- FTSE 100 closes in red
- Wall Street mixed at end of weak month
- Ocado Group lower as Retail posts loss
4:45pm: TSE 100 finishes in red
The London benchmark fell 58 points or 0.74% lower, closing Tuesday’s session at 7,876.
3.45pm: Vodafone still in play
Vodafone Group PLC shares rose after UAE telecoms firm, e& – formerly Etisalat – upped its stake in the FTSE 100-listed mobiles and broadband player.
E& lifted its stake in Vodafone to 14% from 13% earlier this month, the company said in a filing after completing the purchase on Monday.
Abu Dhabi-listed e&, which first bought a stake of 9.8% in Vodafone last May, now owns 3.79 billion shares.
“The investment rationale remains unchanged from our initial announcement on the 14th of May 2022,” e& said, having said in May that it made the purchase “to gain significant exposure to a world leader in connectivity and digital service at an attractive valuation”.
French telecoms billionaire Xavier Niel bought a 2.5% stake in Vodafone in September 2022, and Liberty Global purchased a 4.9% stake earlier this month
3.35pm: Mine’s a large one
Fashion brand Scotch & Soda, which has stores in locations including London’s Covent Garden, is reportedly exploring a sale after more than a decade in private equity ownership, Sky News has reported.
The Amsterdam-based company – which is owned by private equity investor Sun European Partners – has drafted in advisers to oversee an auction following talks about a refinancing of the business, the report said.
Scotch & Soda is sold through fewer than a handful of standalone UK shops as well as in department stores.
Retail industry sources told Sky that professional services firm Teneo had been hired to run the sale process, while Rothschild had been advising Scotch & Soda on its refinancing plans, and EY has been engaged to work with the company’s lenders.
Sun has been an investor in the fashion label since 2011, when it jointly acquired the business with Kellwood, one of Sun’s portfolio companies at the time. Insiders told Sky that Sun was expected to sell the entirety of its controlling stake in Scotch & Soda as part of the process.
The brand’s valuation was unclear although it is thought to be on track to make more than €20m in earnings before interest, tax, depreciation and amortisation this year, Sky News added.
3.20pm: Goldman boss talks Platforms
Goldman Sachs’ chief executive David Solomon has said the US bank is “considering strategic alternatives” for its consumer platforms business, which includes the specialty lender GreenSky and credit-card partnerships with Apple and General Motors, the Wall Street Journal has reported.
Solomon made the comments while speaking at the bank’s investor day, the US newspaper said, but did not immediately offer more details, though the language he used could suggest a sale of GreenSky or its card partnerships.
Less dramatically, it could represent some kind of restructuring of the card agreements to make them more lucrative for Goldman, or allowing another bank to become an issuer alongside Goldman.
“We’re focused on profitability, the right strategy and will be nimble and flexible,” Solomon said, according the paper. “We’ve significantly narrowed our ambitions for consumer strategy.”
Goldman said Tuesday it aims to reach a pretax break-even in Platform Solutions by 2025. Platform Solutions includes GreenSky and the card partnerships. It also includes a transaction banking, which provides payment services to banks and corporations. That unit is currently profitable, the company said.
Solomon’s statements were a marked departure from Goldman’s last investor day in 2020 when the firm said it was building a leading digital consumer bank that would address a range of consumer banking and borrowing needs, the WSJ noted.
3.10pm: BP hydrogen boost
BP PLC plans to invest up to 2 billion euro ($2.12 billion) by 2030 in its refinery in Spain to produce low-carbon hydrogen and biofuels, Reuters has reported.
The FTSE 100-listed company aims to develop a large plant to produce 2 gigawatts (GW) of green hydrogen, which is produced by splitting water using renewable energy, in order to replace polluting hydrogen used to produce fuels at the Castellon refinery.
The project, HyVal, will also increase the refinery’s biofuels production three-fold to 650,000 tonnes a year 2030, BP said in a statement. The green hydrogen will also be used as a feedstock in biofuel production, including sustainable aviation fuel (SAF).
