(Alliance News) - UK retailer Marks & Spencer on Wednesday said its transformation plan is progressing rapidly as it makes up for "lost time" in its Clothing & Home unit, which saw a "difficult" first half.
Revenue for the half-year to September 28 fell 2.1% to GBP4.86 billion, though pretax profit jumped 52% to GBP153.5 million. Profit before tax and adjusting items fell, however, by 17% to GBP176.5 million.
M&S booked just GBP23.0 million in adjusting items in the recent half year, compared to GBP111.7 million a year ago. This includes costs relating to strategic programmes in areas such as its UK store estate and IT restructure.
Like-for-like sales growth in the Food unit was 0.9% in the half-year, driven by volume. Clothing & Home like-for-like sales, meanwhile, fell 5.5%.
M&S said it saw an improved Clothing & Home performance in October following a "difficult" first half.
"Our transformation plan is now running at a pace and scale not seen before at Marks & Spencer. For the first time we are beginning to see the potential from the far reaching changes we are making," said Chief Executive Steve Rowe.
"In Clothing & Home we are making up for lost time. We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season's contemporary styling and better value product," said Rowe.
Looking ahead, M&S said some improvement in trading is expected in the second half, though market conditions remain challenging.
The stock was up 6.6% at 194.45 pence early 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 7,382.11
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Hang Seng: down 0.1% at 27,652.28
Nikkei 225: closed up 0.2% at 23,303.82
DJIA: closed up 30.52 points, 0.1%, at 27,492.63
S&P 500: closed down 0.1% at 3,074.62
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GBP: flat at USD1.2876 (USD1.2868)
EUR: flat at USD1.1076 (USD1.1067)
Gold: firm at USD1,485.80 per ounce (USD1,483.02)
Oil (Brent): flat at USD62.58 a barrel (USD62.72)
(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
0955 CET Germany services purchasing managers' index
1000 CET EU eurozone services PMI
1100 CET EU retail trade
0830 EST US preliminary productivity & costs
1030 EST US EIA weekly petroleum status report
0700 EST US MBA weekly mortgage applications survey
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Boris Johnson has compared Labour leader Jeremy Corbyn with Soviet dictator Joseph Stalin, as the UK prime minister launched the Tory campaign to remain in power. As Parliament was dissolved ahead of the election, and Corbyn prepared to campaign on a pledge to end the need for food banks if Labour took power, Johnson claimed the opposition leader shared Stalin's "hatred" of wealth creators.
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Johnson has urged US President Donald Trump to lift tariffs on Scotch whisky over concerns the newly imposed US tax could wipe GBP1 billion off single malt sales over the next year. The two leaders discussed the future of US trade policy during a phone call on Tuesday evening.
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Optimism among small and medium-sized manufacturing firms has plunged in the last three months faster than any pace since July 2016, according to the Confederation of British Industry. The latest CBI SME Trends Survey for October also found that of the 240 manufacturers interview, optimism around exports for the year ahead also remains gloomy. Total new orders fell slightly in the three months to October – down 6%, at a similar pace to July, when there was a 4% fall.
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A top ally of Trump admitted he told a Ukraine official that US military aid was contingent on Kiev investigating Trump's Democratic rival Joe Biden, testimony released Tuesday showed. In some of the most damning evidence yet to the House impeachment inquiry of Trump, Gordon Sondland, the US ambassador to the EU, said he told a senior Ukraine official that military aid would likely not be released until Kiev made clear it would investigate Biden and his son's ties to Ukraine energy firm Burisma.
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Germany's manufacturing orders rose once again in September on the previous month, Destatis reported. Manufacturing orders were 1.3% higher in September on August, after August's orders declined by 0.4% on July. This 0.4% fall for August has been revised from a provisional 0.6% dip. However, there was a still a 5.4% year-on-year decline in manufacturing orders in September, though not as steep as August's 6.5 year-on-year fall.
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Japan services activity fell in October for the first time in over three years, data showed, driven primarily by tax changes and the disruption caused by a typhoon hitting the country. The Jibun Bank Japan services purchasing managers' index fell to 49.7 points in October from 52.8 in September. This was the first fall since September 2016, pushing the sector below the 50 point mark which separates expansion from contraction.
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BROKER RATING CHANGES
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BERNSTEIN RAISES IAG TO 'OUTPERFORM' (MARKET-PERFORM) - PRICE TARGET 650 (520) PENCE
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JPMORGAN RAISES FERREXPO TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 190 (250) PENCE
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JEFFERIES RAISES SOFTCAT TO 'BUY' ('HOLD') - TARGET 1250 (978) PENCE
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COMPANIES - FTSE 250
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Cybersecurity firm Sophos Group reported growth in revenue for its first half, though swung to a loss. Revenue for the six months to September 30 grew 5% year-on-year to USD365.8 million with subscription revenue the main driver of growth, up 8% and offsetting an 8% decline in hardware revenue. Billings of USD372.0 million were up 5% year-on-year. Sophos swung to a loss of USD1.5 million, however, from a USD26.0 million profit a year ago. General finance & administration costs were up to USD72.3 million from USD44.6 million. In October, US-based private equity firm Thoma Bravo agreed a GBP3 billion takeover of Sophos.
