Theresa May suggests extension of transition period
Theresa May has hinted that she is willing to extend the Brexit transition period.
The prime minister suggested a longer transition period to EU leaders on Wednesday, in order to break the deadlock in negotiations.
European Parliament President Antonio Tajani said: “It was mentioned – both sides mentioned the idea of an extension of a transition period as one possibility that is on the table and would be looked into.”
“Theresa May during her speech said it’s possible to achieve an agreement also on a transition period, but not with a clear position on the timing,” he added.
Extending the transition period will mean that the UK is likely to add additional budget contributions to the EU on top of the current £39 billion divorce bill.
Eurosceptic Conservative backbenchers have rejected the idea of extending the transition period because it will mean that the UK will still have to abide to EU rules and pay into the budget whilst having no say over how the money is spent.
The Shadow Chancellor, John McDonnell, said that an extended transition period would increase uncertainty for business.
“Everyone I talk to now – business leaders, investors, trade union leaders all of them are saying the uncertainty and the insecurity at the moment means decisions are not being taken about long-term investment,” he said.
Nigel Farage said that the extension period “may mean we never leave at all”.
“The problem isn’t Brexit, the problem is the prime minister,” he said.
In further news, a source has said that there will be no special Brexit summit in November due to sufficient progress already being made.
“The EU27 leaders stand ready to convene a European council, if and when the union negotiator reports that decisive progress has been made. For now, EU27 is not planning to organise an extraordinary summit on Brexit in November,” said the source.
Ladbible takes over Unilad, saving 200 jobs
After going into administration last month, viral news website Unilad has been bought by rival LadBible.
Owner of Unilad, Bentley Harrington, collapsed with £6.5 million worth of debts including the £1.5 million it owed to the HMRC.
The website employs over 200 employees at the editorial office based in Manchester. LadBible has said that it will keep the businesses separate and there will be no job losses.
“As of today, LadBible Group and Unilad Group are now united under the same roof. This transforms the media landscape worldwide,” said LadBibe in a statement.
“Bringing these brands together makes us the largest social video publisher ever, and a youth media brand to be reckoned with, having over 120 million followers across our social channels. In August alone, our combined videos were viewed 4.5 billion times.”
The amount that was paid for UniLad has not been disclosed.
Both companies are the two biggest publishers on Facebook including the platforms BBC, CNN and the New York Times.
Andrew Poxon and Andrew Duncan, of Leonard Curtis Business Rescue and Recovery, who were the join administrators said in a statement that they had “identified a purchaser and worked with those concerned to deliver a positive outcome for all stakeholders”.
Barratt Developments forward sales up 12.4%
Residential property company Barratt Developments Plc (LON:BDEV) has reported an impressive start to the new fiscal year, with a 12.4% jump in on-year forward sales – this comes alongside strong activity by other players in the property development market.
The jump comes as the sales for the year just gone were up to £3.15 billion, a jump from £2.8 billion the year before.
While these figures are encouraging, net reservations per outlet have dipped from 0.74 to 0.72 per active outlet per week for the period between July and August. Similarly, the number of on-year new developments have dropped by 9 to 53, and the number of active outlets has dipped from 371 to 365.
Despite this, Barratt remain confident in delivering strong growth and operating performance for fiscal 2019, with targets reportedly set at between 3-5% volume growth per annum.
‘The group has started the new financial year in a strong position, with a good sales rate, healthy forward order book and customer demand supported by an attractive lending environment,’ said David Thomas, Chief Executive.
‘We are focused on delivering our medium term targets set out at our Full Year results, whilst maintaining our commitment to leading the industry in the design and quality of our homes and in customer service, which we believe is fundamental to our ongoing success.’
The firm’s shares are currently trading down 0.58% or 3p since trading began on Wednesday morning, at 511p. Analysts from Peel Hunt have reiterated their ‘Buy’ stance on Barratt stock, while Shore Capital analysts have reiterated their ‘Hold’ stance.
