London Property: Will house prices recover in 2019?
New data from Project Etopia has revealed that house prices fell in 85% of London’s boroughs.
Amid a difficult time for the UK property market, prices in the capital have slumped by an average of 7.6% over the past year.
The past year was the second year running that house prices in London fell, where in the 12 months to December, house prices in the capital fell by 0.8% to £466,988. House prices fell 0.5% in 2017.
“Brexit has smashed property market sentiment to smithereens. Buying and selling property requires confidence but confidence, as we edge closer to Brexit, is close to zero. For countless prospective buyers, Brexit has put everything on hold,” said Jonathan Samuels, who is the chief executive of Octane Capital.
“Borrowing rates may be low and the jobs market strong, but a deep undercurrent of uncertainty is causing the vast majority of people to sit on their hands. It’s about as good a buyers’ market as it could get,” he added.
Out of the 32 London boroughs, only five saw an increase in property prices and transactions, including the City of London.
The boroughs experiencing the worst falls were Tower Hamlets (22.5%), Westminster (14.4%) and Croydon (14.5%).
“Falling transaction levels in a city like London, where affordability is a critical problem, is a sign of a sick housing market that refuses to adjust,” said Joseph Daniels, the chief executive of Project Etopia.
“Options for those seeking to buy at fair value are thin on the ground. Sellers have been encouraged to see their home as a piggy bank because of the UK’s boom-and-bust property cycle.”
“Vendors need to moderate their expectations but more importantly, policymakers must start building a meaningful number of new homes so the accumulation of wealth ceases to be the market’s main driver in the long term.”
House prices are expected to increase again, although this is expected to take up to 18 months.
Debenhams may close a further 40 stores
Debenhams is reportedly planning to close 90 stores, according to the Daily Telegraph.
The struggling department store may axe 10,000 jobs as the chain battles against plunging profits and sales.
Shares in the group have fallen 90% over the past year and the chain reported a £491.5 million loss in October.
The department store already planned to close 50 stores over a five-year period, which was announced in November. A further 40 stores may be planned to close, which should “address the structural challenge and drive profitable growth”.
The news comes just days after scandal amid the board, where Mike Ashley voted against the chief executive and chairman of Debenhams, who were both ousted.
“The board believes that it is in the best interests of Debenhams plc that the executive team remains fully focused on delivery of the plan. In the meantime, the board remains open to constructive suggestions from shareholders that are in the interests of the business as a whole,” said the group in a statement.
Sports Direct (LON: SPD) owns almost 30% of shares in Debenhams.
Shares in the department store (LON: DEB) are down 7.57% (1102GMT).
New Look reveals restructuring plan, saving £1bn
New Look has announced a restructuring program that will cut debt by £1 billion.
The debt will be reduced from £1.35 billion down to £0.35 billion through a debt-for-equity swap proposal.
The retailer, which is owned by Brait, also plans to raise £150 million by issuing new bonds.
“Today’s agreement represents a critical step in our turnaround plans and lays the foundations to secure the future and long-term profitability of New Look by materially deleveraging our balance sheet and providing us with the financial flexibility to better attack our future,” said Alistair McGeorge, the executive chairman.
“Over the past year we have made significant progress with our wider turnaround plans to rebuild our position in the UK womenswear market and recover the broad appeal of our product whilst implementing significant cost savings and efficiencies.”
“However, it has been clear for some time that the Group’s existing level of indebtedness has been constraining our ability to accelerate our turnaround plans and would continue to limit our growth in the future.”
“Therefore, today marks an important milestone for the business, our colleagues, our suppliers and all our other stakeholders. A materially delevered balance sheet and a more flexible capital structure will allow us to better navigate the challenging market environment and create a stable operating platform so that we can achieve further progress against our turnaround plans.”
“Upon completion of the restructuring, our focus will be to enhance profitability by continuing to provide fantastic product for our customers, building brand equity and grasping new market opportunities,” he added.
New Look is closing 85 stores in the UK this year, whilst it is also negotiating the future of a further 13 stores with landlords.
Sales in December fell by 5.7%.
Shares in the South African investment firm Brait (JSE: BAT) are currently trading down by 6.22% (0946GMT).
Quiz issues profit warning, shares tumble 30%
With a weaker demand over Christmas, Quiz has issued its second profit warning in three months.
Down from the previous estimates of £11 million in October last year, the fashion retailer now expects 2019 profits to total £8.2 million.
Following the announcement, shares in Quiz tumbled 33%.
Tarak Ramzan, the group’s chief executive, said: “Against the backdrop of challenging trading conditions over recent months, Quiz has delivered further revenue growth over the Christmas period driven by the performance of our own websites. However, the growth and the margin achieved have been below our initial expectations.”
“Management’s utmost priority remains achieving further growth for the business and improving profitability in the future,” he added.
