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(Alliance News) - Marks & Spencer on Wednesday raised its annual profit outlook for the second time in less than three months after a sales rebound, but it warned over surging costs and disruption due to supply chain issues.
M&S shares were up 16% in early London trade.
The food, clothing and homewares retailer reported pretax profit of GBP187.3 million in the six months to October 2, swung from a loss of GBP87.6 million a year earlier at the height of the pandemic, and up 18% on two years ago before Covid-19 struck.
M&S said it expects full-year underlying profit to beat expectations, now guiding for around GBP500 million – having already upgraded its guidance in late August to above GBP350 million.
This comes despite warnings over "significant" supply chain cost rises over the second half, which it said will continue into the new financial year.
It said it is battling amid shortages for lorry drivers, warehouse and supplier staff, which is particularly affecting its Ocado Retail joint venture.
M&S said it is increasing pay to attract and retain workers, "which will put pressure on costs in the remainder of our financial year".
The company declared no interim dividend, unchanged from a year ago. Two years ago, M&S paid a 3.9p interim dividend.
Food sales rose 10% in the first half of the year, but clothing and home sales continued to trail, slipping by 1%.
"Food continues to be the star performer for M&S, with the Ocado partnership now sizzling. M&S products already account for about 29% of the Ocado basket, and given Ocado's expansion plans, the growth outlook in this category looks tasty for M&S," commented Ross Hindle, an analyst at Third Bridge.
"However this bright spot can't mask M&S's structural challenges, particularly in clothing & home, where the store experience, fashion proposition and clothing range remains far off its competitors. M&S's proposition continues to draw consumers towards the upper end of the target 35-55 target age range, with the group unable to shake its 'out-dated' fashion label."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,296.72
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Hang Seng: up 0.8% at 25,001.61
Nikkei 225: closed down 0.6% at 29,106.78
DJIA: closed down 112.24 points, 0.3%, at 36,319.98
S&P 500: closed down 0.4% at 4,685.25
Nasdaq Composite: closed down 0.6% at 15,886.54
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EUR: down at USD1.1565 (USD1.1577)
GBP: up at USD1.3550 (USD1.3530)
USD: up at JPY113.05 (JPY112.94)
Gold: down at USD1,824.20 per ounce (USD1,825.74)
Oil (Brent): up at USD85.28 a barrel (USD84.08)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0700 EST US MBA weekly mortgage applications survey
0830 EST US consumer price index
1000 EST US monthly wholesale trade
1030 EST US EIA weekly petroleum status report
1200 EST US EIA weekly natural gas storage report
1400 EST US monthly Treasury statement
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A first draft of a pact that could be agreed at Cop26 urges countries to strengthen their emissions-cutting plans for the 2020s in the next year. A draft "cover decision" published on Wednesday morning also urges them to set out long-term strategies by the end of next year to reach net-zero emissions by around mid-century, to curb warming to 1.5C. The document, which was published by the UK Cop26 presidency around six hours later than expected, will have to be negotiated and agreed by countries attending the talks. It says that meeting the goal to limit global warming to 1.5C – which countries pledged to try to pursue under the Paris climate accord – needs meaningful and effective action in "this critical decade".
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Greenland's parliament voted Tuesday to ban uranium mining and exploration in the vast Danish territory, following through on a campaign promise from the ruling left-wing party which was elected earlier this year. The Inuit Ataqatigiit party won snap elections in April that were originally triggered by divisions over a controversial uranium and rare earth mining project. The IA won 12 seats in the 31-seat Greenlandic national assembly, beating its rival Siumut, a social democratic party that had dominated politics in the island territory since it gained autonomy in 1979. On Tuesday 12 MPs in the national assembly voted to ban uranium mining, with nine voting against. The IA had campaigned against exploiting the Kuannersuit deposit, which is located in fjords in the island's south and is considered one of the world's richest in uranium and rare earth minerals.
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Japan Prime Minister Fumio Kishida unveils his post-election cabinet Wednesday, with a new foreign minister but other posts unchanged as the government begins work on a new pandemic stimulus package. At a special parliament session, lawmakers voted Kishida in as prime minister after his victory in last month's general election. The soft-spoken moderate took leadership of the ruling Liberal Democratic Party in September after former premier Yoshihide Suga decided not to stand for re-election. Kishida's post-election cabinet, to be officially announced later Wednesday, is largely the same as the government he named after becoming LDP leader – with the exception of a new top diplomat, Yoshimasa Hayashi.
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BROKER RATING CHANGES
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BARCLAYS CUTS BABCOCK TO 'EQUAL WEIGHT' ('OVERWEIGHT') - TARGET 352 (424) PENCE
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JPMORGAN STARTS OXFORD NANOPORE WITH 'OVERWEIGHT' - PRICE TARGET 725 PENCE
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HSBC RAISES JOHNSON SERVICE GROUP TO 'BUY' ('HOLD') - TARGET 170 (165) PENCE
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COMPANIES - FTSE 100
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Television broadcaster ITV said it has had an "outstanding" nine months with strong performances from its Studios and Media & Entertainment businesses driving revenue growth. For the nine months to September 30, revenue was GBP2.79 billion, up 29% from GBP2.17 billion at the same time last year. Total advertising revenue came in at GBP1.36 billion, rising 31% from GBP1.04 billion. As previously guided, ITV expects to propose a final dividend of 3.3p at the full year stage. Looking ahead, ITV said total advertising revenue for 2021 is expected to be the highest in the company's history. ITV highlighted it has a strong programming slate going into next year as it continues to invest in content and expects total schedule costs to be around GBP1.16 billion in 2022. This includes the FIFA World Cup, the FA Cup and a strong schedule of dramas at ITV Studios which will "drive increased levels of live and streaming viewing". "With the combination of Broadcast and ITV Hub's mass simultaneous reach, our brand safe addressable advertising product and the strong economy, 2021 looks set to have the highest advertising revenue in ITV's history, despite the lockdown in the first quarter," said CEO Carolyn McCall.