Segro rental income soars 43%
Property investor and developer Segro Plc (LON:SGRO) have seen their shares rally amid reports of an impressive nine months in 2018 – sharing the fate of their counterparts in the property development sector.
The firm’s rental collection reached ‘headline’ rates – meaning that “annualised gross passing rent receivable, once incentives such as rent-free periods had expired”. The company have thus far collected £52 million within the first three quarters, which represents a 43% on-year jump. Further, Segro’s vacancy rates have grown from 4.8% to 5.2%, largely due to completion of speculative developments during the quarter.
The company said it had completed 219,000 square metres of developments, with the potential to generate £10.6 million in headline rent, £8.5 million of which has already been leased.
“Segro’s business has continued to perform well in the third quarter of 2018,” said chief executive David Sleath.
“Ongoing favourable occupier market conditions have enabled us to achieve another strong leasing performance for both new and existing space.”
“In line with our disciplined approach to capital allocation, we have exchanged or completed disposals totalling over £200 million during the period at a significant premium to book value, taking advantage of strong investor demand and a limited supply of prime, well-located assets.”
“The structural trends of e-commerce and urbanisation continue to underpin occupier and investor demand for prime warehouse space, notwithstanding near-term economic and political uncertainty in the UK.”
The firm’s shares are currently trading up 16p or 2.62% at 625.8p. Liberum Capital, Peel Hunt and JP Morgan Cazenove analysts have reiterated their ‘Buy’, ‘Hold’ and ‘Underweight’ stances on Segro stock respectively.
Mediclinic shares fall on profit warning
Shares in Mediclinic (LON:MDC) fell on Wednesday, after the company issued a trading update on its interim results.
The firm, which specialises in providing private healthcare, warned of weaker-than-expeceted performance in Switzerland.
The South African company said it expects to report a 2% increase in sales for the first half the year to September-end, alongside a 4% decline in adjusted profits.
Commenting today, Dr Ronnie van der Merwe, CEO, said:
“Trading in the first half of the year experienced the customary seasonality in Switzerland and the Middle East. In the Middle East, we delivered a gradual improvement in revenue and margin expansion ahead of the anticipated stronger growth in the second half of the year. In Switzerland, the business continues to adapt to recent regulatory changes in the outpatient environment, which in the period had a greater than expected impact on admissions and the insurance mix.”
“In Southern Africa, margins were maintained on lower volumes due to weakness in the second quarter from fewer pneumonia and bronchitis related cases during the winter.
He added: “For the full year, our performance in Southern Africa remains in line with guidance. In the Middle East, full year EBITDA delivery remains on track with revenue growth lower than previously expected. In Switzerland, we now expect to deliver modest revenue growth in the full year including contribution from Clinique des Grangettes, with an adjusted EBITDA margin of around 16%.”
Alongside locations in Switzerland, the firm operates in South Africa, Namibia, and the United Arab Emirates.
As well as the South African Securities Exchange (JSE), Mediclinic is also listed on the London Stock Exchange and is a constituent of the FTSE-250 Index.
As of currently, the company also holds a 29.9% stake in Spire Healthcare, a UK-based private healthcare provider.
Shares in Mediclinic are currently trading -17.53% as of 12.52AM (GMT).
Elsewhere across the markets, online clothing retailer Asos shares (LON:ASC) rallied on Wednesday on boosted profits.
Conversely, shares in low-cost airline Flybe fell during early morning trading, after the company warned on profits.
Crest Nicholson issues profit warning, shares fall 14pc
The housebuilder Crest Nicholson issued its third profit warning in two years on Wednesday.
The company expects pre-tax profits to be between £170-190 million for the year to 31 October, which is below market expectations of £205 million.
“The usual autumn pick up in sales volumes has not been evident during September and October, with many customers put off decisions to buy whilst current political and economic uncertainties persist,” said Stephen Stone, Crest Nicholson’s executive chairman.
Shares fell by 14% in early trading.
The group have warned that demand is low amid Brexit uncertainties, with shares also falling at rival groups such as Berkeley (LON: BKG) and Persimmon (LON: PSN).