Quiz is a Glasgow-based retailer and has 70 stores and 148 concessions across the UK. The group also has stores in Ireland, Saudi Arabia, United Arab Emirates, Malaysia, Singapore, Cyprus, Egypt, Georgia and Pakistan.
Quiz floated on the Aim market in July 2017, where it attracted over £100 million from investors.
“Quiz became the latest High Street casualty as its shares plummeted on a profits warning. Overall performance isn’t bad at all – sales rose more than 8.4%, led by a 34.1% jump in online revenues. High Street sales held up ok, rising 1.6%,” said Neil Wilson, who is an analyst at Markets.com.
“But we got a bad profits warning. It looks like discounting is really killing retailers. There is just no way they can pass on higher costs by raising prices. Consumers are simply not prepared to pay more. The discounting vicious circle means shoppers are now expecting big price reductions. Margins at Quiz are like others coming under a lot of pressure from heavy discounting,” he added.
Shares in the fashion retailer (LON: QUIZ) are currently trading -29.73% (1110GMT).
Moss Bros shares edge up on positive trading update
Shares in Moss Bros rose on Friday morning after the group reported a better-than-expected Christmas trading update.
Sales were up by 0.6% in the period between 29 July to 5 January, however, were down by 1% on a like-for-like basis.
“Despite the improving trend in performance, we anticipate the period ahead will continue to be extremely challenging, as a result of the uncertain consumer environment, wider political backdrop and the significant cost headwinds that we continue to face from a weaker pound and further increases in business rates and employee-related costs,” said Brian Brick, the retailer’s chief executive.
“We remain debt free, with a strong balance sheet and are confident in our ability to deliver enhanced returns to our shareholders over the longer term,” he added.
The group has predicted a loss of £0.6 million, which meets the forecast.
“Moss engaged in higher levels of promotional activity than normal, impacting gross margins, although the hit was less than we had feared, meaning the outcome for the year will be better than our recent pre-emptive downgrade,” said Peel Hunt.
“We’re not going to crow about the downgrade being less than feared, but we are encouraged that Moss has been able to drive a significant acceleration in online sales and demonstrate the relevance of the offer and the Brand and see the shares responding favourably to today’s update.”
On Friday morning, shares in Moss Bros (LON: MOSB) increased by 3.2% to 27.06p. Shares are currently trading +2.67% (1035GMT).
Flybe shares crash 80% on rescue deal
Flybe shares have plummeted after the struggling airline was offered a deal just 1p-per share.
The deal made by Virgin Atlantic, Stobart Aviation and US private equity firm Cyrus Capital Partners values Flybe at £2.2 million.
The airline issued a profit warning in October, which wiped £20 million off its market capitalisation, causing shares to plummet from 48p in March to Thursday’s closing price of 16.38p.
Christine Ourmières-Widener, Flybe’s chief executive, said: “The industry is suffering from higher fuel costs, currency fluctuations and significant uncertainties presented by Brexit.”
“We have been affected by all of these factors which have put pressure on short-term financial performance. At the same time, Flybe suffered from a number of legacy issues that are being addressed but are still adversely affecting cashflows.”
“By combining to form a larger, stronger, group, we will be better placed to withstand these pressures,” she added. “We aim to provide an even better service to our customers and secure the future for our people,” she added.
Virgin Atlantic chief executive Shai Weiss, said: “Together, we can provide excellent connectivity to our extensive long haul network and that of our joint venture partner, Delta Air Lines, at London Heathrow Airport and Manchester Airport for the benefit of our customers.”
“In the near future, this will only increase, through our expanded joint venture partnership with Air France-KLM.”
The crash in Flybe shares comes following the collapse of Monarch Airlines and Primera Air.
If the takeover vote is supported by 75% of shareholders, the deal is expected to close during the second quarter of 2019.
Shares in the airline (LON: FLYB) are currently trading down 83.72% at 2,67p (1003GMT).
Supermarket Christmas sales: winners and losers
It’s been almost two weeks since we entered 2019 and the leading UK supermarkets have begun to announce their Christmas trading figures. With mixed results, what seems clear is that the British consumer has tightened their pockets this Christmas. As special sales offers drove sales for some supermarkets, and the discounters Aldi and Lidl seeing the biggest Christmas market share, the consumer is opting for the cheaper alternatives.
