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FTSE 100 Live: Royal Mail reveals £200m strike hit, Jet2 lifts guidance

 (Evening Standard)
(Evening Standard)

Royal Mail’s owner today revealed that 18 days of industrial action had cost it around £200 million.

International Distributions Services also reported a 12.8% year-on-year decline in Royal Mail revenues for the first nine months of the year, leading to a £295 million operating loss.

Meanwhile, holidays and airline business Jet2 followed easyJet in lifting profits guidance on the back of a surge in demand and higher prices. On another busy day of corporate reporting, drinks firms Diageo, Fevertree and Britvic are among those updating investors.

Wall Street higher after fourth quarter economic growth slips by less than forecast

14:23 , Michael Hunter

Reassuring economic growth data helped New York’s S&P 500 rise 5 points to 4023.86, a more modest advance at the start of trade than the one predicted by futures markets in the broad stock benchmark.

It came after data showed the US economy grew by an annualised 2.9% in the fourth quarter. While that was slower than the 3.2% in the third quarter, it was better than the 2.6% forecast.

With inflation looking to have peaked, speculation has deepened that the Federal Reserve could adopt smaller rate rises at its meeting next week, with analysts pointing to a potential 0.25% hike, with policymakers keen to protect growth rates form the impact of their fight against rising prices.

Competition watchdog to look into greenwashing over fast moving consumer goods

14:14 , Michael Hunter

The green claims made by a range of household products from food and drink to cleaning products and personal care items are to come under the scrutiny of the Competiton and Markets Authority.

The watchdog will “examine the accuracy” of the environmental credentials claimed by so-called fast-moving consumer goods, a sector worth £130 billion each year to the economy.It will scrutinise claims about products being “sustainable” or “better for the environment”

The CMA pointed out that the average UK household “spent almost £70 a week on food and drink alone” in 2021, and that it was worried about “greenwashing” at a time when the cost of living is rising.

Reads more here

Competition Watchdog wants to check your toothpaste

14:11 , Michael Hunter

The green claims made by a range of household products from food and drink to cleaning products and personal care items are to come under the scrutiny of the Competiton and Markets Authority.

The watchdog will “examine the accuracy” of the environmental credentials claimed by so-called fast-moving consumer goods, a sector worth £130 billion each year to the economy.

The CMA pointed out that the average UK household “spent almost £70 a week on food and drink alone” in 2021, and that it was worried about “greenwashing” at a time when the cost of living is rising.

Read more here

Wise under fire as London fintech accused of hiding prices of cheaper rivals

12:51 , Simon Hunt

Leading London fintech Wise has come under fire after a rival firm accused it of unfairly touting the affordability of its services by concealing the prices of other providers who were cheaper.

Wise, which offers international money transfers, publishes a daily exchange rate comparison on its website, which today shows it to be the cheapest provider for a £1,000 sterling-euro transfer. But rival Atlantic Money says it was dropped from Wise’s comparison after its own rates were seen to be lower.

Atlantic Money have written to the UK competition regulator, the Competition and Markets Authority, to express its concerns, in a letter seen by the Standard.

read more here

Dexters snaps up Marsh & Parsons in £29 million deal

12:22 , Simon Hunt

London estate agency Dexters have snapped up rival Marsh & Parsons for £29 million in what it claims will be London’s biggest chain.

The takeover will create a network with 150 offices, 2000 staff and handling £5 billion of deals a year.

Marsh & Parsons, which was sold by property services group LSL, was founded in 1856, making it one of London’s oldest estate agencies.

The estate agent has 30 offices mainly in central London and is known for its eye-catching advertising campaigns.Dexters said the brand will be retained and the number of branches doubled over the next few years.

The deal came as one of Dexters’ biggest rivals, Foxtons, reported revenues grew last year by 11% to £140.

Prudential and 3i lead FTSE 100, Tate & Lyle upbeat

10:36 , Graeme Evans

Jet2 shares continued to climb today after the package holidays group upped profits guidance.

The shares were as low as 637p in October but now stand at 1208p after today’s rise 3% or 30.5p extended the run seen on the back of other strong industry updates.

Jet2 said that customers' eagerness to take their “much valued and anticipated holidays” remained high as it reported summer booking trends ahead of last year.

Wizz Air struck a similar tone today after it reported a jump in third quarter revenues, although shares gave up a chunk of their recent gains as investors locked in profits.

The FTSE 250-listed stock fell 8% or 242p to 2770p, while low-cost rival easyJet gave up 4p to 509.5p and British Airways owner IAG eased 0.4p to 169.32p.