Demand has fallen so much that Crest Nicholson has closed its London office.
Demand for homes targeted at “aspirational” buyers have “suffered from a lack of confidence among discretionary buyers, who cite economic and political uncertainty as a disincentive to transact”.
The group’s board asked Stone to lead a new strategy which will “focus on shareholder returns by prioritising cash flow and dividends, maximising value in the land and development portfolio and improving operational efficiencies”.
The group’s finance director, Robert Allen, plans to leave the company after a short handover period.
Housebuilder Barratt (LON: BDEV) has seen a more positive set of results, with a strong start to its financial year.
David Thomas, Barratt’s chief executive, said: “The group has started the new financial year in a strong position, with a good sales rate, healthy forward order book and customer demand supported by an attractive lending environment.”
Shares in Crest Nicholson (LON: CRST) are trading down 4.84% at 307,40 (1253GMT).
Brexit £36bn divorce bill hangs upon Irish backstop
With conflicting rhetoric on how close the UK are to reaching a Brexit deal with the EU, Chancellor Philip Hammond delivered a solemn warning on the morning of the prime minister’s meeting with the EU27.
Hammond has warned that should a deal fail to be brought to fruition, the resulting ‘divorce bill’ could mount to anywhere between £30-36 billion, only some £3-9 billion less than the initial cost of striking a deal.
As stated by a cabinet source, “the Treasury’s legal advice was that if we left without a deal we would still have to pay the EU £30-36 billion because we would be unlikely to win any case that went to international arbitration,”
Theresa May will meet the EU27 leaders this evening, with the goal of making progress on talks prior to the meeting with the European Council in December, as hopes of a November summit dwindle. The progression of talks remain hinged on the idea that some form of backstop for the Irish border will be put in place upon the UK’s exit from the EU bloc next March. The backstop will act as a form of short-term customs safety net, and while May has categorically ruled out the possibility of a backstop in talks with her cabinet on Tuesday, EU negotiators have stated that any extension on a Brexit transition would be contingent on some form of backstop being put in place.
Number 10 commented that some progress had been made on future trade frameworks and the idea of a backstop for trade and customs covering the UK as a whole. However, negotiator Michael Barnier stated that a one-year extension on negotiations would be subject to the UK accepting the terms of a two-tier backstop.
French finance minister Bruno La Maire has said on the morning of the talks, that we “are not far from a deal”.
Similarly, May’s spokesman added, “We want to secure a deal as quickly as possible. We think it is in the best interests of the UK and European Union to forge that deep future partnership”.
However, May faces the monumental tasks of quelling domestic antagonism and the Autumn budget, before she can even venture to think about reaching a deal for Brexit. The Irish backstop issue appears to be the deciding factor, with Brexiteers and DUP members threatening to vote down the budget should she compromise and pander to EU demands. At the same time, the December summit could well be the prime minister’s last chance to agree on a deal with the EU in time for it to be ratified by EU parliaments and Commons, before March 2019.
In the words of one EU diplomat, “The clock is ticking – the ball is in the UK court. The British have a political problem, they have to come back to us when they’ve solved it.”
The question hangs in the air, should we prepare for a no deal, should we push for a Canada plus scenario, or is there a chance the UK will not leave at all?
Flybe shares plummet after profit warning
Flybe (LON:FLYB) shares plunged on Wednesday morning, after the company issued a profit warning for the year.
The low-cost airline warned that amid softer trading, it now expects second half revenue to be behind market expectations.
Flybe attributed the disappointing performance to higher fuel costs, carbon prices as well as pound volatility for further denting profits.
Specifically, the company said it now expects full year pre-tax loss of £12 million, significantly higher than anticipated. The company also said the sum includes the benefit of £10 million from an onerous lease provision release.
This includes an estimated GBP29m of adverse year-on-year impact from weaker sterling, fuel and carbon prices.
Looking ahead, the budget airline said it was looking into ways to reduce costs.