A first hydrogen electrolyser unit of 200 megawatt is expected to be operational in 2027 and produce up to 31,200 tonnes of green hydrogen per year.
Reuters noted that Spain is aiming to become a major player in the production of low-carbon hydrogen and biofuels thanks to its ample solar and wind power and proximity to sea.
2.50pm: Wall Street wobbles
The FTSE 100 index fell back to fresh session lows with US stocks mixed at the open on Tuesday as investors struggled for direction on the last day of February trading.
Around 20 minutes after the market opened, the Dow Jones Industrial Average was down 106 points or 0.3% at 32,782, while the S&P 500 was off 0.1%, but the Nasdaq Composite managed to edge up 0.1%%.
FOREX.com market analyst Fawad Razaqzada said investors were understandably cautious to invest money into the markets, given the cost-of-living crisis around the world and the stickiness of inflation.
“While we have seen signs of peak inflation and the economy has held its own better than hoped, rising bond yields continue to pose a big threat to stocks and other risk assets,” Razaqzada said.
He noted with yields on the rise, this has weighed on the S&P 500’s so-called equity risk premium (ERP) which measures the potential reward investors might reap from buying US stocks, above and beyond a “risk-free” asset, namely US bonds.
“Given the elevated macro risks and a low ERP many investors would rather avoid all the headache and buy short-dated Treasurys to earn a fixed, higher, return of around 5% or so,” he said.
“Yet, the US equity markets have remained relatively resilient. Undoubtedly, there are other factors at play. A low ERP does not mean all stocks are bad. It just means investors will have to be very selective in picking the right stock and remaining nimble.”
In London, around 2.50pm, the UK benchmark index was down 76 points, or 1% lower at 7,859 as dollar earners suffer from a firmer pound after the NI protocol deal with the EU
2.25pm: Norse Atlantic bound
Fledgling Norwegian low-cost carrier Norse Atlantic Airways has announced it will serve more US destinations from Gatwick than any other airline this summer, according to newspaper reports.
The airline said it will add Boston, Los Angeles, San Francisco and Washington DC to its transatlantic operations from the West Sussex airport. It already connects Gatwick with New York, and recently announced it will serve Orlando and Fort Lauderdale from May.
Norse began flying between Gatwick and New York in August last year, with return trips available from £255.
The airline – which exclusively operates Boeing 787 Dreamliner aircraft – hopes to succeed where Norwegian Air Shuttle (NAS) failed.
NAS operated transatlantic flights with low fares but axed its long-haul operations in January 2021 due to heavy losses. It was founded by Bjorn Kjos, who resigned as chief executive in July 2019 and holds a minority stake in Norse.
The increase in Norse’s flights signals a ramp-up in competition with legacy carriers such as British Airways and Virgin Atlantic, which has moved most of its flights to London’s Heathrow airport with Gatwick slots to be transferred to transatlantic joint-venture partner Delta Air Lines.
2.10pm: Juggling miners
Analysts at US bank Citigroup think mining companies face a tricky juggling act in 2023 as price rises tail off while costs continue to rise.
After reviewing the latest results and updates from the big mining sector, the bank’s earnings estimates for the miners have come down by between 2-10%, though its analysts said a lot of this stems from a lower coal price assumption.
Two key takeaways from the numbers were the potential for a production pickup in copper (Quellaveco and Los Pelambres ramp up) but only a moderate year-on-year decline in unit cost inflation, implying that comparable unit costs will still go up in 2023.
On the upside, the potential for a release of working capital remains a possible sector cash flow boost.
Glencore and Anglo-American remain the bank’s preferred picks.
1.30pm: Here’s a look at some of the top risers and fallers on the markets so far today
Shares in hedge fund Man Group jumped 7% in the first hour of trade after the hedge fund group’s performance beat market expectations.
A 4% dip in assets under management ranked as a success against a backdrop of stock and bond market falls, alongside a series of central bank rate hikes.
Safestay (AIM:SSTY) saw its shares leap 10% higher to 22p in early trade on Tuesday after the hostel operator said its performance is returning to pre-pandemic levels.