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Industrial software provider Aveva Group said it saw a good first half performance, delivering a "solid set of results" and laying foundations for future growth. For the six months to September 30, revenue rose to GBP480.9 million from GBP332.6 million last year, but its pretax loss widened to GBP80.3 million from a GBP24.2 million loss. Aveva said the loss was due to the amortisation of intangible assets relating to its combination with the Schneider Electric industrial software business and its OSIsoft acquisition. Aveva declared an interim dividend of 13.0 pence, up 4.8% from 12.4p paid out last year. The Cambridge-based firm said the integration with the OSIsoft businesses has progressed well. It said growth is expected to continue in the second half of the year on an organic constant currency basis, supported by a good contract pipeline and improving market conditions. "End market conditions started to improve during the period following disruption caused by the Covid crisis. As a result, we are seeing the resumption of structural growth, driven by increased digitalisation and net-zero projects, across a wide range of industry sectors," said Chief Executive Officer Peter Herweck.
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Vodacom said it will acquire a 55% stake in Vodafone Egypt Telecommunications from parent Vodafone for USD2.74 billion, around ZAR41.31 billion, in cash and shares. Vodafone Egypt is 55% held by Vodafone and provides telecommunication services in Egypt, including mobile and fixed voice, SMS and data to around 43 million customers. The remaining 45% is held by Telecom Egypt. The payment price of USD2.74 billion gives Vodafone Egypt an enterprise value of USD3.15 billion. Vodacom will satisfy 80% of the consideration through the issue of 242.0 million new shares at a price of ZAR135.75 each, which will increase Vodafone's shareholding in Midrand-based Vodacom from 61% to 65%. The remaining USD548 million is to be settled through cash.
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COMPANIES - FTSE 250
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JD Wetherspoon said like-for-like sales fell in the first quarter as the pub operator pointing to potential supply chain issues ahead of the busy Christmas holiday season. For the 15 weeks to November 7, like-for-like sales were 8.9% lower than the record sales achieved in the same period in 2019. Wetherspoon said supply chain issues have occurred from "time to time" but have usually related to a minority of items. The pub chain said problems have eased in recent weeks, but the busy Christmas period is yet to come. "As outlined in our annual report, published in October 2021, there have been no outbreaks of Covid-19, as defined by the health authorities, among customers in Wetherspoon pubs. However, some customers have been understandably cautious. Improvement in trade will therefore depend, to some extent, on the outlook for the Covid-19 virus," said Chair Tim Martin. "Whereas we have an increased element of caution about near-term sales, 'booster' vaccinations and better weather in the spring are likely to have a positive impact in the coming months."
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COMPANIES - MAIN MARKET AND AIM
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Advertising and marketing agency S4 Capital said it is focused on landing "whopper" clients, as it reported a big rise in third-quarter revenue. Executive Chair Martin Sorrell said S4 has secured 6 such clients and has identified 19 more as potential clients. This helped gross profit/net revenue to rise by 92% from a year before to GBP144.4 million in the third quarter that ended September 30 from GBP75.3 million a year before. On a like-for-like basis, growth was 42%. However, Sorrell warned that S4 Capital is prioritising top-line growth, and the investment required to do this will cut into profit margins. "The pandemic has proven to be an accelerator of digital marketing transformation and we are taking full advantage of this opportunity by choosing to invest a proportion of our [earnings before interest, tax, depreciation and amortisation] margin in growth," Sorrell said.
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COMPANIES - GLOBAL
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Allianz said it delivered a strong operating performance across all business segments in the third quarter of 2021. The Munich, Germany-based insurance and asset management firm said total revenue increased 9.5% in the three months to September 30 to EUR34.4 billion from EUR31.4 billion recorded a year ago. Revenue for the nine months to the end of September increased to EUR110.1 billion from EUR104.9 billion. Operating profit grew 11% year-on-year to EUR3.24 billion, driven by the company's Asset Management and Life-Health business segments. However, the strong growth in operating profit was offset to a major extent by a decrease in the non-operating investment losses. As a result, net income attributable to shareholders increased just 2.3% to EUR2.11 billion in the third quarter of 2021.
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Johnson & Johnson said the Oklahoma State Supreme Court ruled in favour of its subsidiary Janssen Pharmaceutical in overturning the trial court's USD465 million judgment in 2019. In August 2019, Johnson & Johnson appealed the civil judgment in Cleveland County District Court in the State of Oklahoma's lawsuit against opioid manufacturers. At the time, the company said the judgment disregarded its compliance with federal and state laws. "Janssen did not cause the opioid crisis in Oklahoma, and neither the facts nor the law support this outcome," said Michael Ullmann, executive vice president of General Counsel at Johnson & Johnson, said in statement.
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DoorDash has added Europe to its menu with the purchase of Finland-based food delivery firm Wolt in an all-stock deal valued at USD8.1 billion, the company announced Tuesday. The news came the same day DoorDash reported that its revenue grew 45% to USD1.3 billion in the recently ended quarter but that its loss more than doubled to USD101 million when compared with the same period last year. San Francisco-based DoorDash's shares surged 20% USD230.00, in after-market trade in New York following the announcement. Wolt has a team of more than 4,000 employees in an operation that spans 23 countries, according to the companies.
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Wednesday's Shareholder Meetings
European Opportunities Trust PLC - AGM
Hays PLC - AGM
Newmark Security PLC - AGM
PCI-PAL PLC - AGM
ThinkSmart Ltd - AGM
Thor Mining PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
Copyright 2021 Alliance News Limited. All Rights Reserved.
