Thomas Cook shares soar 45% following record lows
Shares in Thomas Cook soared by 45% on Wednesday morning.
Following a week where shares plunged by 60%, they rebounded after Moody’s changed the outlook from negative from stable.
The company’s stock value has plummeted over the past week since the group issued a second profit warning in a couple of months.
Holiday bookings through Thomas Cook fell over the summer as the heat wave led more people to stay in the UK.
“2018 was a disappointing year for Thomas Cook, despite achieving some important milestones in our strategy for transforming the business,” said the group’s chief executive Peter Fankhauser last week.
“After a good start to the year, we experienced a larger-than-anticipated decline in gross margin following the prolonged period of hot weather in our key summer trading period,” he added.
Vitali Morgovski, Moody’s assistant vice president-analyst, said: “Our rating action reflects the deterioration of credit metrics after unfavourable earnings development in the financial 2018 and the group’s weakened liquidity.”
“Furthermore, the negative outlook reflects Moody’s concerns regarding the company’s ability to recover its profitability and cash generation in the coming fiscal year as the macroeconomic tailwind becomes less supportive whereas the outcome of Brexit negotiations and their potential impact on customer behaviour that may include a shift to late bookings exacerbates the uncertainty,” he added.
Shares in Thomas Cook (LON: TCG) are currently trading +36.37% (1311GMT).
Stagecoach shares rise despite first-half loss
Stagecoach shares rose on Wednesday after the company reported its results for the first-half of the year.
The bus and rail operator posted a pre-tax loss of £23 million for the first six months of the year. This compared to the £97 million in profit earned the year before.
The group attributed to the loss to exceptional charges relating to North America goodwill, amounting to 85.4 million.
Moreover, the group are also considering offloading the North American arm of their business, with rising fuel costs threatening its MegaBus and CoachUSA operations in the U.S.
Chief Executive of Stagecoach, Martin Griffiths commented:
“While we recognise the competitive challenges in some of our markets in the UK and North America, we are confident that public transport will be central to delivering Government priorities to grow the economy, connect people and communities, reduce road congestion and improve air quality. We are reviewing strategic options for the North America Division and that includes ongoing discussions regarding a possible sale of all or part of the business.
“The Group is focused on making further progress in the second half of the year and we have increased our expectation of full-year adjusted earnings per share to reflect the above-forecast rail earnings in the first half of the year.”
The bus firm also announced that it had trialled autonomous buses on routes to Edinburgh and Fife as a result of £4.35 million in Innovate UK funding.
The company added that the interim dividend is to remain at 3.8p.
Shares in Stagecoach (LON:SGC) are currently trading +14.43% as of 13:10PM (GMT).
Brexit legal advice published, issues of contempt
After losing three votes in one day on Tuesday, Theresa May’s government are being made to publish the Brexit legal advice, with MPs finding the government to be acting ‘in contempt of Parliament’.
While there was some upshot for the prime minister – in that Jacob Rees-Mogg’s vigilante faction seems to have been pacified for the time-being – what follows yesterday’s votes could be a drawn out process of pretty much ‘more of the same’. With next Tuesday’s vote on the Withdrawal Agreement likely to come crashing down, comments from MP Dominic Grieve are already moving towards a motion for a ‘Plan B’ proposal if nothing is agreed by January.