Revenues for the 12 months to 31 December 2022 are expected to come in at £19mln, ahead of market expectations and up from £6.4mln the year before, when trading was restricted by COVID-19 lockdowns, the group said.
Shares in Manchester United plc fell 9.2% overnight after rumours that the Glazer family may decide not to sell their majority stake.
None of the bids, of which two have been made public so far – from Jim Ratcliffe’s Ineos Group and Qatari sheikh Jassim bin Hamad Al Thani – are high enough to persuade the Glazers to sell, according to media reports yesterday.
Baron Oil PLC (AIM:BOIL) was seen 17.5% lower after a competent person’s report (CPR) was published by consulting firm called ERC Equipoise today.
The CPR is an independent document designed to provide stakeholders with an assessment of the potential of oil and gas assets.
1.00pm: Marginal gains seen in the US
US stocks are expected to edge higher at the start of the final trading session of February, however, despite a solid start to the year, the major indexes are on pace for their second negative month in three.
In pre-market trading, futures for the blue-chip Dow Jones Industrial Average (DJIA), the broader S&P 500, and the tech-laden Nasdaq 100 were all up 0.1%.
On Monday, the DJIA closed 72 points, or 0.2% higher at 32,889, while the S&P 500 and Nasdaq Composite gained 0.3% and 0.6%, respectively.
As of Monday’s close, the DJIA is down 3.5% for the month and the only major index negative for the year. Both the S&P 500 and Nasdaq Composite are positive in 2023, but down 2.3% and 1%, respectively, in February.
James Hughes, Global Head of Brand at Scope markets commented: “US futures made a solid start to the overnight session but momentum has been ebbing away since … A mixed session in Asia and a weaker start in Europe is doing little to lend support here, whilst month-end position-keeping also has the ability to provide a degree of influence.”
He added: “US economic data remains something of a mixed bag with yesterday’s better-than-expected pending home sales print again adding weight to policy hawks at the Federal Reserve.
Later in today’s session, the Chicago PMI print and Consumer Board Confidence figure will both be in focus, with upbeat prints here unlikely to offer any respite for equities, either.”
Also on the economic front on Tuesday, investors will eye wholesale inventories and the S&P Case-Shiller home prices index.
On the corporate front, in after-hours moves following news, Zoom Video rose after posting strong earnings, while Occidental Petroleum fell after posting a top-and-bottom line miss.
More retail earnings reports are due for release on Tuesday, including results from Target, AutoZone, Rivian Automotive, Norwegian Cruise Line Holdings and AMC Entertainment.
Ahead of the US open and the FTSE is standing at 7,900.11, down 35.00 points, or 0.44%.
12.30pm: AB Foods extends gains, Citi and Deutsche raise target
Heading into the afternoon and the FTSE 100 has recovered some ground lost earlier in the session but remains in the doldrums, down 28 points.
Banks have provided support with NatWest, Lloyds, Barclays and HSBC all higher. Strong inflation figures in Spain and France together with record food price figures from Kantar suggested interest rates may have to move higher from current levels, an environment which is generally supportive to banks.
Elsewhere in the sector Spanish rival Santander said it intended to pay 50% of profits out to shareholders today, sending shares higher.
AB Foods gained a further 1.7% following yesterday’s strong statement in which it raised guidance for the coming year. Citi raised its price target to 2,100p from 1,900p while Deutsche Bank was more bullish, lifting its target from 2,180p to 2300p.
Reiterating a ‘buy’ rating the German bank said: “The pre-close trading update reinforced our positive view on AB Foods with a better Primark sales and margin performance and robust performance across the Food businesses more than offsetting the weaker sugar performance.”
The broker raised EPS estimates for the next three years by 4%, 5% and 9% respectively.
“AB Foods remains one of our top picks in the European retail space given the strong Primark LFL, new space and margin recovery in addition to the robust Food businesses performance and benefit from £500m share buyback.”
11.58am: IEA warns increased Chinese demand could lift gas prices
The International Energy Agency has warned of a possible rise in natural gas prices to new records, spurred on by unpredictable consumption rates in China.
