

The company says the second half of the year will be much stronger than the first.

Pros avoid the stock market, retail investors keep punting

10:29 , Simon English

PROFESSIONAL investors are sitting on the sidelines nervous about the economy and wobbling markets, but the amateurs are still piling in, figures from two top City firms today suggest.

IG and AJ Bell both said customers numbers are rising as clients they gained during lockdown keep on punting.

While big fund managers have seen outflows of cash due to fading performance and investor nerves, AJ Bell said assets in the last year are up a bit at £63.5 billion, “strong growth…in what is an uncertain economic environment”, it said.

More strikingly, IG saw revenues for the year up 16% to £972 million.

Profits rose 7% to £477 million, giving IG a fairly extraordinary profit margin of 49%.

CEO June Felix said IG has a “loyal high-quality client base”.

“Even with inflation, our clients will continue to invest in markets. They feel they have to take control of their own destiny,” she added.

IG is a high-profile sponsor of the England cricket team, something Felix said has led to “lots of great brand awareness”.

Active client numbers are up 31% to 381,500.

read more here

Howden rises 2%, Frasers up 20% in FTSE 250

10:23 , Graeme Evans

FTSE 100 newcomer Howden Joinery sent its shares 2% higher by revealing “good momentum” heading into its peak trading period.

The supplier of kitchens and joinery products also cheered investors with an estimate that its target market in the UK is much larger than it previously thought.

Howden shares have come off the boil this year but rose 9.4p to 638.4p today after a reassuring set of interim results. The figures included pre-tax profits 21.6% higher than last year and up 86% on 2019’s pre-pandemic level at £145 million.

Chief executive Andrew Livingston said the company continued to effectively manage inflationary and supply chain pressures, adding that like-for-like sales for the most recent four week period were 6% stronger in the UK.

He sees significant future growth opportunities, given that research suggests that the market for UK kitchen and joinery products is worth an estimated £11 billion.

Howden sells to trade customers through 788 depots, with around one-third of products manufactured in-house at its factories in Runcorn and Howden, East Yorkshire.

Reiterating a price target of 1022p, UBS analysts said they “continue to like Howden’s story” including its potential for international expansion.

Howden shares topped the FTSE 100 risers board during an otherwise lacklustre session for investors, with the top flight down 31.67 points to 7232.64. Other risers included JD Sports Fashion, which added another 3.85p to 143.65p on top of the 10%-plus improvement seen since last week.

Dechra Pharmaceuticals, the veterinary drugs company, dropped 202p to 3528p at the bottom of the FTSE 100 after it placed new shares at an 8% discount in a move to raise £180 million towards the acquisition of US-based Piedmont Animal Health.

The fallers board also featured heavyweight stocks Lloyds Banking Group and BP, down 1.5% after strong gains earlier in the week.

The FTSE 250 index improved 46.17 points to 19,446.01, led by rallies of 20% for Frasers Group and 11% for Moneysupermarket.com after their respective updates.

Go-Ahead shares fell 46p to 1484p after hopes of a bidding war for the public transport group were dashed when Australian firm Kelsian dropped its interest, leaving shareholders with a recommended 1,500p a share offer from the Gerrard consortium.

Howden Joinery leads FTSE 100, Ocado down 2%

08:44 , Graeme Evans

Trading in London is off to a resilient start, with the FTSE 100 index down by 8.33 points at 7255.98 and the FTSE 250 index up 71.38 points at 19,471.22.

Shares in Howden Joinery posted the biggest rise in the FTSE 100 after the kitchen supplier reported a 21% improvement in first-half profits and said it had “good momentum” heading into its peak trading period.

Ocado shares were 14.8p lower at 758.2p, a drop of 2% after the grocery delivery technology business reported a much wider half-year loss of £211 million. The performance was driven by an 8% drop in revenues for its Ocado Retail division.

Dechra Pharmaceuticals, the FTSE 100-listed veterinary drugs company, dropped 260p to 3470p after placing new shares at an 8% discount as it raised £180 million towards the acquisition of US-based Piedmont Animal Health.

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