Andrea Leadsom says MPs will rue the day:
During an interview with Radio 4, the Leader of the House told listeners, “We will comply with [the vote] but not without some regret. This is a very important breach that has taken place here.” “Law officers themselves will be very reluctant to give advice which they might then see across the front pages of the newspapers.” “Frankly, any parliamentarian who wants at some point to be in government is going to live to regret their vote last night.” “The government is committed to leaving the European Union in line with the referendum and unless government were to do something completely different to change tack, or indeed to pass this deal, then we will be leaving the EU on 29 March next year without a deal,” she said. Ms Leadsom finished by remarking that at this time, Ms May remains the right person to lead the country, and MPs’ decision to unsettle the prime minister’s plans would be one they would, “live to regret”.Hashed out, replayed and we’re back to the same problems:
Issues remain over the Irish backstop, with MPs outlining the theoretical disaster that would be an effective customs line in the sea between mainland Britain and Northern Ireland. Former Tory chief whip, Mark Harper, weighed in, “She should listen to Conservative colleagues … It would undermine the UK common market and threaten the integrity of the UK by creating a customs and regulatory border down the Irish Sea,” Similarly, there is the issue of public confidence, or lack there-of. Discourse is increasing in camps calling for a peoples’ vote, with supporters of the Leave campaign growing increasingly apathetic with the government’s seeming inability to carry out definitive steps. Further, the prime minister is suffering from the split of the political establishment, with cross-party figures calling for an encore of democratic rigmarole. Fellow Conservative, Justine Greening, has called for a three-option second vote – warning that another vote would be necessary, “we could be debating Brexit not for the next five days but for the next five years”. “This is less about the future of the Tory party but more about how we can bring the country together.” Former PM Tony Blair has also publicly thrown his weight behind a peoples’ vote, Theresa May now has to contend with the shift of political discourse – especially in the media – towards the ideas that seem to be gaining momentum, particularly in the South-East. There is also the matter direct dissent. While he would be one among many, trade secretary Liam Fox has openly encouraged MPs to ‘take down’ Brexit by blocking or continuing to stall Bills currently going through the House – with Mr Fox drawing particular attention to the draft Trade Deal, which would be needed for the UK to take its place in the World Trade Organisation post-Brexit.Going Forwards:
Regardless of the to-and-fro, the law states the UK will be leaving the EU next year, and thus the law would have to be changed in order to prevent this. James Rees of the Brexit Committee has stated that outside of issues of UK-EU citizens’ rights and the Northern Irish border, consensus has been reached on one thing – that a No Deal Brexit would be damaging to the UK. Boris Johnson faced rebuttal and haranguing the government’s policy, with his party members stating that his tendency to recount issues and offer no solution, has grown wearying for a House suffering from a shortage of amicable solutions. The fashion continues to be – choose a country with a higher GDP per capita than ourselves, stick the word ‘plus’ behind it, and use this as a model for our Brexit deal, as if such a thing would be possible to draft and ratify within the remaining time period. PMQs have just begun and the legal advice has been released to ‘some’ MPs, curious readers should keep an eye on Twitter for the MPs who feel inclined to release some of these details publicly.Lloyds share price resumes decline after May’s defeat
Lloyds share price (LON:LLOY) resumed a 10-month downtrend following Theresa May’s historical defeat in the House of Commons.
Lloyds shares fell on Wednesday morning after the UK Prime Minister’s government was found to be in contempt of parliament after losing a parliamentary vote by 18 votes.
Shares in Lloyds fell as low as 54.29p before rebounding.
It was the first time in history a government had been found to be in contempt of parliament, a serious matter that resulted in the government being forced to publish the full legal advice it had wanted to keep secret.
The impact on Lloyds share price and the rest of the banking sector has not be driven so much by Theresa May’s triple defeat on Tuesday but more the chances of her Brexit deal being passed looking ever more unlikely.
Tuesday’s contempt vote was followed by Brexit debate where numerous MPs said they would vote against her deal.
The outcome of the parliaments meaning vote 11th December could see the UK hurtling towards a ‘No-deal’ scenario, and the worst outcome for markets, particularly shares in UK banks.
Both the government and the Bank of England have warned leaving the EU without a deal would lead to significant reduction in UK GDP over the long term.
Today’s move in Lloyds share price is evidence investors will not be hanging around in bank shares to see the full impact.
Despite posting a strong start to 2018, Lloyds share price has been in steady decline entering a technical bear market with a decline of over 20% from highs of 72.3p to a closing low of 54.5p.
The decline comes in-spite of an 18% increase in statutory profit after tax to £3.7 billion in the nine months to 30th September.
Lloyds profitability
The Bank of England recently published stress tests on UK banks which highlighted the banks were adequately capitalised to deal with any negative economic fall out. However, such a scenario is likely to impact heavily on the banks’ profitability. The Bank of England predicted the UK economy could enter recession and contract by 8%, such a reduction would hit Lloyds’ profitability significantly despite being well capitalised. Mark Carney also told the Treasury Select Committee prices food prices could rise between 5-10% putting further pressure on households, this in turn could increase the rate of defaults on debt provided by banks such as Lloyds.
A torrid 2018 for Lloyds shares
Despite posting a strong start to 2018, Lloyds share price has been in steady decline entering a technical bear market with a decline of over 20% from highs of 72.3p to a closing low of 54.5p.
The decline comes in-spite of an 18% increase in statutory profit after tax to £3.7 billion in the nine months to 30th September.
Joules reveals 17% rise in revenue, shares up 7.8%
Joules has announced a 17.6% rise in revenue in the 26 weeks to 25 November. The fashion retailer has raised its first-half underlying profit expectations.
