“While the Board believed strongly in the new company’s potential to deliver benefits for customers and the wider market, it does not now believe the new company would be in a position to meet trading collateral requirements in a sustainable way; and does not now believe the new company would be capable of listing on the premium segment of Official List and Main Market of the London Stock Exchange,” the group added.
Martin Herrmann, chief operating officer of Innogy SE, said: “Adverse developments in the UK retail market and regulatory interventions such as the price cap have had a significant impact on the outlook for the planned retail company. “We are now assessing the different options for our British retail business.” SSE and Npower said back in November that they would have to reconsider their terms, indicating that the deal may fall through. Russ Mould, investment director at AJ Bell, said “SSE’s retail merger plan with Npower looked complicated from the start and it’s perhaps no surprise that the deal is off.” “The big utility companies are under pressure from an incoming price cap on standard variable tariffs, as well as rising competition from independent operators who are gobbling up market share.” Shares in SSE (LON: SSE) are trading down 2.62% (1527GMT).SSE & Npower merger falls through, shares fall
SSE has abandoned plans to merge with Npower.
The potential merger between two of the UK’s biggest energy firms has been cancelled amid “very challenging market conditions”.
The new government price cap and increasing competition mean that new considerations for the retail arm are to demerge and list its retail arm or sell it.
The cap will keep energy bills below £1,137 a year for “typical usage” and will start in January 2019.
Alistair Phillips-Davies, the SSE chief executive, said: “This was a complex transaction with many moving parts. We closely monitored the impact of all developments and continually reviewed whether this remained the right deal to do for our customers, our employees and our shareholders.”
“Ultimately, we have now concluded that it is not. This was not an easy decision to make, but we believe it is the right one.”
In a statement, SSE said it had decided the tie-up was no longer “in the best interests of customers, employees or shareholders”.
Laura Ashley announces 40 UK store closures
Laura Ashley has announced plans to close 40 stores in the UK, focusing instead on growth in Asia.
The home furnishings company is the latest group to struggle amid the difficult trading environments, with plans to shut around a quarter of UK outlets.
The group is owned by Malaysian United Industries (MUI), who’s new chairman Andrew Khoo said the “challenging environment” in the UK was hitting Laura Ashley.
“The direction I want to go is to have not so many stores, but maybe the ones we have could be larger. It’s more about showcasing the brand. It doesn’t really matter if they buy online or offline, we just want them to get inspired,” he said.
“We’re moving to Asia in a much bigger way. We have a regional office in Singapore, it’s a dedicated office of about 10 people and it’s focused purely on e-commerce into China.”
“Once we get a significant foothold in digital retail in China we can look at the physical stores roll out,” he added.
“It’s a challenging environment and it could become more challenging.”
“My long-term view of the UK is I have confidence in the UK and we will continue to invest in the UK. As long as Laura Ashley stays relevant there’s no reason we can’t get over this little speed bump.”
The retailer has struggled alongside groups New Look, Marks & Spencer (LON: MKS), House of Fraser and Carpetright (LON: CPR) who are also all closing stores with CVAs. Laura Ashley issued its third profit warning in 12 months in February.
In other market news, Monday has seen Asos (LON: ASC) shares fall after a profit warning and shares in H&M (STO: HM-B) fall by almost 10% despite a rise in sales.
When markets opened on Monday, shares in Laura Ashley (LON: ALY) tumbled by 7% but have since recovered and are now trading +15.74% (1455GMT).
H&M shares down 10% despite rise in sales
Shares in H&M fell almost 10% on Monday following the retailer’s trading update.
Despite a 12% rise in sales for the three months to the end of September to 56.4 billion kronor ($6.2 billion), shares tumbled as investors remained unconvinced of the group’s recovery.
H&M’s full-year report will be released at the end of January and has not given further details of its progress amid the difficult trading environment.
Harris Associates, H&M’s second-largest shareholder, has trimmed down its stake in the company over this year.
Monday also saw Asos (LON: ASC) issue a profit warning due to poor trading in the run-up to Christmas. Last week, Sport’s Direct (LON: SPD) boss Mike Ashley said trading in November was “the worst on record, unbelievably bad”.