Although prices fell in recent months, this could change in the current year as demand in Asia and especially China picks up, the IEA said in its gas market report published in Paris on Tuesday.
As the world’s largest importer of natural gas, China recently lifted the Covid restrictions that dampened domestic demand last year, the report noted.
After last year’s turmoil, global natural gas markets are set to remain tight in 2023
Our latest report forecasts the world’s gas demand will be flat this year, but major uncertainties persist around the potential for further Russian supply cuts ⬇ https://t.co/Wf6tneoBBc
— International Energy Agency (@IEA) February 28, 2023
In an optimistic scenario, renewed demand growth for liquefied natural gas in China could be as high as 35%, according to the IEA. This would trigger fierce competition in international markets and could lead to gas prices returning to the unsustainable levels of last summer – a particular concern for European buyers.
“Last year was exceptional for global gas markets. Prices are returning to tolerable levels, especially in Europe, where a mild winter and a drop in demand contributed to cooling markets,” said IEA’s director for energy markets & security, Keisuke Sadamori.
“China is the big unknown in 2023, and if global LNG demand returns to pre-crisis levels, it will only increase competition in global markets and inevitably drive prices up again.”
11.30am: Santander plans to return up to half of profits to shareholders
After the disappointing UK bank reporting season comes better news from Santander.
The Spanish bank said on Tuesday it intends to increase pay-outs to shareholders to 50% of profits from 40% as the lender laid out plans for higher profitability and growth alongside full-year results.
The Madrid-based lender which bought UK building society Abbey National in 2004 is targeting a return on tangible equity of 15-17% for the next three years (2023- 2025), while delivering double-digit average annual growth in tangible net asset value per share plus dividend per share through the cycle.
By 2025, it is aiming to add 40mln customers, which would take its total to 200mln.
“This will help to grow revenues by 7-8% per year on average in constant euros in 2023-2025. Furthermore, through its ongoing transformation, the bank expects to improve its efficiency ratio from 45.8% to 42% by 2025,” Santander added.
In 2023, the bank expects to continue to generate further, profitable growth, targeting double-digit revenue growth; a ROTE of above 15%; cost of risk below 1.2%; a cost to income ratio of 44-45%, and CET1 above 12%.
In 2022, attributable profit rose to €9.61bn, 18% more than 2021, a new record. Underlying profit also amounted to €9.61bn, up 11% year-on-year.
The lender declared a 5.95c per share final dividend, taking the annual pay-out to 11.78c which was an increase of 18%.
In the UK, underlying attributable profit totalled €1.4bn in in 2022, down 9% compared to 2021, hit by rising bad debt provisions and a €127mln charge relating to a settlement agreed with the FCA regarding AML controls prior to 2017.
Total income was up 12%, driven by strong net interest income growth (+13%) benefitting from higher mortgage volumes and margin management in a rising interest rate environment.
Costs rose 3% and bad debt provisions increased to €316mln.
Shares in Santander rose 4.9% in Madrid on Tuesday to €3.72 per share. In London, banking shares were a firm feature helping pull the FTSE off its lows.
Lloyds Banking Group PLC (LSE:LLOY) rose 1.6%, Barclays PLC (LSE:BARC) 1.1% and HSBC Holdings PLC (LSE:HSBA) 1.1% leaving the Footise at 7,907.82, down 27.29 points, or 0.34%, well off earlier lows of 7,884.75.
11.02am: FTSE 100 line-up seen unchanged in latest reshuffle
The latest FTSE reshuffle is set to see Moonpig fly out of mid-cap index and a sausage-skin maker staging a temporary entry, according to Susannah Streeter at Hargreaves Lansdown.
She said the FTSE 100 line-up is set to stay unchanged but Moonpig, 888 Holdings and Videndum look set to be relegated from the FTSE 250.
Heading upwards are sausage skin maker Devro, STEM recruiter SThree while North Sea oil producer Ithaca Energy is set to join the FTSE 250 following its IPO.
The FTSE All Share Index quarterly review is based on closing prices and market capitalisations today and will be announced by FTSE Russell on 1 March with changes taking effect the close of business on 17 March.
