The company blamed the results on a “very challenging” market, with uncertainty in the economy leading to a “significant deterioration in the consumer market”. The weakness of the pound against the dollar also hit profits.
The results come just a few months after the company closed a deal to buy boutique rival Sofology for £25 million. Analysts and investors were positive about the deal, which lifted shares by 4 percent after it was announced. On Thursday, the company remained positive in the face of its disappointing results, saying it had “excellent” long-term prospects. Chief executive officer Ian Filby said: “Although group sales will inevitably be affected by the market environment, we have identified opportunities to drive operating efficiencies and reduce financing costs that are expected to deliver near-term benefits, particularly in the second half of the financial year. “Based on these plans and the current market environment, we would expect to achieve modest, second-half weighted profit growth and good cash generation in the current financial year and we continue to have excellent prospects for the longer term.” Shares in DFS are currently trading down 4.11 percent at 215.75 (1109GMT).DFS shares plunge as profits fall by a fifth
Shares in furnishing company DFS (LON:DFS) dropped over 5 percent in early trading on Thursday, after profits sunk by 22 percent.
Pre-tax profts for the year to July fell from £64.5 million to £50.1 million, with sales pushing up just 0.9 percent to £762.7 million.
Top Takeover Targets this Autumn
In addition, this report includes:
⇒The weather may be getting colder but action in these sectors could start to heat up
⇒One of these stocks is on such a low PE it could be inevitable that a predator snaps it up as a value play
⇒Top sectors that are making money and could see takeover activity take off with overseas companies capitalising on the weak pound
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Amazon and Apple hit by EU tax crackdown
Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) hit by tougher tax enforcement put in place by the EU.
Technology giants Amazon and Apple have been ordered by Brussels to pay back a series of owed money to the union, after it deemed it had received unfair tax breaks.
Specifically, Amazon has been ordered to pay around €250 million for back taxes in Luxembourg after benefiting from illegal state aid.
In addition, the commission’s competition watchdog has ordered Ireland to collect €13 billion in taxes owed by Apple, which it has since failed to collect.
“Luxembourg gave illegal tax benefits to Amazon. As a result, almost three-quarters of Amazon’s profits were not taxed,” said Ms Margarethe Vestager, the European competition commissioner.
She added: “In other words, Amazon was allowed to pay four times less tax than other local companies subject to the same national tax rules. This is illegal under EU state aid rules. Member states cannot give selective tax benefits to multinational groups that are not available to others.”
Amazon rebutted the claims, stating: “We believe that Amazon did not receive any special treatment from Luxembourg and that we paid tax in full accordance with both Luxembourg and international tax law. We will study the commission’s ruling and consider our legal options, including an appeal.”.
The deliberation on Amazon follows a three-year long investigation by the European Commission amid concerns that the company had violated EU regulations.
Back in 2003, Amazon struck a deal with Luxembourg, after it issued a “comfort letter” to the company, which introduced a cap on profits which could be taxed in Luxembourg.
Ultimately, this was concluded as giving the company an unfair advantage over competitors, motivating its decision to push back on unpaid tax.
It is currently estimated that Amazon is still yet to pay $1.5 billion to US tax authorities.
Shares in both companies are down marginally in pre-market trading.
Topps Tiles shares sink as profit warning hits investor confidence
Shares in Topps Tiles (LON:TPT) fell over 4 percent on Wednesday morning, after the company warned on profits ahead of full year results.
A slowdown in the housing led to a tougher time for the company, who detailed “challenging market conditions” as the reason for the drop in profits. They are now expected to be at the lower end of expectations, after the range was lowered to between £18.5 million and £19.5 million, down from an earlier estimate of £21.65 million.
Revenues for the year are expected to be in the region of £211.6 million, down on £215 million a year earlier.
Matthew Williams, Topps Tiles’s chief executive, said “significant strategic progress has been made”, and that the company remains “excited by the growth opportunities open to us.”
“Despite this, the tougher market conditions we first highlighted in Q2 continued into the final quarter and, as a result, we are taking a prudent view on market conditions for the year ahead.
“We remain focused on our strategy of ‘Out Specialising the Specialists’ and are beginning to gain traction with a number of new initiatives.”
Shares in Topps Tiles are currently trading down 1.80 percent at 73.40 (1035GMT).
Tesco shares fall despite surge in first half profits
Tesco reported rising sales for the seventh quarter in a row on Wednesday, with like-for-like sales up just over 2 percent.
Pre-tax profit rose to £562 million for the first half of the year, an impressive boost from the £71 million recorded in the same period last year.
However analysts and investors were disappointed with the 2.1 percent rise in like-for-like sales, which was down 0.2 percent from the figure recorded over the previous period. Shares in Tesco opened higher when the results were first announced, but have since fallen into the red.
The supermarket’s CEO Dave Lewis said the results showed Tesco was “very firmly back on track”, adding that “Sales are up, profits are up, cash generation continues to strengthen and net debt levels are less than half what they were when we started our turnaround three years ago”.
Shares are currently trading down 1.32 percent at 187.55 (0953GMT).
GBP/USD dumps after weak UK GDP figures
The pound fell on Friday following the release of UK GDP figures pointing to a weaker expansion in the second quarter than initially thought.