“The last thing the sector needs right now is a profit warning from one of it’s few star performers a week before Christmas. E-commerce is often positioned as the death knell of the high street, so you know things are bad when even the online giants are struggling,” said Natalie Berg, who is a retail analyst at NBK Retail.
The Asos profit warning saw shares in the group tumble, as well as affecting shares in rival Boohoo (LON: BOO).
Shares in H&M (STO: HM-B) are currently trading -9.31% (1430GMT).
Asos issues unexpected profit warning, shares tumble
Asos issued a profit warning in the run-up to Christmas, sending shares down over 40%.
The online retailer said that sales had faced a “significant deterioration” and would continue to remain challenging.
The group’s sales growth forecast has been downgraded from 20 to 25% to 15%.
“Whilst trading in September and October was broadly in line with our expectations, November, a very material month for us from both a sales and cash margin perspective, was significantly behind expectations,” said Asos in an unscheduled announcement.
“The current backdrop of economic uncertainty across many of our major markets together with a weakening in consumer confidence has led to the weakest growth in online clothing sales in recent years. We have recalibrated our expectations for the current year accordingly.”
Chief executive Nick Beighton said: “We achieved 14% sales growth in a difficult market, but in the light of a significant downturn in November, we think it’s prudent to recalibrate our expectations for the full year.”
“We are taking all appropriate actions and our ambitions for Asos have not changed,” he added.
The online clothing retailer blamed the fall in sales on economic uncertainty and weaker consumer confidence.
The news comes amid difficult trading environments that have hit many high street stores. Last week, Sport’s Direct (LON: SPD) boss Mike Ashley said trading in November was “the worst on record, unbelievably bad”.
Whilst many brick-and-mortar stores have faced challenging retail environments, online retailers were considered to safe from the weaker consumer confidence and economic uncertainty.
The profit warning from Asos has sent shockwaves through the online retail industry, with shares in Boohoo (LON: BOO) falling over 10% and shares in Next falling 8% in morning trading.
Natalie Berg, who is a retail analyst at NBK Retail, said: “The last thing the sector needs right now is a profit warning from one of it’s few star performers a week before Christmas. E-commerce is often positioned as the death knell of the high street, so you know things are bad when even the online giants are struggling.”
Shares in Asos (LON: ASC) are currently trading down 40.43% at 2,498.36 (1019GMT).
Pound falls amid continuing Brexit uncertainty
The pound fell lower on Friday after Theresa May’s trip to Brussels to discuss the backstop issue with EU leaders.
This morning, the pound was half a percent down against the dollar and 0.3% against the euro. The pound fell to $1.2616 and €1.1114 respectively.
Ian Strafford-Taylor, the chief executive of currency traders FairFx, said: “Over the last couple of months… we’ve seen several developments in Brexit negotiations, MP resignations and more recently a leadership challenge which have all sparked significant turbulence for the pound.”
The fall in the sterling has seen passengers at Heathrow being offered one US dollar for each pound.
“Now that Theresa May has vanquished a vote of no confidence the currency can get back to focusing on the depressing state of her attempts at Brexit. Falling half a percent against the dollar – cable ducked back under $1.26 in the process – and 0.3% against the euro, sterling slumped in the face of the latest round of rejections from the EU, May’s desperate attempts to save her deal so far proving pretty useless,” said Connor Campbell from Spreadex.
The Euro has also fallen on Friday amid Brexit uncertainty and protests taking place in France.
Chris Williamson, who is the chief business economist at IHS Markit, said: “The eurozone economy saw a disappointing end to 2018, with growth slowing to the weakest for four years.”
“While some of the slowdown reflected disruptions to business and travel arising from the ‘yellow vest’ protests in France, the weaker picture also reflects growing evidence that the underlying rate of economic growth has slowed across the euro area as a whole.”
“Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions within the euro area. The surveys also point to further signs that the struggling autos sector continued to act as a drag on the region’s economy.”