The group has also said that it will be carrying out contingency plans in the form of a third-party distribution facility in the EU to prevent disruption amid a hard Brexit.
Joules said: “These plans include establishing an EU-based third-party distribution facility; scheduling earlier inbound product deliveries for our spring/summer 2019 ranges; preparation for expected increased administrative activities; and hedging US dollar requirements more than 12 months forward.”
The group “anticipates that trading conditions in the UK will remain challenging over the near term, with continued macroeconomic uncertainty, rapidly changing consumer shopping behaviours and a highly competitive environment.”
Additionally, the fashion retailer has ordered in the Spring/Summer 2019 collection earlier than usual in order to prevent Brexit disruption and possible devaluing of the pound.
Chief executive Colin Porter said: “I am delighted to update on what has been another period of strong performance for Joules despite challenging trading conditions.”
“This performance, which is ahead of our initial expectations for the Period, is a testament to the strength of the Joules brand, the engagement of our loyal customers with our product collections, and our fantastic teams.”
“In the UK, our ‘total retail’ cross-channel model, underpinned by investment in infrastructure, has proven to be well suited to today’s rapidly changing consumer shopping behaviours. In addition, our international wholesale business continues to make excellent progress by both increasing sales to existing accounts and developing new accounts.”
“We have an outstanding brand, good momentum and a growing customer base and we look forward to the second half of the financial year with confidence.”
The interim financial results will be announced on 23 January.
In morning trade, shares in the group (LON: JOUL) are trading +7.83% (0953GMT).
CAA takes legal action against Ryanair
Ryanair is facing legal action over its refusal to compensate thousands of customers.
The Civil Aviation Authority has said that customers who had flights cancelled over summer are entitled to compensation under EU law.
Strikes over summer led to many flights to be delayed or cancelled, affecting thousands of UK passengers.
The airline has defended itself and says it does not owe passengers compensation because the strikes were “extraordinary circumstances”.
“Courts in Germany, Spain and Italy have already ruled that strikes are an ‘exceptional circumstance’ and EU261 compensation does not apply. We expect the UK CAA and courts will follow this precedent,” said Ryanair in a statement.
Under EU legislation, passengers can make an EU261 claim when flights are delayed by three hours or more, flights are cancelled or when they are denied boarding.
“As a result of Ryanair’s action, passengers with an existing claim will now have to await the outcome of the Civil Aviation Authority’s enforcement action,” said the CAA.
Rory Boland, the Which? travel editor, said: “Customers would have been outraged that Ryanair attempted to shirk its responsibilities by refusing to pay out compensation for cancelling services during the summer – which left hard-working families stranded with holiday plans stalled.”
“It is right that the CAA is now taking legal action against Ryanair on the basis that such strikes were not ‘extraordinary circumstances’ and should not be exempt, to ensure that the airline must finally do the right thing by its customers and pay the compensation owed.”
Shares in Ryanair (LON: RYA) are trading at 11,44 (0929GMT).
Department store spending continues to fall
New data has shown that spending in department stores has fallen for the 13th consecutive month.
Data from Barclaycard users’ spending showed that spending in department stores across the UK has fallen by 7.1% year on year.
The sector remains one of the hardest hit as stores struggle amid the rise of online rivals, the decline in consumer confidence and Brexit uncertainty.
Whilst John Lewis reported record sales during Black Friday week and revealed 7.7% rise in sales compared to the same week a year previous, sales went on to fall almost 6% after the US-inspired retail holiday.
Laura Suter, a personal finance analyst at investment firm AJ Bell, said: “Department stores took a pummelling in November. The problems faced by the likes of House of Fraser and Debenhams, and questions about the stores’ future, have likely put many off shopping with the brands.”
The news comes after Mike Ashley blasted MPs on the lack of effort going onto the dying high street.
The Sports Direct (LON: SPD) boss told MPs on Tuesday that a 20% retail tax was necessary on retailers that make more than a fifth of their sales online.
“It is not my fault the high street is dying; it’s not House of Fraser, not Marks & Spencer (LON: MKS) or Debenhams’ (LON: DEB) fault,” said Ashley.
“It is very simple why the high street is dying. It is the internet that is killing the high street. The vast majority of the high street has already died. In the bottom of the swimming pool, dead.”
A spokesperson from the Treasury said on Ashley’s tax suggestion: “As the chancellor made clear in the Budget, an online sales tax would be passed onto consumers. That’s why we’re putting £675 million into a Future High Streets Fund instead to help high streets to evolve.”