London’s top flight stood 12.39 points higher at 7757.26, with private equity firm 3i Group up by 5% or 69.5p to 1529.5p after its performance was boosted by the “very impressive“ contribution of the Action discount chain.

Action, which accounts for about half of the assets in 3i’s private equity division, reported a 30% sales leap in 2022 as 3i’s net asset value jumped to 1649p from 1477p in September.

Other blue-chip risers included Prudential, which lifted another 3% or 45p to 1379p after it announced the opening of an office in Macau as it targets a key and under-penetrated life insurance market.

The FTSE 250 index improved 81.10 points to 19,855.14, with food ingredients business Tate & Lyle one of the best performers after it said it had been successful in passing on higher input costs.

Its shares jumped 6% or 42.4p to 765.6p as the former blue-chip company reported revenues growth of 19% in its food and beverages division for the quarter to 31 December.

Among smaller stocks, eyewear manufacturer Inspecs rallied 30% or 19.5p to 82p on AIM after it reassured on recent trading amid progress in streamlining its Norville business.

TSB owners to land £50m dividend

09:27 , Simon English

TSB showed a return to form from a computer meltdown that saw it fined £50 million today, with a rebound in profits that allows it to pay a dividend to owners Sabadell for the first time.

The bank that was spun out of Lloyds is still dealing with the fallout from a spectacular computer crash in 2018 that saw nearly two million customers locked out of their accounts for several weeks.

It was fined by watchdogs and blasted for lacking “common sense”.

New management led by Robin Bulloch today reported a 16% rise in profits to £183 million for 2022.

Bulloch said: “In challenging and unpredictable economic circumstances, TSB continues to be a relevant, purpose-driven brand offering the banking products and services our customers need most.”

Sabadell, the Spanish parent which stuck by TSB, will enjoy a £50 million dividend.

Bulloch insists the bank now has “a relentless focus on improving our service”.

IG investors shrug off market wobbles to carry on trading

09:22 , Simon English

CLIENT numbers are down at IG, but the City trading down house still had a record year that allows it to beef up returns to shareholders.

The grand-daddy of the spread betting industry saw revenues up 5% to £495 million in the half year as investors shrugged off market tremors to keep punting on shares, currencies and indices.

That revenue translated into profits of £240 million, down a bit, but at a still fairly extraordinary profit margin of 50%.

IG had already unveiled share buybacks of £150 million – today it increased that to £200 million.

The number of active traders fell by 8400 to 312,000, a sign that the lockdown inspired trading boom is over. That period saw scores of new investors come to the stock market to invest money saved while cooped up indoors.

Chief executive June Felix said: “All of the us recognise that markets have been challenging. But out clients have been trading through the market cycles.”

IG shares moved up 10p to 790p, which leaves the business valued at £3.3 billion.

IG says its high value clients are sophisticated players of markets looking to hedge often quite complicated portfolios.

Industry figures show that most people who trade using spread bets or CFDs (contracts for difference) end up losing money.

FTSE 100 led by 3i, Tate & Lyle up 4%

09:17 , Graeme Evans

The FTSE 100 index is 27.61 points higher at 7772.48, led by a jump of 5% for 3i Group after the investment group posted a strong third quarter performance.

The company was boosted by a “very impressive” showing for the Action discount chain, which accounts for over half of the assets in its private equity division. Shares lifted 70.5p to 1530.5p.

Other blue-chip risers included Prudential, which rallied 2% after announcing plans to open a branch in Macau. Diageo shares fell 4% after its interim results.

The FTSE 250 index rose 89.76 points to 19,893.80, with Tate & Lyle up 4% or 27.6p to 750.8p as it revealed success in recovering higher input costs.

High rollers return to Rank casinos at Christmas but too late to prevent £100 million loss

08:00 , Michael Hunter

Rank, the owner of London’s Grovsenor Casinos, has reported a £100 million loss for the first half, as the return of gamblers around Christmas came too late to keep it in profit,

It said while trading in the festive season was “strong”, it remained “cautious” on the outlook for the second half of its financial year, adding: “We recognise that the cost-of-living pressures are likely to continue to have an effect on our UK venues’ customers over the coming months.”

The company’s loss before tax was £101.2 million, up from a £101.5 million profit in the same period a year ago.

US GDP figure in focus, FTSE 100 higher

07:57 , Graeme Evans

Today’s fourth quarter GDP estimate from the US economy will be another key factor in determining whether policymakers have room to slow the pace of interest rate rises.