Christine Ourmières-Widener, Chief Executive Officer of Flybe, said:
“We have made progress in driving our unit revenues across the Summer season, but we are now seeing a softening in the market. We are reviewing further capacity and cost saving measures while continuing to focus on delivering our Sustainable Business Improvement Plan. Stronger cost discipline is starting to have a positive impact across the business, but we aim to do more in the coming months, particularly against the headwinds of currency and fuel costs. We continue to strengthen the underlying business and remain confident that our strategy will improve performance.”
Flybe is set to announce its interim results next month.
The last few years have been particularly turbulent for many airlines, with Monarch collapsing into administration towards the end of 2017.
Moreover, rival airlines such as Ryanair recently warned on profits, as strike action impacted profits.
Flybe is based in Exeter, England and is the largest independent regional airline in Europe.
The airline was founded back in 1979 as Jersey European Airways.
Shares in Flybe are currently -38.53 % as of 11.37AM (GMT) on the warning.
UK inflation falls to 2.4% in September
UK inflation levels fell to 2.4% in September, driven in part by lower food prices.
The Office For National Statistics (ONS) said inflation in September fell to 2.4%, compared to 2.7% back in August.
This was attributed to lower prices for both food and non-alcoholic drinks.
Moreover, the ONS said that transport also had a marked impact upon the dip, with passenger fares showing larger price falls between August and September than a year ago.
Mike Hardie, head of inflation at the ONS, said: “Food was the main downward pull on inflation as last year’s September price rises failed to reappear, while ferry prices dropped after their surprisingly high summer peak.
“However, it wasn’t all one-way traffic with energy suppliers pushing up their prices.”
These statistics follow recently released official figures, which revealed that wages rose on average 3.1%. This marked the fastest pace of wage growth in a decade.
Specifically, the ONS said unemployment fell by 47,000 to 1.36 million. Meanwhile, unemployment rate remained at a 43-year low of 4%.
Pay growth – excluding bonuses – was up from 2.9% from the previous period.
The Chancellor is set to deliver his highly-anticipated Autumn budget on the 29th of October, which will no doubt tackle inflation.
Ahead of the budget, The British Retail Consortium (BRC) have called upon the government to take action on business rates.
Helen Dickinson, chief executive of the BRC, said: “Retailers need the forthcoming Budget to reduce the cost burden on retail businesses. This will incentivise innovation and support the industry in creating quality jobs and providing great choice for consumers at competitive prices – future-proofing retail to ensure the best is made of the opportunities and challenges thrown up by transformation.
“The business taxation system is in urgent need of reform but any shift to an online sales tax would represent a double jeopardy for many retailers who are responding to customer demand and investing in online retailing. Eight out of the top 10 online retailers also have physical stores.”
The high-street has been particularly struggling as of late, with 2017 marking the worst start for the year for retail in five years.
Asos shares bounce 14% amid soaring profits
Asos shares (LON:ASC) ticked up as much as 14% on Wednesday after the company posted a strong set of results for the year.
The online fashion retailer posted a £500 million rise in revenue to £2.4 billion for the year to 31 August.
Profit also rose 28% to £102 million, slightly above expectations.
Back in July, Asos issued a sales warning, sending shares 10% lower.
The fast fashion retailer said that whilst it remained on track to reach profit targets, sales growth would be “likely towards the lower end” of the expected 25 – 30% range.
Chief Executive, Nick Beighton commented on the results:
“Our reported profit increase was achieved despite bearing material transition costs due to our investment programme,”
“All our financial and customer key metrics have shown positive growth. Our guidance remains unchanged both for the current year and the medium term, despite our record levels of investment.”
Regarding future growth, Beighton remained upbeat:
“The potential for our business is huge and we remain focused on building Asos into the world’s number one destination for fashion-loving twentysomethings.”
Online retailers such as ASOS and Amazon have continued to outperform the more traditional high-street stores, as consumers increasingly turn to the ease of the Internet to shop.
Earlier this week, fashion chain Coast announced its collapse into administration becoming the latest victim of the high-street crisis.
Shares in ASOS are currently trading +14.20% as of 10.38AM (GMT).