(Alliance News) - Online fashion retailer ASOS on Wednesday admitted it made a mistake in embarking on a "huge" logistical spending plan which has led to a slump in annual profit.
Pretax profit for the 12 months to August 31 fell 68% to GBP33.1 million, despite revenue rising 13% to GBP2.73 billion. At constant currency, revenue was up 12%.
ASOS's UK retail sales climbed 15% to GBP993.4 million, with international climbing 11%, or 10% constant currency, to GBP1.66 billion.
ASOS issued two profit warnings during the year, the first in December after a "significant downturn" in performance during November 2018, and then another in July after warehouse problems in Atlanta, US, and in Berlin.
Shares in the AIM-listed company closed at 2,560 pence each on Tuesday in London. At the start of December 2018, prior to the first warning, they were around the 5,000p mark.
ASOS said Wednesday the financial and operating performance was "disappointing", with the "huge" investment made more challenging than predicted.
ASOS shares were up 9.9% in early trade Wednesday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.1% at 7,201.87
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Hang Seng: up 0.6% at 26,657.45
Nikkei 225: closed up 1.2% at 22,472.92
DJIA: closed up 237.44 points, 0.9%, at 27,024.80
S&P 500: closed up 1.0% at 2,995.68
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GBP: up at USD1.2784 (USD1.2739)
EUR: firm at USD1.1054 (USD1.1036)
Gold: soft at USD1,479.45 per ounce (USD1,481.99)
Oil (Brent): soft at USD58.92 a barrel (USD59.38)
(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
0930 BST UK monthly consumer and producer price indices
0930 BST UK house price index
1100 CEST EU foreign trade
1100 CEST EU harmonised consumer price index
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US advance monthly sales for retail & food services
1000 EDT US manufacturing & trade: inventories & sales
1000 EDT US NAHB housing market index
1400 EDT US Federal Reserve Beige Book
1600 EDT US Treasury international capital data
1630 EDT US API weekly statistical bulletin
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Boris Johnson faces a race against the clock to secure a Brexit deal and get Tory Eurosceptics and the DUP onside to back him. The UK prime minister carried out a charm offensive in Downing Street on Tuesday evening as he held a series of talks with backbenchers and the leaders of the DUP. Meanwhile, his negotiating team worked through the night as reports increased that a deal was nearing, with a solution said to be forthcoming on the Irish border.
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A no-deal Brexit would be highly controversial in Scotland, Wales and Northern Ireland and risks taking the Union to "breaking point", a leading think tank has warned. The Institute for Government said that since Boris Johnson became UK prime minister, there has been a decline in engagement with the devolved governments. In a report, called No-deal Brexit and the Union, the think tank said: "A no-deal Brexit would be a high stakes gamble with the future of the Union."
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The Liberal Democrats have tabled an amendment to the Queen's Speech calling for any Brexit deal to be put to voters in a referendum. If the amendment backing a so-called "people's vote" is selected by the Commons Speaker, it could be voted on by MPs as early as Tuesday.
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China expressed "strong indignation and firm opposition" to the US House of Representatives' passage of a bill in support of Hong Kong protesters. The Hong Kong Human Rights and Democracy Act requires sanctions against Chinese officials "responsible for undermining fundamental freedoms" in the city. It also provides an annual review of whether Hong Kong is sufficiently autonomous from Beijing to maintain a special trading status with the US.
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A bid by the US to negotiate a ceasefire in north-eastern Syria appeared uncertain as Turkish President Recep Tayyip Erdogan rejected any truce in the region. Turkey will "never" declare a ceasefire, nor will it "negotiate with terrorists," Erdogan told reporters on his plane returning from a trip to Azerbaijan, according to CNN Turk and other media. The reports came after a US announcement that Vice President Mike Pence would travel to Turkey on Wednesday in the hope of negotiating a truce. Pence plans to meet Erdogan on Thursday, the vice president's office said, days after Trump hiked tariffs on Turkish steel imports and sanctioned Turkey's Defence Ministry and Energy Ministry, among other sanctions.
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US President Donald Trump's personal lawyer, Rudy Giuliani, said he will not comply with a subpoena from Democrats in Congress who have mounted an impeachment investigation against the president. The move comes as Democrats held two closed-door depositions of current and former Trump administration officials this week in their investigation into whether Trump unduly pressured the Ukrainian government for personal gain. "I will not participate in an illegitimate, unconstitutional, and baseless 'impeachment inquiry'," Giuliani tweeted.
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BROKER RATING CHANGES
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BERENBERG REINITIATES RECKITT BENCKISER WITH 'BUY' - PRICE TARGET 7420 PENCE
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HSBC RAISES GO-AHEAD GROUP TO 'BUY' ('HOLD') - TARGET 2400 (2100) PENCE
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COMPANIES - FTSE 100
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Rio Tinto chopped its bauxite and aluminium production guidance amid worse-than-expected output, while production at Pilbara, located in western Australia, accelerated. The Anglo-Australian miner said Pilbara iron ore shipments of 86.1 million tonnes in the three months to the end of September were 5% higher than in the third quarter of 2018. Pilbara iron ore production of 87.3 million tonnes was 6% higher year-on-year and 10% higher quarter-on-quarter, reflecting a good recovery from the operational and weather challenges experienced earlier in the year. Looking ahead, Rio Tinto kept its guidance for all of 2019 unchanged, with the exception of bauxite production, which has been revised to around 54 million tonnes from a previously estimated range of 56 million to 59 million tonnes. Aluminium production guidance was revised downwards to around 7.7 million tonnes from 8.1 million to 8.4 million tonnes.