Numis profits sink 17% after hiring spree, shares fall
Profits at the stockbroker Numis dropped by 17% in the year until 30 September.
The group announced on Wednesday that pre-tax profit fell to £38.3 million due to increased investment in staff numbers.
Staff costs at the broker were up by 10.6% to £64.7 million. Additionally, non-staff costs on technology also increased to £31 million.
Despite the fall in profits, revenue for the year was up 4.6% at £136 million.
”Profits were down but that’s the result of a deliberate and significant investment during the period which we think is for the good of the company,” said Ross Mitchinson, Numis’ co-chief executive.
“It is always right to hire brilliant people,” he added.
Co-chief executive Alex Ham said: “In the 12-24 months post-Mifid II there will probably be some forced consolidation among our competitors but it is not something we worry about.”
“We are floating [investment platform] AJ Bell today and brilliant, first-class entrepreneur-led businesses like that will be well-received, but the market has become more selective.”
In September, the share price in the group plunged after the firm warned of a dent to future profits amid an increase in new employees.
“Investment in talented individuals across the business has been a key priority during the year as we seek to strengthen and diversify the business for the future,” said Numis co-chief executives Alex Ham and Ross Mitchinson.
“Our track record and reputation has been a significant factor in our ability to attract highly respected individuals to the business.”
On Brexit, the co-chief executive said it was “causing uncertainty right now, you can see there is less activity than there has been.”
Shares in Numis (LON: NUM) are trading down 1.99% (0846GMT)
Patisserie Valerie appoints new CFO
Nick Perrin has been appointed as the new interim CFO at Patisserie Valerie.
After the previous CFO, Chris Marsh, was suspended and then left the cake retail chain amid an accounting scandal, Patisserie Valerie continues to search for a permanent replacement.
“I am pleased to welcome Nick to Patisserie Holdings,” said Steve Francis, boss of the group.
“I am pleased to welcome Nick to Patisserie Holdings. He brings with him the necessary experience to help strengthen the team as the company works tirelessly to put the events of the past months behind it and look forward to the future.”
Perrin comes from the AIM-quoted vet services provider CVS.
Marsh left the chain after a £40 million black hole was discovered. He was arrested on bail and is under investigation by the Financial Reporting Council, who is also investigating audits provided by Grant Thornton.
A spokesperson for Grant Thornton said: “I can confirm we have received a letter from the Financial Reporting Council informing us of its decision to commence an investigation, and we will, of course, fully cooperate in this matter.”
The bakery chain is in talks to find a successor to Grant Thornton.
In the wake of the scandal, chief executive Paul May also stepped down from the group, who was replaced by Francis.
“I am delighted to welcome Steve Francis as new chief executive at Patisserie Holdings plc,” said Chairman Luke Johnson on Francis’s welcome.
“He has a strong track record of restoring value in turnaround situations, especially in the food industry, and the board looks forward to working with him in the revival of the business.”
Toyota boss: no-deal Brexit would be “disastrous”
The deputy managing director of Toyota has warned against the effects that a no-deal Brexit would have on the car manufacturer.
Tony Walker told MPs on Tuesday that a disorderly Brexit would be “disastrous” to UK operations and would cost up to £10 million a day.
Speaking to a parliamentary select committee, Toyota’s deputy managing director said that Theresa May’s deal has provided more clarity for businesses and is “much better than the confusion we have had. I don’t think I am alone in business in saying that”.
“To say because it is not perfect we should go back to square one is not understandable to us as business people.”
If the UK is to crash out of the EU, it would create havoc to its supply chain.
“We do not just have the 50 trucks, we have to have them in sequence, it is no good if we have 49 trucks and truck 17 is missing. [Production] will then stop. So without the withdrawal agreement and withdrawing with a no deal, we would have stop-start production for weeks, possibly months. It would be very, very difficult for us to cope with,” he said.
“The value of the cars we make is £10 million a day. If we lose that sort of value it’s very, very challenging for us.”
Adding to MPs on the future of Brexit, Walker said: “We strongly ask that the transition period doesn’t become the negotiation period and we would strongly ask that we don’t end up three, four months to go, a bit like this time, with another cliff edge with a very short time to implement.”
Airbus has also supported the prime minister’s deal, with the group’s senior UK vice president calling it a “step forward”.
MPs will vote on May’s deal on 11 December.
Shares in Toyota (TYO: 7203) are trading -1.72% (1527GMT).