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Ultra Electronics said it continues to trade in line with expectations and it has seen "good" order book development since its interim results. "The ongoing strategic evolution is progressing and there remains good long term opportunities and growth potential for Ultra. Our major markets are growing, and our strong technology base is positioning us well on existing and potential future programs," the defence firm said.
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Housebuilder Redrow said trading has remained "encouragingly resilient" in the first 18 weeks of its financial year, despite ongoing Brexit uncertainty and weak demand in the housing market. The value of net private reservations in the 18 weeks to Friday last week was 2% ahead of last year at GBP598 million, excluding a GBP119.5 million sale at Colindale Gardens. Including this, the value of private reservations was up 22% to GBP717 million. The sales rate per outlet per week on a like-for-like basis was 0.67, compared to 0.64 last year. "I am confident that, providing trading conditions remain stable, Redrow is on course to achieve another set of excellent results," said Chair John Tutte.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Intu Properties said it experienced difficult trading conditions in the third quarter and warned that its like-for-like net rental income will fall in 2019. Intu said leasing activity slowed in the period to September 30, with customers more reluctant to dig into their coffers due to prevailing political and economic uncertainty. The firm has however seen an uptick in leasing activity with retailers. Intu said it struck deals with British luxury department store Harrods, Spanish retail chain Zara SA, and an Alibaba Group Holding Ltd subsidiary. Intu said it was hurt by company voluntary agreements of retailers UK-based Monsoon Accessorize and Topshop-owner Arcadia Group Ltd. Intu explained: "We anticipate that like-for-like net rental income for 2019 will be down by around 9%, with more than half the reduction coming from the impact of CVAs such as Arcadia and Monsoon."
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South32 said it has entered into an agreement to sell its South African coal subsidiary for an upfront payment of ZAR100 million. The miner's 92% holding in SA Coal Holdings Proprietary will be bought by a subsidiary of South African coal miners Seriti Resources Holdings Proprietary, a local community trust, and an employee trust. The trusts will take a 5% stake each, with Seriti holding 82%. The remaining 8% interest, not included in the deal, is held by industrial investors Phembani Group Proprietary. The consideration also includes a deferred payment which will see South32 receive a portion of the cash flow generated from by the unit, capped at ZAR1.5 billion. The London, Sydney and Johannesburg listed company will earn 49% of cash generated between the completion of the transaction and March 2024.
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COMPANIES - INTERNATIONAL
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Japanese technology investor SoftBank Group held its interim dividend steady, despite its profit falling sharply amid high-profile issues with some of its Vision Fund investments, though sales remained robust. For the six months ended September, pretax profit narrowed 20% to JPY1.117 trillion, about USD10.25 billion, from JPY1.402 trillion a year prior. This was after net sales fell 0.4% to JPY4.652 trillion from JPY4.654 trillion a year before. Profit performance at the Tokyo-based firm was hurt by a JPY572.64 billion operating loss reported on its SoftBank Vision Fund and Delta fund holdings. This was amid a number of difficulties facing firms invested in by SoftBank through these funds during the period, including office workspace renter WeWork and a fall in the share price of ride-hailing application Uber Technologies. SoftBank proposed a 22.00 yen per share interim dividend, unchanged on the year prior.
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German carmaker BMW said profit in the first nine months of 2019 fell sharply amid tough market conditions, despite revenue and deliveries increasing. For the nine months ended September, pretax profit narrowed 35% to EUR5.06 billion from EUR7.83 billion a year prior. This was despite revenue rising 3.4% to EUR74.84 billion from EUR72.37 billion.
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Societe Generale reported a notable drop in net income in the third quarter of 2019, stemming from restructuring and a difficult market environment for the French bank. Reported group net income for the three months ended September 30 came in at EUR854 million, 35% lower than the EUR1.31 billion net income figure a year before.
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Walgreens Boots Alliance has been exploring the possibility of a USD70 billion take-private deal, holding talks with a number of private equity groups over what would be the largest buyout in history, Financial Times reported. The FT cited one of the people with knowledge of the discussions who warned that a take-private was a long shot that would face a number of challenges. No final decision has been made about whether to pursue the idea and it was not clear whether financing on such a scale would be available, FT reported. The US-listed drugstore group has more than 18,750 stores in 11 countries and has annual revenue of nearly USD34 billion.
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The US telecom regulator approved the merger of T-Mobile and Sprint, moving the tie-up of the third- and fourth-largest US carriers closer to completion. The Federal Communications Commission cleared the USD26 billion deal three months after approval by antitrust officials at the US Justice Department. The 3-2 FCC vote is conditioned on the divestment by Sprint of its prepaid division Boost Mobile to the satellite broadcast group Dish, which will begin building a new national wireless network.
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Wednesday's Shareholder Meetings
Innovaderma
1pm (re allowing share buyback and name change)
Metal Tiger (re buyback authority)
Blue Star Capital (re vote on placing)
Vast Resources
Redrow
Allied Minds (re HawkEye 360 shareholding disposal)
GCP Student Living
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By Tom Waite; thomaslwaite@alliancenews.com
London Briefing is available to subscribers as an email newsletter. Contact info@alliancenews.com
Copyright 2019 Alliance News Limited. All Rights Reserved.
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