10.31am: Sterling edges higher but NI deal not seen as boosting UK growth
Sterling edged higher on Tuesday extending yesterday’s 1% gain lifted by the the announcement of a deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
While retail data from Kantar showing grocery inflation hit a record high of 17.1% in the four weeks to 19 February which followed last week’s strong PMI figures increased concerns that the Bank of England may increase interest rates again. There had been hopes that the central bank would pause the current tightening cycle.
Economists doubt whether the UK/EU deal over Northern Ireland will change the growth picture in the UK enormously but it does remove a deal of uncertainty.
Samuel Tombs at Pantheon Macroeconomics said the deal is “unlikely to provide a material boost to economic growth.”
He said evidence that the current arrangements have dampened economic activity are not compelling.
He did feel that it would improve the economic performance of some import-intensive businesses, such as retailers.
Oxford Economics agreed and thinks it is “overly optimistic” that the deal would provide a big boost to business investment.
The pound was 0.2% higher at US$1.2080 mid-morning in London. Meanwhile, the FTSE 100 is back above 7,900 at 7,902.99, down −32.12 points, 0.40%.
9.58am: Ocado “so much promise and so little joy”
Shares in Ocado Group are now down more than 10%. Russ Mould at AJ Bell described the firm, as offering “so much promise and so little joy.”
“Three years ago, it was on the cusp on a significant shift in consumer behaviour. The pandemic forced people to buy their groceries online, meaning any company that didn’t have a robust set-up to pack and deliver food and drink to households had to think fast to gain this capability,” he noted.
“Ocado had the best moment in its existence to sell its technology platform to grocers around the world. Sadly, the deals have been few and far between, leaving investors wondering when it will ever make a sustainable profit.”
He was scolding on the figures saying they are as “appetising as a bucket of sick.”
“Revenue growth has ground to a halt, pre-tax losses are getting worse and net debt has ballooned.”
He feels the “retail joint venture with Marks & Spencer looks stuck in the mud.”
“Consumers are pulling back from doing big shops which is problematic for Ocado. It’s more cost and time efficient to fill a van with a big customer order than lots of little ones, so the shift in shopping behaviour creates a headwind.”
“Ocado has long argued that it needs to spend money to make money, but patience is wearing thin for the long-suffering shareholders,” Mould concluded
Shares in Ocado were down 10.4% at 560p each in London Tuesday while the FTSE 100 has conceded the 7,900 mark, at 7,896.85, down 38.26 points.
9.36am: Inflation rises in Spain and France
Inflation is never far away from investor’s minds and news today in Europe and the UK suggests pricing pressures aren’t going away as fast as hoped.
Inflation figures in Spain and France both rose in February while the latest grocery price survey from Kantar in the UK showed food price inflation hit a record high, up 17.1%.
Over in France, consumer price inflation stood at 6.2% in February, up from 6% in January, as a result of accelerating food and services prices.
French CPI (Y/Y) Feb P: 6.2% (est 6.1%; prev 6.0%)
– French CPI EU Harmonised (Y/Y) Feb P: 7.2% (est 7.0%; prev 7.0%)
– French CPI (M/M) Feb P: 0.9% (est 1.0%; prev 0.4%)
– French CPI EU Harmonised (M/M) Feb P: 1.0% (est 1.0%; prev 0.4%)— LiveSquawk (@LiveSquawk) February 28, 2023
The harmonised index, which is important for the ECB, stood at 7.2% compared to 7% in January. Month-on-month, consumer prices rose by 0.9% compared to 0.4% in January.
ING Economics said the data indicates, “that French inflation has still not peaked.”
“Both headline and core inflation are likely to continue to rise in the coming months, giving the ECB further reason to continue raising rates beyond the first quarter.”
“It will probably take until the second quarter to see the peak in inflation in France and until the summer to see inflation really come down,” ING forecast.
In Spain, inflation rose in February to 6.1% from 5.9% last month. Harmonised inflation followed the same move to 6.1% from 5.9% in January. Core inflation reached 7.7% in February from 7.5% last month, it has has now risen continuously for 22 consecutive months.