Following two successive quarters of negative GDP, the US saw a rebound in the third quarter with output growth of 3.2%. This rate is expected to have slowed to around 2.6% in the final three months of 2022, with a weaker reading likely to fuel hopes that the Federal Reserve may only increase rates by 0.25% next month.

The Nasdaq and S&P 500 fell by around 2% yesterday following Microsoft’s weaker-than-expected outlook but later recovered to near their opening marks.

Shares in electric car maker Tesla rose 5% in after-hours trading, having reported earnings in line with expectations after a 37% jump in fourth quarter revenues.

The FTSE 100 index closed 0.2% lower yesterday, but CMC Markets expects a positive session today with a forecast for the top flight to climb 19 points at 7764.

Strike-hit Royal Mail posts drop in parcel revenue and £200 million loss but points to fewer redundancies

07:51 , Michael Hunter

A fall in revenue from parcels as strikes hit consumer confidence in Royal Mail’s parent company added to the continuing decline in volumes of letters, sending its loss for the nine months to the end of December up to £295 million.

International Distribution Services said the 18 days of industrial action in the period cost it around £200 million. Revenues from parcels -- the part of the business it wants to prioritise in changes that are at the heart of the dispute -- fell by 17.8% year-on-year, with volumes down 20%. Letter revenue was down by over 6%, with volumes down 8% excluding some mass mailings for elections.

It forecast a full-year adjusted operating loss “around the mid-point of the existing £350 million to £450 million range,” forecast, although that “assumes no further days of strike action in Q4 and the CWU accept a pay settlement inline with the best and final pay offer.”

The company said the number of voluntary redundancies needed to reach its target to reduce the number of jobs equivalent to a full-time post “will be significantly lower” than the 5,000 to 6,000 expected in an update in October, in part due to people deciding to leave, or what it called “current levels of attrition.” It repeated its pledge for no compulsory redundancies.

In the peak Christmas post period, when it had seven days of industrial action in December, Royal Mail delivered “in excess of 110 million parcels and over 600 million addressed letters”. It said. Up to around. 12,500 union-grade employees covered by the Communication Workers Union returned to work on strike days.

Surge in glass manufacturing costs hurts Fevertree

07:51 , Simon Hunt

Premium tonic and mixers maker Fevertree sounded a more cautious note about its prospects this morning, warning that margins were being hampered by a surge in costs of glass production.

It sales in 2022 were down 2% in the UK to £118 million.

In a statement the firm said: “The impact of elevated European energy costs into glass bottle pricing will be material in 2023.

“Whilst energy pricing has recently reduced, it remains volatile and at least three times higher than 2021 levels, impacting both the cost of raw materials and the direct energy cost in glass manufacture.

“As a glass-led business, with c.80% of our sales mix in glass bottles, we are particularly exposed to this significant headwind. “

Guinness owner Diageo beats market expectations with £9.4 billion sales

07:33 , Simon Hunt

Guinness, Tanqueray gin and Smirnoff vodka owner Diageo posted an 18.4% rise in reported net sales to £9.4 billion in the six months to the end of 2022, with organic growth of 9.7%.

That was substantially ahead of the £9.1 billion in sales and 8.1% organic growth pencilled-in by City analysts.

Joshua Warner, Market Analyst at City Index, said: “Diageo has given investors reasons to cheers this morning. Volumes grew less than anticipated at just 1.8%, but higher prices and a strong performance from its premium brands allowed sales to grow at a much faster pace.”

“Diageo’s business is some 36% larger now than it was before the pandemic started, but its share price is trading just 18% higher - although its valuation still demands a premium over the wider market.”

Organic net sales incorporates all sales generated from within a company, through the firm’s internal processes. Reported net sales will therefore incorporate sales coming from outside of the company too, a Diageo spokesperson explained.

Jet2 profits boosted by strong holiday demand

07:32 , Graeme Evans

Holidays business Jet2 today said winter booking trends continued to strengthen, meaning it now expects to exceed market expectations for profits in the year to 31 March.

As well as its planes flying with average load factors slightly better than the pre-pandemic level in winter 2018/19, Jet2 said its pricing and margins were significantly higher.

It added that forward bookings for the summer are encouraging, with the mix of package holiday customers representing approximately 77% of the total departures and one percentage point higher than summer 2022.

Average load factors for summer 2023 are also one percentage point ahead, with pricing strong and margins encouraging as Jet2 said “customers' eagerness to take their much valued and anticipated holidays remains high”.

Offsetting the encouraging demand trends, the group said it faces cost pressures including fuel, carbon, a strengthened US dollar and wage increases.