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Barratt Developments said it has started its new financial year positively, with a good sales rate and a healthy forward order book. For the 15 week period to October 13, Barratt's sales rate was 0.72 net private reservations per active outlet per average week. Total forward sales with joint ventures on October 13, was 12,963 homes, up from 12,903 at the same time last year. Barratt said it continues to make good progress on its volume growth targets of 3% to 5% per annum over the medium term, with a focus on driving margin improvements. "We have started our new financial year well. Based on current market conditions, we continue to expect to grow volume towards the lower end of our medium-term target range this year," said Chief Executive Officer David Thomas.
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Warehouse property investor Segro said it saw a strong operational performance in the period between July 1 to October 15. Segro signed GBP15.3 million worth of new rental income in the third quarter, up 21% from GBP12.6 million in the third quarter last year, it said. Segro reported a stable vacancy rate in the period of 4.9%, up from 4.8% at June 30. "SEGRO continues to benefit from the structural trends of urbanisation and technological revolution, and despite the uncertain macro-economic backdrop at this time, we head into the final part of the year with confidence. Looking ahead, the combination of new rental income from the development programme, compounded with the benefits of active asset management of our existing portfolio, should enable us to drive sustainable growth in both earnings and dividends," said CEO David Sleath.
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COMPANIES - FTSE 250
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Mediclinic International said it delivered a solid performance in the first half of its financial year across all of its operations, with revenue and earnings set to rise. For the six months to the end of September, the dual-listed private hospital group said adjusted earnings before interest, taxes, depreciation and amortisation will increase by around 3.5% from GBP231 million the year before. This is on revenue that is to grow by 9.0% on a reported basis from GBP1.39 billion the prior year. On a constant currency basis, revenue will increase by 6.5% year-on-year. Mediclinic said its accounted share of profit from its 30% stake in Spire Healthcare Group rose slightly to GBP2.1 million from GBP1.8 million the year before. The London-listed investee reported in September that its performance for the first half of 2019 was in line with expectations, and its guidance for the year remained unchanged.
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COMPANIES - INTERNATIONAL
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Roche Holdings revised its annual outlook upwards amid an improved performance in the first nine months of 2019. The Swiss healthcare company said sales in the nine months to the end of September rose by 10% to CHF46.1 billion, about USD46.23 billion. On a divisional basis, sales in the Pharmaceuticals segment increased 12% to CHF36.6 billion, driven by the multiple sclerosis medicine Ocrevus, the new haemophilia medicine Hemlibra and cancer medicines Tecentriq, Perjeta and Avastin. Sales in the Diagnostics division increased 4% to CHF9.5 billion. The business area Centralised & Point of Care Solutions was the main contributor, Roche said, with growth driven by the immunodiagnostics business.
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Italian-American carmarker Fiat Chrysler Automobiles said it was upbeat for fourth quarter Europe sales after a strong September performance closed what was a weak start to the third quarter. For the three months ended September, European sales stood at 200,200 vehicles taking the Fiat, Alfa Romeo and Jeep maker to a 5.4% market share in the region. In 2018, FCA reported 92,800 sales in July, 73,300 in August and 61,900 in September. This implies total third quarter sales in 2018 of 228,000.
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General Motors Chief Executive Mary Barra was back at the bargaining table with union leaders on Tuesday, a labour source said, amid signs of potential progress in talks to end a strike. Barra's appearance came with news that United Auto Workers leaders had called local union representatives to Detroit for a meeting on Thursday. Such gatherings have in the past served as occasions to vote on labour agreements. Nearly 50,000 hourly workers have been on strike since September 16 in a walkout that has halted production at 31 factories and led to thousands of layoffs at auto supply companies.
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Google stepped up its smartphone ambitions with updated Pixel handsets, touting a move toward computing with a simple hand wave or spoken command. Pixel 4 models boasting features including gesture and face recognition debuted at a "Made by Google" event showcasing new hardware infused with artificial intelligence to respond to motion and voice. The Pixel 4 handset with a 5.7-inch display has a starting price of USD799 in the US and will be available globally starting October 24. A larger 6.3-inch Pixel XL will start at USD899. The new devices aim to ramp up the challenge by Google, part of Alphabet, in the premium smartphone segment dominated by Samsung Electronics and Apple, which recently unveiled an iPhone 11 starting at USD699.
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Wednesday's Shareholder Meetings
Barratt Developments
SOCO International (re name change to Pharos Energy)
Loungers
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By Tom Waite; thomaslwaite@alliancenews.com
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