Spanish CPI (Y/Y) Feb P: 6.1% (est 5.8%; prev 5.9%)
– Spanish CPI EU Harmonised (Y/Y) Feb P: 6.1% (est 5.7%; prev 5.9%)
– Spanish CPI (M/M) Feb P: 1.0% (est 0.7%; prev -0.2%)
– Spanish CPI EU Harmonised (M/M) Feb P: 1.0% (est 0.9%; prev -0.4%)— LiveSquawk (@LiveSquawk) February 28, 2023
ING expects Spanish inflation to be around 4.3% for the full year 2023, reaching 2.7% by the end of the year.
“It will probably take until the second half of 2024 for headline inflation to return to the ECB’s 2% target,” it predicted.
ING still expects growth of 1.3% in Spain in 2023, but with ECB rate hikes on the way it forecast Spanish economic growth would fall to 0.8% in 2024.
9.00am: Pricing pressures remain in Europe
London’s blue chips made a weak start on Tuesday with Ocado Group PLC (LSE:OCDO) top of the fallers after reporting widened full year losses as its Ocado Retail joint venture swung into the red.
At 9.00am the FTSE 100 was at 7,908.38, down 26.73 points, or 0.34%.
Equities were further hit by strong inflation figures in France and Spain which raised fears that pricing pressures are not falling as fast as hoped. French CPI edged higher to 6.2% in February from 6% in January, just ahead of consensus forecasts of 6.1%. In Spain, inflation also rose in February to 6.1% from 5.9% last month.
Pantheon Macroeconomics noted the increase in the headline rate in France was not driven by higher energy inflation but by higher food inflation and a rise in the core rate.
Rising food prices were also evident in London as Kantar latest figures showed grocery inflation hit 17.1% in the four weeks to 19 February, the highest level ever recorded by Kantar, with households facing an £811 increase to their average annual bill if they buy the same items.
Adding to the food retail theme, Ocado Group tumbled 7% after reporting wider full-year losses.
The firm said revenue was broadly flat at £2.5bn in the 12 months to 31 December 2022, up 0.6%, with strong growth in Solutions revenue offset by a decline at Ocado Retail. Ocado Retail’s revenue fell 3.8% to £2.2bn, with robust customer growth offset by lower value baskets.
But pre-tax losses at the online food retailer widened to £501mln compared to £176.7mln in 2021 due to rising costs and investments made at Ocado Retail and £349mln depreciation and amortisation.
Ocado Retail, a joint venture between Ocado Group and Marks and Spencer Group PLC (LSE:MKS) (Marks and Spencer Group PLC (LSE:MKS)), posted an EBITDA loss of £4mln compared to a profit of £150.4mln in 2021.
Sophie Lund-Yates at Hargreaves Lansdown said: “Ocado Retail has seen losses mushroom. Despite a 13% increase in active customers, volumes haven’t followed suit, meaning the cost to serve all those online orders has become a burden.”
“Ocado is in the eye of the cost-of-living storm because its offering isn’t synonymous with being the best value, it’s a higher-end option, without the same benefits of enticing people in with tangible, physical goods like M&S or Waitrose can.”
“One quarter of British shoppers are struggling as grocery price inflation goes above 17% for the first time, according to new data from Kantar. It was a year ago that food inflation climbed above 4%, meaning consumers now feel like there’s a hole in their wallet every time they reach the checkout,” he pointed out.
Leading the FTSE 100 risers was St James’s Place PLC where shares rose 3% after results.
Peel Hunt said the numbers were, “slightly ahead of consensus, with good progress towards five year strategy.”
While in the FTSE 250 top billing was taken by Man Group PLC (LSE:EMG) which surged 6.7% after forecast busting results.
Core EPS of 48.7c beat consensus of 44.3c while core performance fee pre-tax profits of US$489mln beat consensus of US$438mln.
8.23am: Food inflation hits new high, up 17.1%
Grocery price inflation has risen again to 17.1% in the four weeks to 19 February 2023, the highest level ever recorded by Kantar, with households facing an £811 increase to their average annual bill if they buy the same items.
