- FTSE down 30 points
- Government used P&O Ferries
- Ocado (LON:OCDO) missed targets
Frasers Group PLC led the FTSE 250 risers, up 21% to 908.5p, after the retailer reported a strong performance for the year to April and said it expects “healthy growth" in profits this year.
The Sports Direct (LON:FRAS) owner posted adjusted pre-tax profits of £344.8mln for the year to 24 April 2022, compared to a loss of £39.9mln the year before. Group revenue was up almost 31% at £4.74bn, boosted by the reopening of stores after lockdown.
Despite the challenging economic backdrop, the company said it is confident of achieving “healthy growth” in adjusted pre-tax profit to £450mln-£500mln for the current financial year.
"I am really proud of the record performance we've announced today,” said chief executive Michael Murray, who took over from his father-in-law Mike Ashley last year.
“It's clear that our elevation strategy is working and we are building incredible momentum with new store openings, digital capabilities and deeper brand partnerships across all of our divisions.”
UK Sports Retail revenue increased 31.2% during the year, driven by the reopening of stores after the Covid-19 pandemic lockdown, while Premium Lifestyle revenue increased by 43.6%, reflecting the opening of new FLANNELS stores, Frasers said.
Meanwhile, JD Sports Fashion PLC was the second-largest climber on London’s blue-chip index, up 3.5% to 144.7p after revealing it’s in talks to offload Footasylum.
11.34am: Government used P&O Ferries despite condemning sackings
After heavily condemning P&O Ferries, the government has recently admitted to using its services for the military.
RMT transport union claimed it saw evidence that the Ministry of Defence (MoD) bought slots on P&O’s Dover-Calais service when air transport was busy supporting Ukraine.
The MoD admitted to using P&O in a recent exercise.
"P&O Ferries are the provider of last resort in such situations, on an exceptional basis only," a government spokesperson commented.
In March, the ferry operator unlawfully sacked 800 workers without notice, replacing them with foreign agency workers who could be paid less than minimum wage.
Many of its ship vessels failed safety inspections, which was another factor in its services being suspended.
RMT general secretary Mick Lynch labelled the MoD's use of P&O services as a "new low, even by this zombie government's sinkhole standards."
10.54am: Record interest payments on government debt in June
Rocketing inflation has caused interest payments on UK government debt to surge to the highest level on record in June.
Interest payments reached £19.4bn, which was more than double the previous monthly record set in June last year.
The unprecedented debt interest payments have been pushed increasingly higher by inflation in recent months.
Government borrowing – the difference between spending and income from tax – grew to £22.9bn, up by £4.1bn from June 2021, according to the Office for National Statistics.
June borrowing reached its second-highest level since records began 29 years ago.
Liz Truss, one of two candidates for Boris Johnson’s successor, has vowed to cut taxes immediately, whereas Rishi Sunak insisted this would further fuel inflation and, in turn, push interest payments even higher.
10.09am: Ocado slides lower
Ocado continues to lead the way as one of the index's largest fallers, down 2.6% to 754p.
The online grocery group reported lower revenues and bigger losses for the first half but insisted it has a “clear path” to at least £750mln of underlying earnings within four to six years.
Revenues of £1.26bn were generated by Ocado, down 4.4% on a year ago as gains for its Solutions software arms were offset by a decline for its UK retail joint venture with Marks & Spencer Group PLC.
9.35am: JD plans Footasylum sale
JD Sports is in talks with private equity firm Aurelius Group to sell its Footasylum following pressure from the Competition and Markets Authority (CMA).
The Bury-based FTSE-100 company acquired Footasylum in 2019 for £90mln, though JD Sports was unable to formally integrate its competitor due to a CMA investigation.
The CMA initiated a merger inquiry into the partnership and in February 2022, the watchdog handed down a £4.7mln fine for improperly sharing sensitive information.
The tussle led to the high-profile departure of former chairman Peter Cowgill in May.
9.07am: Quick snapshot
FTSE 100 opened lower, down 29 points to 7,234. Ocado group was the largest faller on London’s blue-chip index after sales fell 8% in its half-year results, wildly missing previous expectations.
Frasers Group reported a jump in profits despite a “significant increase” in running costs. Sports Direct’s parent firm recorded a profit of more than £300mln, compared to a loss the previous year.
Russia resumed pumping gas through its biggest pipeline to Germany on Thursday after a 10-day outage. Resumption eases supply concerns after Nord Stream 1 gas was turned off for annual maintenance.
JD Sports entered talks to sell Footasylum following a months-long battle with Britain’s competition watchdog. JD is attempting to negotiate a sale to a private equity firm, despite growing difficulties in obtaining financing for corporate deals.