“Forward-looking indicators such as new orders and future expectations remaining subdued suggest that demand growth is stalling, adding to downside risks to the immediate outlook.”
Capita shares down on NAO’s British Army report
Shares in Capita fell over 6% on Friday after a new government report revealed that it has failed to meet targets recruitment contract for the British Army every year.
The outsourcing firm has a £495 million contract with the British Army since 2012, where Capita has been responsible for recruitment.
According to the report from the National Audit Office (NAO), Capita has failed to meet targets every year since the deal was awarded and recruitment has been as low as 21% of the British Army’s requirements.
The NAO has said that the Army Recruiting Partnering Project has “underestimated the complexity of what it was trying to achieve” and there are “significant problems”.
A spokesperson from Capita said: “As the NAO report states, both Capita and the Army underestimated the complexity of this project. Our focus is now on working with the Army to deliver a recruitment process fit for the 21st century.”
“We have overhauled governance on the contract and are already seeing improvements, with applications at a five-year high and a reduction in the amount of time it takes candidates to join the Army. We are absolutely committed to getting this partnership right.”
The Army and Capita believe the changes to the recruitment approach and the new online system will lead to an increased number of recruits. Recruits have already increased over the past two years.
A spokesman from the British Army said: “We are fully committed to improving our recruiting process. Working with Capita we have put in place a plan to address the challenges. The army has developed a range of measures to speed up the recruitment process.”
“This includes new measures to reduce the time between applying and starting training, greater access to military role models for recruits and a new IT system.”
“The army meets all of its operational commitments to keep Britain safe,” he added.
Shares in Capita (LON: CPI) are currently trading down 4.24% at 109,65 (1119GMT).
Richard Branson: Hard-Brexit would be a “disaster”
Richard Branson has warned that a hard Brexit would be “an absolute disaster”.
Speaking to the BBC, the Virgin Group founder said that the British people and businesses will suffer in the event of a hard Brexit.
“I think Theresa May needs to be 100% honest with the public. She’s admitted that a hard Brexit would be an absolute disaster for the British people,” he said.
“From our Virgin companies’ point of view, a hard Brexit would torpedo some of our companies. If British business suffers, British people will suffer, and it’s really really important that people realise that.”
Branson went on to say the fall in the pound would particularly affect Virgin holidays, where fewer people would be able to afford to go on holiday due to the poor exchange rates.
The Virgin Group boss was speaking from the Virgin Galactic event, where one of his spaceships is set to reach space for the first time.
Branson’s space startup hopes that the SpaceShipTwo passenger rocket ship will reach further than 80km, which space is said to start.
“Overall the goal of this flight is to fly higher and faster than previous flights. We plan to burn the rocket motor for longer than we ever have in flight before, but not to its full duration. At the end stages of the rocket burn in the thin air of the mesosphere and with the speeds that we expect to achieve, additional altitude is added rapidly,” said the company in a blog post.
His comments come during a tough time for the prime minister, who has delayed the Parliamentary vote on the Brexit withdrawal agreement. The new vote will take place in January.
Theresa May is currently in Brussels where she is working on the backstop issue with the Irish border with EU leaders.
ReNeuron shares rally despite first-half loss
ReNeuron released its half-year results for the six months ended 30 September on Friday. The stem cell-based therapy company posted a first-half loss amid the development of treatments for stroke sufferers and sight issues. Shares in the company rose over 5% following the announcement.
Loss before tax for the period came to £6.8 million. This compares to the £11 million on-year losses.
Across the period, the company has been developing various treatments. Its CTX cell therapy is designed for stroke disability and has progressed into a clinical trial in the US. Top-line data from the US trial is expected in early 2020. Equally, ReNeuron has made advancements on its hRPC drug product for retinal diseases.
ReNeuron is a leading, UK-based, clinical-stage cell therapy development company.