Fraser McKevitt at Kantar said: “Shoppers have been facing sustained price rises for some time now and this February marks a full year since monthly grocery inflation climbed above 4%. This is having a big impact on people’s lives.”
“Our latest research shows that grocery price inflation is the second most important financial issue for the public behind energy costs, with two-thirds of people concerned by food and drink prices, above public sector strikes and climate change.”
Aldi pushed its market share to a new record this period hitting 9.4%.
It remains the fastest growing grocer, with sales up by 26.7%, closely followed by Lidl which increased sales by 25.4% taking its market share to 7.1%.
Frozen food specialist Iceland also won share, taking 2.4% of market sales, up from 2.3% last year as spending through its tills increased by 10.8%.
Ocado put in a strong performance, bucking the overall trend in online sales. While online fell by 0.9% over the 12 weeks, the digital specialist grew sales by 11.3% to achieve its largest ever market share of 1.9%.
Tesco edged slightly ahead in the battle between Britain’s biggest retailers, with sales up by 6.6%. Sainsbury’s and Asda were just behind with sales rising by 6.2% and 5.9% respectively. Morrisons’ sales decline of 0.9% was its best performance since May 2021.
Waitrose returned to growth, nudging up sales by 0.7%. It has a market share of 4.7%. Convenience retailer Co-op increased sales by 3.4% while independents and symbols were up by 1.8%.
8.15am: Footsie dips at the open
London’s blue chips fell back on Tuesday conceding some of yesterday’s strong gains as investors digested a raft of trading updates and the implications of the deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
At 8.15am London’s blue chip index was at 7,908.59, down 26.52 points, or 0.33% while the FTSE 250 stands at 19,826.23, down 59.87 points, or 0.30%.
Ocado Group PLC (LSE:OCDO) fell 4.4% to 597.44p after reporting losses widened in 2022.
The firm said revenue was broadly flat at £2.5bn in the 12 months to 31 December 2022, up 0.6%, with strong growth in Solutions revenue offset by a decline at Ocado Retail. Ocado Retail’s revenue fell 3.8% to £2.2bn, with robust customer growth offset by lower value baskets.
But pre-tax losses at the online food retailer widened to £501mln compared to £176.7mln in 2021 due to rising costs and investments made at Ocado Retail and £349mln depreciation and amortisation.
Ocado Retail, a joint venture between Ocado Group and Marks and Spencer Group PLC (LSE:MKS), posted an EBITDA loss of £4mln compared to a profit of £150.4mln in 2021.
Shore Capital described the results as “awful”, that “record, as expected, material losses; half-a-billion of them.”
“One day in a distant time zone the Ocado Group may be surrounded by the words, meaningful sequential pre-tax profits, who knows, it may even pay Corporation Tax, but one cannot yet see the rainbow, never mind any pot of gold. Further notable losses are guided for FY23,” the broker said.
But heading the other way was AO World PLC (LSE:AO.) which soared 8.5% after raising guidance for the second time in as many months due to higher retail margins than previously forecast.
The electrical retailer now expects adjusted EBITDA in a range of £37.5m to £45m for the full year compared to the £30mln to £40mln guidance given in January.
“The steps we have taken to simplify the business and become more efficient have outperformed expectations and been delivered quicker than expected,” AO said in a statement.
Croda International PLC (LSE:CRDA) slipped 5.8% despite record results on Tuesday as it posted a rise in full-year sales and profit following a strong performance in Asia, Western Europe and Latin America, with growth across consumer care and life sciences.
In the year to the end of December 2022, statutory pre-tax profit rose 89.6% to £780m, including a gain on the PTIC business disposal of £356.0m. Adjusted pre-tax profit was 11% higher at £496.1m and sales pushed up 10.6% to £2.1bn.
But Travis Perkins (LSE:TPK) PLC tumbled 8.2% after reporting a 16% fall in adjusted operating profit to £295mln impacted principally by lower year-on-year property profits and a £15mln charge related to restructuring activities in the fourth quarter.
