Proactive Investors - The FTSE 100 opened lower on Tuesday following falls in Asia as nerves over the health of the world’s second largest economy continue to cast a shadow over the market.
At 8:15am, London’s lead index was down 23.72 points, 0.3%, at 7,600.27 while the FTSE 250 was down 52.14 points, 0.3%, at 18,363.17.
Asos PLC fell 2.4% after warning of low-end profits after reporting a 15% drop in sales in the fourth quarter.
Shore Capital noted that despite delivering £300 million of profit improvement and cost savings, the company fell short of meeting its own guidance, with a considerably more negative free cash flow expected for the year.
But on the positive side, Peel Hunt (LON:PEEL) said stock clearance was better than expected, with year-on-year stock down 30% (target was 20%), with management targeting a further 30% reduction this year to sub £600 million.
It described the update as “steady progress, although the lower achieved FCF generation may weigh on sentiment.”
PZ Cussons (LON:PZC) also fell, down 1.1%, after reporting a fall in profit and an unchanged dividend.
Shore Capital said it saw “no shocks or surprises in the completed year.”
PZ Cussons profit hit by falling margins
Now for the owner of Carex - PZ Cussons PLC which reported a rise in revenue but a fall in profit hit by a drop in operating margin and a one-off charge relating to Sanctuary Spa.
The consumer goods firm said revenue in the year to May 31 rose 11% to £656.3 million from £592.8 million the year before with like-for-like (LFL) revenue growth of 6.9% - the third consecutive year of LFL revenue growth.
Statutory pre-tax profit fell 4.5% to £61.8 million from £64.5 million while basic earnings per share slipped 27% to 8.70p from 11.88p.
The company said operating margin declined by 200 basis points while the EPS decline also reflected a £16.5 million impairment of the Sanctuary Spa brand, as well as increased investment related to transformation.
The firm said performance in the new financial year has been in line with expectations, with modest year on year growth in LFL revenue and a higher operating profit margin.
“We have seen continued good revenue growth in Nigeria and ANZ, a stable performance in the UK, offset by a further decline in Indonesia,” it said.
The dividend was left unchanged at 6.40p reflecting the devaluation of the Naira following the year end, which is expected to have a material adverse impact on the near-term reported financial performance.
Asos reports drop in sales and see low-end profit
First out of the blocks is a very detailed trading update from Asos PLC.
The retailer reported a drop in sales in the fourth quarter and warned profit would be at the low-end of expectations as it continues to pursue its Driving Change agenda.
In a trading statement for the period ended September 3, the FTSE 250-listed firm said sales fell 15% with the hot weather boosting sales in June followed by weaker performance in July and August amidst a deterioration in the UK clothing market.
Sales continued to fall across the group's four main geographies - the UK, EU, US and Rest of World - but the downturn worsened in every region except the EU.
Earnings before interest and tax are expected around the bottom of the guided £40 million to £60 million range, with free cash inflow in the second half now expected to be c.£60 million, down from £150 million, principally as a result of timing effects that will reverse in September and October.
Asos explained that the hot weather drove a strong June and a wet July and August produced a weaker sales result.
Adjusted gross margins for the second half were up just 150 basis points year-on-year, below previous guidance of a 200bp improvement, due to the investment in promotional activity to reduce inventory levels.
Asos said while the stronger than expected June and weaker than expected July and August broadly netted out to deliver sales and Ebit in-line with guidance, the phasing of sales impacted year-end cashflow, it said.
This impact will reverse during September and October, it claimed.
Inventory levels are down around 30% year-on-year, ahead of guidance, while adjusted gross margin rose 150 basis points in the second half, below guidance, as lower freight and duty costs, were partially offset by tactical investment in promotional activity to prioritise stock reduction in a challenging trading environment.