The company also highlighted its increased business development during the period, reflecting a third party interest in its core therapeutic programmes. Chief Executive Officer of ReNeuron Olav Hellebø commented on the announcement: “Our therapeutic development programmes have continued to progress well during the period. We are particularly excited to have opened the placebo- controlled Phase IIb clinical trial in the US for CTX in chronic stroke disability. We remain encouraged by the progress made in partnering discussions across all of our technologies and programmes and we hope to be able to conclude an initial out-licensing agreement in the near term.” “We have continued to maintain tight control over our operating costs, reflected in the financial statements for the period. Our cash position remains robust and we are positioned to deliver significant clinical milestones in our stroke and retinitis pigmentosa programmes over the next 18 months.” Elsewhere in the medical sector, AstraZeneca’s cancer medicine failed to meet its primary objective in November. Equally, the company sold its US rights to Sobi and Grunenthal. At 09:56 GMT today, shares in ReNeuron Group plc (LON:RENE) were trading at +5.38%.SThree profits ahead of market expectations
Specialist STEM staffing business SThree issued a trading update on Friday for the financial year ended 30 November. Shares in the company rose almost 7% in early trading on Friday morning following the announcement.
Full year adjusted profit is expected to be ahead of the current market consensus range.
Adjusted pre-tax profit is predicted to lie within the range of £49-£51.4 million. Additionally, the company has announced that Gary Elden OBE will be stepping down from his position as Chief Executive Officer in the new year. Gary Elden commented on the announcement: “We are pleased to have delivered another strong quarter in Q4 continuing the momentum from Q2 and Q3, resulting in an overall GP result for the year of +12%. The Group is benefiting both from the broad geographic reach of its operations, with 83% of GP now generated in international markets, and from its focus on the best STEM markets, where the demand for niche, skilled candidates continues to be driven by a shortage of supply.” “Strong performances in Continental Europe, particularly from our market-leading businesses in the Netherlands and Germany, as well as the USA were key to the delivery of this result. Our Contract businesses continued to perform well, with GP increasing by 14% year on year and with Contract runners at the period end reaching a record level for the Group. We expect full year profit to be ahead of consensus.” “At the start of 2018 I stated that after two years of turbulent political, market and economic pressure, we entered the year in good shape. That turbulence and pressure has increased throughout the year and yet we have delivered strong results. Looking ahead to 2019, we are in better shape, and well positioned to continue to benefit from the growth opportunities in our chosen STEM markets.” “I have been privileged to be part of SThree for almost 30 years and am proud to have led the Group as CEO during a major period of growth and development. As today’s results demonstrate, the Company is in great shape to make further progress and I look forward to following its continued development as a shareholder. I am grateful to the Board for their support and encouragement, and to SThree staff around the world for all their commitment and hard work.” Other stock market headlines on Friday include ReNeuron shares rallying amid the company’s first-half loss announcement. At 09:42 GMT today, shares in SThree plc (LON:STHR) were up 4.20%.Theresa May on her “difficult day” and lack of breakthrough in Brussels
Prime Minister Theresa May arrived at the EU HQ on Thursday for the start of the summit.
Speaking to reporters, the prime minister spoke of the “difficult” day experienced on Wednesday and how she has no plans to lead the party into the next general election.
“Can I just say a word about yesterday, which was a difficult day. And I’m grateful for the significant support I had from colleagues. But I have also heard loud and clear the concerns of those who didn’t feel able to support me. And I know the concerns there are in the House of Commons about this issue of the backstop, that they do not want it to be permanent,” said May, speaking in Brussels.
“And what I will be talking to European leaders about here today is what we need to get this deal over the line. I’ve already met Leo Varadkar, I will be addressing the European Council later, and I will be showing the legal and political assurances that I believe we need to assuage the concerns that members of parliament have on this issue.”
Ahead of the summit, May said that she did not expect an immediate breakthrough at the meeting.
“It’s in the best interest of both sides, the UK and the EU to get the deal over the line, to agree a deal – but I recognise the strength of concern in the House of Commons and that’s what I will be putting to colleagues today,” she told reporters.
“I don’t expect an immediate breakthrough, but what I do hope is that we can start to work as quickly as possible on the assurances that are necessary.”
This week saw May survive the vote of confidence in her leadership. She won by 200 to 117 with 63% of the vote.