Among the small caps, Cambridge Cognition said it followed up its strong performance last year with order and revenue growth in the first half of 2022. The company said it has a “healthy and growing qualified pipeline of opportunities for the second half.”
Fuller Smith & Turner said sales returned to pre-pandemic levels as supply chain management and its "premium" offering provide "a degree of protection." Sales in the City and West End are recovering strongest.
IXICO said it once again has been picked by a leading global pharma company to support its ongoing drug development programme in Huntington's disease. Under the new contract, IXICO will provide services to support the phase II dose-finding study.
8.24am: Indecisive market
The FTSE 100 made an indecisive start to Thursday trading as traders mulled conflicting factors.
First spiking downwards, then up, then down again, the blue-chip index was down 9 points after half an hour of wavering.
Biggest faller was Ocado Group PLC (LSE:OCDO) after its half-year results showed retail revenues declined 8% to £1.1bn, wildly missing expectations of £2.3bn.
“Despite its best efforts, Ocado for the moment remains a jam tomorrow stock," said Richard Hunter, head of markets at Interactive Investor.
Top of the leaderboard is Howden Joinery Group (LSE:HWDN) as its own interims showed profits up 20% on last year and over 90% higher than pre-pandemic levels.
6.49am: Modestly lower start forecast
The FTSE 100 is expected to open lower on Thursday, extending losses from the previous day as attention turns to the European Central Bank and the magnitude of a predicted interest rate rise.
London’s gauge of blue-chip stocks has been called four to five points lower on spread-betting platforms, having dropped 31.97 points the day before to 7,264.31.
Overnight, US stocks gained ground, with the tech-powered Nasdaq finishing 1.58% higher, the S&P 500 closing up 0.59% and the Dow Jones rising 0.15%.
Concerns over Russian gas supplies had rocked European stocks yesterday and this morning reports have confirmed that the Nord Stream 1 pipeline started flowing to Europe after a 10-day shutdown.
The flow of natural gas is expected to be well below full capacity as operator Nord Stream AG said that it would take a while to ramp up, according to German news agency DPA.
With President Putin having signalled that flows will remain below capacity, the European Union has told member states that they will need to cut gas usage by 15% until March next year.
Despite the gains on Wall Street, Asian stocks are mixed and European futures are lower, said market analyst Jeffrey Halley at Oanda, on news that both Alphabet (NASDAQ:GOOGL) Inc (NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:NASDAQ:MSFT) are “assessing hiring requirements”.
It doesn’t look like last night’s momentum will be carried forward into today’s European session, added Michael Hewson at CMC Markets, “with Italian Prime Minister Mario Draghi expected to resign later today, in a huge blow to the ECB as they meet today where they are expected to raise rates for the first time in 11 years.”
“Not to put too fine a point on it the choice facing the European Central Bank today is akin to frying pan, or fire,” he added.
“With inflation already at record highs across the euro area, at a record 21.9% in Estonia, at 19.3% in Lithuania and at a much lower 6.5% in France it’s clear that headline interest rates need to go up from their current -0.5%, but by how much, as the region heads towards a bigger energy crisis in the autumn.
“ECB President Christine Lagarde has already indicated that rates will go up by 0.25% today, and that remains the most likely outcome, however in recent comments it has been made clear that the ECB will be discussing a move of 0.5%, with the potential of more to come in September.
“The ECB’s biggest problem is not so much that it is powerless to mitigate current levels of inflation it’s that there are increasing splits on the governing council over how much rates need to rise without causing instability in Eurozone bond markets and widening spreads, particularly between Italian and German bond yields.”
In London, company news today includes results from Ocado Group PLC (LSE:OCDO), hot on the heels of its £578mln fundraising, and interim from kitchen retailer Howden Joinery Group (LSE:HWDN), where the second half outlook is the main point of interest.
Around the markets
- Pound - up 0.2% to US$1.1992
- Oil - Brent crude down 0.3% to US$106.59 per barrel
- Gold - down 0.4% to US$1689.97
- Bitcoin - down 3.5% to US$22,851.18
6.50am: Early Markets - Asia / Australia
Asian shares were mixed on Thursday as Bank of Japan stuck to its ultra-easy monetary policy as expected.
The Japanese yen has weakened considerably in recent months as the island nation’s easy monetary policy diverges from that of other countries.
Japan's Nikkei 225 reacted favourably, rising 0.36% while South Korea’s Kospi surged 0.91%.
The Shanghai Composite in China fell 0.48% and Hong Kong’s Hang Seng was on the back foot, slipping 0.77%.
Australia’s S&P/ASX200 advanced 0.28% with lithium and green metals stocks enjoying investor support.