The leading UK supermarkets
Tesco plc (LON:TSCO) saw an increase in its sales over Christmas as a result of various Christmas sales offers. Like-for-like sales increased 2.6% across UK supermarkets. Offers on vegetables, lamb and beef joints and wine drove sales for the supermarket over the Christmas period. In contrast to Tesco, Marks & Spencer (LON:MKS) revealed a decrease in its sales over the festive period. Like-for-like sales fell by 2.2%, and food sales were down 1.2%. Clothing sales were also down, declining by 4.8%. The company’s chief executive has blamed a “very challenging trading period” as a result of mild weather. Moreover, a reduction in consumer confidence and high competition have also driven this decline. Morrisons (LON:MRW), however, announced that its total Christmas sales (excluding fuel) were up 4%. Like-for-like sales were also positive, increasing by 3.6% (excluding fuel). As for Sainsbury’s (LON:SBRY), sales fell in the run-up to Christmas as a result of the strong competition from other supermarkets. Sainsbury’s has blamed “cautious customers” for its drop in sales. Like-for-like sales slid 1.1% over the period. Grocery sales were slightly more positive, but only saw a 0.4% increase during the third quarter. The biggest winners are Aldi and Lidl. Aldi reported a record breaking week of sales during the week leading up to Christmas day. Sales soared by 10% compared to the same period from the prior year. The discount supermarket offered “Specially Selected” and “Exquisite” lines as part of its Christmas range of products. Additionally, Lidl grew by 9.4% over the Christmas period. Two-thirds of UK households visited the discounters over the Christmas shopping season. The two discounters accumulated the “highest-ever combined Christmas Market share of 12.8%,” according to the head of retail and consumer insight at Kantar. With Aldi and Lidl delivering a strong performance over Christmas, what has become increasingly obvious is the cautious spending of the consumer. Perhaps with the economic fear of Brexit, more consumers feel obliged to tighten their wallets in the event of difficult economic hardship. With their discounted prices and strong product quality, Aldi and Lidl appear to be the alternative to the traditional UK supermarkets.Premier Oil reduces net debt ahead of full year results
Premier Oil released a trading update on Thursday ahead of its 2018 Full Year Results. The UK oil company said that it has reduced its debt to $2.3 billion at the end of 2018. This figure is below its previous $2.4 billion guidance.
The estimated net debt figure of $2.3 billion is a $390 million reduction from 2017.
Full-year production was 7% higher compared to 2017, making it a record year for the company. It produced 80,500 barrels of oil equivalent per day (boepd). November and December production alone averaged 92 kboepd, remaining above forecast.
Premier Oil is an independent UK oil company with gas and oil interests in the UK, Asia, Africa and Mexico, with its headquarters in London.
Chief Executive of Premier Oil, Tony Durrant, commented on the results: “Our strong operational performance and disciplined expenditure have enabled us to reduce our debt levels ahead of forecast. At the same time, we have continued to build our portfolio for the future, sanctioning our high value Tolmount Main gas project and capturing highly prospective new acreage in Mexico and Indonesia. Looking to the year ahead, we have a strong production base which is well hedged and our priority remains to further reduce our debt levels while progressing our future growth projects to final investment decisions.” Premier Oil is expected to spend roughly $290 million on development and exploration. This includes wells in Mexico’s Zama field. Elsewhere in the oil sector, Anglo African Oil and Gas announced that they expect to raise £6 million for expansion of their pre-existing operations and drilling. Like Premier Oil, Anglo African is an independent oil and gas firm, but its operations are based in Congo. Premier oil believes that it is “well placed” to continue to decrease its debt reduction in 2019. Its improved portfolio mix, increased high margin Catcher barrels and its hedging programme places the company in a strong position to continue to deliver this debt reduction. At 10:52 GMT today, shares in Premier Oil plc (LON:PMO) were trading at +3.94%.Halfords shares crash on latest profit warning
Shares in Halfords have crashed after the retailer issued yet another profit warning.
The retailer said that expected profits have fallen from the previous estimate of £70 million down to between £58 million and £62 million this year.
Halfords said on Thursday that sales in the group fell due to weaker consumer confidence and the mild weather.
“This has been a challenging third quarter for the business, driven by exceptionally mild weather and ongoing weak consumer confidence. Together, these factors have led us to reduce our profit expectation,” said Graham Stapleton, the chief executive.
“Halfords is a robust business and we firmly believe that the strategy we outlined in September is the right direction for the business,” he added.
The group’s last profit warning came in May last year when the bike specialist said profits would come in flat. In September, the retailer said that profits would not rise in 2020.
Stapleton joined Halfords in January after the former boss left to join Marks & Spencer.
Shares in Halfords (LON: HFD) are trading down 19.45% (1009GMT).
DFS profit outlook unchanged amid Brexit uncertainty
DFS furniture announced on Thursday that it will keep its full-year profit outlook unchanged. Additionally, the company has also announced that its CFO Nicola Bancroft will retire.
For the five months to 30 December 2018, DFS has had a good underlying sales growth of 10%, despite the “challenging consumer environment“.
Additionally, it saw a like-for-like growth across all of its brands and a strong 22% growth in online sales. Reported gross sales grew 29% measured against the same period from the previous financial year.