The building materials firm is targeting cost savings of around £25mln in 2023.
7.44am: Home sellers accepting bigger discounts
Home sellers are accepting an average discount of 4.5% off their asking prices to find a buyer, according to property website Zoopla.
The average property price in the UK is now £260,800, Zoopla said, which means sellers are taking a cut of £14,100, the highest gap between asking and selling prices for five years.
Richard Donnell, executive director at Zoopla, explained: “Greater realism on the part of sellers is supporting housing market activity in the face of higher borrowing costs.”
“Many homeowners are sitting on sizable house price gains made over recent years and have more room to be flexible accepting offers below the asking price.”
“Discounts to asking price have widened and while 4-5% discounts are manageable, if these were to widen further then this would point to a greater likelihood of larger house price falls.”
“We believe the market remains on track for a soft landing in 2023 with modest price falls of up to 5% and one million housing sales.”
7.36am: Losses widen at Ocado
Ocado Group PLC (LSE:OCDO) reported flat revenue but widened full-year losses on Tuesday as cost pressures and investments made to support Ocado Retail took their toll.
The online food retailer said revenue was broadly flat at £2.5bn, up 0.6%, with strong growth in Solutions revenue offset by a decline at Ocado Retail. Ocado Retail revenue of £2.2bn, fell 3.8% with robust customer growth offset by lower value baskets.
Pre-tax losses widened to £501mln compared to £176.7mln in 2021 due to rising costs and investments made at Ocado Retail and £349mln depreciation and amortisation.
The company said liquidity remained healthy liquidity with a cash balance of £1.3bn, following the equity raise in June.
Looking to 2023 and Ocado said revenue at Ocado retail is expected to show mid-single digit growth with an improving trajectory during the year, reflecting a return to volume growth as the challenging comparison to larger volume basket shopping behaviours that remained in early 2022 fades.
EBITDA at Ocado Retail is forecast to be marginally positive. “It is likely that EBITDA will be negative in the first half and positive in the second half, as a return to volume growth supports improved capacity utilisation and reduced costs relative to sales,” the firm said.
Chief Executive Tim Steiner said: “Ocado Retail, our UK JV with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the Covid unwind and the UK cost of living crisis, by growing customer numbers and increasing online market share.”
“As the Covid unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments.”
“Our strong balance sheet gives us the means to finance our growth through the mid-term (4-6 years) by which time we expect Ocado Group to be cash flow positive with the cash flows from existing CFCs sufficient to finance future investments.“
7.00am: Subdued start seen in London
FTSE 100 expected to open little changed on Tuesday consolidating yesterday’s strong gains with sentiment lifted by the announcement of a deal between the UK and the EU over post-Brexit trading arrangements for Northern Ireland.
Spread betting companies are calling London’s lead index down by around 2 points.
Michael Hewson at CMC Markets noted: ““Optimism over the UK economy also helped after it was announced that a long-running trade sore could well be confined to the history books, with agreement on the fractious Irish border issue.”
“All the focus will now be on the DUP to see whether the new arrangements pass muster with them.”
“Later this afternoon we have comment from Bank of England officials, John Cunliffe, Chief Economist Huw Pill and external MPC policymaker Catherine Mann, who has become even more hawkish given current trends around increasingly sticky inflation.”
US stocks ended the day in the green, recovering some of the ground lost on Friday, following the worst week of the year on Wall Street.
On Wall Street, the Dow Jones Industrial Average closed up 72.37 points, or 0.2%, at 32,889.29. The S&P 500 rose 12.31 points, or 0.3%, to 3,982.35, and the Nasdaq Composite leapt 72.04 points, or 0.6%, to 11,466.98.
In Asia on Tuesday, the Nikkei 225 index was up 0.1%. In China, the Shanghai Composite was up 0.3%, while the Hang Seng index in Hong Kong was down 0.3%. The S&P/ASX 200 in Sydney closed up 0.5%.
Back in London and the early focus will be results from abrdn, boohoo, Croda, Intertek and Ocado.
Source: proactiveinvestors.co.uk