In the three months to June of this year the UK economy grew at just 1.5%, the weakest growth rate since 2013.
What will be of concern to market participants is the slowdown was particularly pronounced in the services sector, a huge part of the UK economy.
Head of Gross Domestic Product at the ONS, Darren Morgan said of the reading:
“There was a notable slowdown in growth in the first half of 2017. The often buoyant services sector was the only area to grow in the second quarter, mainly due to increases in computer programming and retail.
“Household spending growth continued to slow in the second quarter. However, revised figures show business investment grew more strongly than previously estimated. Meanwhile, the UK’s deficit with the rest of the world was little changed in the second quarter.
“Today’s figures include several improvements to the way we measure the UK economy, including better estimates of self-employed income and interest received from corporate bonds. These improvements have the impact of increasing the saving ratio and current account deficit over a number of years.”
GBP/USD fell over 40 points in the immediate reaction to the announcement and continued to trade lower throughout Friday morning. GBP/USD is down over 250 points since touching intraday highs of 1.3659 20th September.
Despite the recent drop, Sterling is over 10% stronger against the dollar since post-brexit lows helped largely by hawkish suggestions from the Bank of England that the MPC will soon vote for a rate hike.
Price of Bitcoin rebounds after comments from Morgan Stanley CEO
Bitcoin has rebounded from the lows hit in the wake of Jamie Dimon comments, surging after Morgan Stanley’s CEO said the currency was “more than just a fad”.
James Gorman, CEO of the Wall Street bank, said the cryptocurrency has “compelling” privacy features. He continued:
“The concept of anonymous currency is a very interesting concept – interesting for the privacy protections it gives people, interesting because what it says to the central banking system about controlling that.”
His comments contrast with those of JP Morgan CEO Jamie Dimon, who said the currency was only good for thieves and drug dealers. Bitcoin took a hit in the wake of his comments, which hit the news at the beginning of this month, but has since rebounded.
The currency is now up on the day to above $4,200.
Toshiba confirms sale of memory chip business to Bain Capital
Shares in troubled technology giant Toshiba (TYO:6502) traded up on Thursday, after the group announced it had finalised the sale of one of its businesses to Bain Capital.
The $18 billion deal to sell its computer memory chip business will aim to make up for losses incurred after the failure of its US nuclear business, which plunged the company into financial difficulties towards the end of last year.
The deal was announced by Toshiba and Bain Capital, who are leading a consortium that includes South Korea’s SK Hynix Inc and US buyers of Toshiba chips such as Apple and Dell. However rival bidder Western Digital, who was tipped as the favourite for the deal, is not likely to give up without a fight. In a statement, they said:
“We are disappointed that Toshiba would take this action despite Western Digital’s tireless efforts to reach a resolution that is in the best interests of all stakeholders”.
The sale of Toshiba Memory is likely to boost its finances by 740bn yen after taxes, pulling its out of negative shareholder equity and ensuring it remains a listed entity.
Shares in Toshiba are currently trading up 2.34 percent at 306.00 (1224GMT).
Boohoo share price sinks for second day running as CEO sells shares
Boohoo (LON:BOO) shares traded down nearly 10 percent on Thursday morning, after one of its chief executives sold over 4 million shares and reduced her stake in the business to just 4 percent.
The shares sold by joint CEO Carol Kane were worth around £10.7 million, selling for 230 pence each. The downwards push on shares came despite strong earnings reports released on Wednesday, with revenues and profits jumping 41 percent in the six months to August 31st.
The company maintained its current profit guidance, however, causing a share sell-off exacerbated by Kane’s divestment.
“The strong performance in the first half-year and our expectations for the second half have given us confidence to raise guidance for the full year,” said joint chief executives Mahmud Kamani and Carol Kane in a statement.
Investors failed to be impressed by the results, however, with shares falling on the results on Wednesday. Shares were down almost 10 percent by mid-morning, a move that was echoes early on Thursday.
Co-founder Mahmud Kamani and his siblings sold 36.6 million shares earlier this year, taking home around £80.5 million earlier this year.
Shares in Boohoo, who also own the Nasty Gal and Pretty Little Thing brands, are currently trading down 13.76 percent at 16.98 (1155GMT).
Oil rally pauses day after Kurdistan referendum
Oil prices fell on Tuesday after strong gains in the previous session on fears Turkey was going to refuse to receive oil from the semi-autonomous Kurdistan region of Iraq.
Kurdistan held an independence in defiance of central Iraqi government which drew condemnation from both Turkey and Iran.
The Kurdistan region voted decisively for independence but the Iraqi refused to recognise the result.
Turkey and Iran have significant Kurdish populations and fear the independence referendum could lead to calls for similar votes in the regions close to Kurdistan.
Turkey considers many Kurdish military forces fighting in Iraq against ISIS as terrorist organisations and see an independent Kurdistan destabilising the region.
The Turkish oil pipeline going through Ceyhan usually pumps around 500,000-600,000 barrels of oil per day. Oil prices have rallied sharply over recent days on the prospect of Ceyhan supply ceasing and putting pressure on supply, adding to OPEC cuts currently in place.
The recent gains added to a strong run in Brent oil which is in a technical bull market having rallied over 20% from June lows.