DFS half-year profits plummet over 50 per cent
Sofa retailer DFS (LON:DFS) reported a fall in sales and pre-tax profits for the six months to 27 January, as the British high-street continues to struggle.
The firm said revenue discounting acquisitions was down by 3.5 per cent to £366.5 million, with profits 58.1 per cent lower, totalling £7 million.
DFS chief executive Ian Filby commented: “We have seen a strengthening trading performance across the first half of the financial year and through February into March.
“We therefore remain confident that, despite the current challenging market conditions, the group will deliver modest growth in EBITDA and generate strong cashflow across this financial year, in line with our expectations.”
An overall boost to group revenues, which hit £396.1 million, up from 379.9m, was attributed to “increasing scale and relative market leadership following the recent acquisition of Sofology”.
DFS acquired the brand for £25 million, as it looks to remain competitive amid an increasingly challenging retail environment.
Neil Wilson, senior market analyst at ETX Capital, commented on the results: “Broadly speaking, DFS is managing to handle the broader downturn in retail pretty well.
“The collapse of Feather & Black, Warren Evans and Multiyork, whose assets DFS has acquired, served to indicate the severe pressure on the market and the opportunity for those with enough scale to see it out.
“As we have noted on several occasions, this company has been here before, coping with recessions and property market downturns that prevent customers splashing out on big ticket items.”
The British high-street has come under pressure in recent years amid falling foot-fall and high inflation levels continue to affect consumer spending.
This comes amid reports that both department store giants House of Fraser and Debenhams (LON:DEB) are struggling after a disappointing Christmas period.
Debenhams shares dropped to 0.29p a share on Wednesday, as concerns continue to mount.
Shares in DFS are trading +8.5 percent as of 9.21AM (GMT), as investors react to the results.
Diploma report revenue rises across the board
Technical product business Diploma reported its first half results on Wednesday, with revenues coming in ahead of expectations.
Group revenues were 8 percent ahead of the comparable period, and 12 percent ahead at constant exchange rates. Revenues were even stronger in the life sciences division, up 16 precent or 8 percent on an underlying basis.
Abacus dx, the Australian diagnostic business that Diploma acquired in April last year, made a strong positive contribution to the results. Its seals sector also reported that revenues were expected to increase by 4 percent after strong trading activity in its North American businesses.
Underlying revenues grew by 3 percent in the first half, despite weak performances in Russia and Australia, with revenues rising 6 percent in its controls sector.
The firm said adjusted operating margin remains in line with the comparable period last year.
Shares in Diploma (LON:DPLM) are currently trading up 0.89 percent at 1,109.00 (0913GMT).
Paddy Power Betfair name Saga’s Jonathan Hill as CEO
Paddy Power Betfair (LON:PPB) have announced the appointment of Jonathan Hill as its chief financial officer, taking the place of current CFO Alex Gersh.
Hill will join the gambling company in the autumn from over 50s insurer Saga, where he is currently CFO. Previously he was CFO at Bovis Homes.
Shares in Paddy Power Betfair sunk on Wednesday morning in the wake of the announcement, currently trading down 1.58 percent at 7,145.00 (0833GMT).
The resignation of Alex Gersh followed that of the company’s CEO, Breon Corcoran, who had been at the helm of the company since its merger with Paddy Power. Corcoran’s successor, Peter Jackson, took over just last month.
“We’re delighted that Jonathan is joining us,” said Jackson. “He brings substantial strategic and operational finance experience in consumer businesses and I am confident he will make a significant contribution to Paddy Power Betfair’s future success.”
During its latest set of the results the company’s mood was positive, saying it can clear the hurdles of regulatory changes in the UK and Australia and that it would up its spending on advertising to spur on growth.
DFS shares rise 5pc despite 58pc profit plunge
Shares in sofa retailer DFS (LON:DFS) rose 5 percent on Wednesday morning, after maintaining its dividend despite a profit fall of over 50 percent.
Profit before tax plunged 58.1 percent to £7 million in the 26 weeks to the end of January, down from £16.7 million in the same period last year. DFS attributed the fall to £4.6 million of non-underlying costs and the “impacts of acquired businesses”.
Revenue before acquisitions also fell by 3.5 percent to £366.5 million, with earnings before interest, tax, depreciation and amortisation (EBIDTA) down 7.4 percent to £30 million.
Despite the troubling figures, the sofa retailer maintained its interim dividend of 3.7p per share. It also appeased investors by saying that it expects things to pick up in the second half of the financial year with a stronger year-on-year revenue trend than the first half.
DFS Chief Executive Officer Ian Filby said: “We have seen a strengthening trading performance across the first half of the financial year and through February into March. We therefore remain confident that, despite the current challenging market conditions, the Group will deliver modest growth in EBITDA and generate strong cashflow across this financial year, in-line with our expectations.”
Shares in DFS are currently trading up 5.65 percent at 179.60 (0823GMT).
City of London house prices fall 8pc
New data has shown London’s house prices to fall in almost half of the capital’s postcodes.
Areas most hit by the slump in prices at in central London, with the City of London seeing a fall in house prices by as much as eight percent.
However, the slump is not restricted to central postcodes. 42 percent of London’s postcodes have seen a fall in house prices over the past year.
“The weakness in London’s housing market has been building since 2015… sales volumes are first to be hit when demand weakens and housing turnover across London is down 17 percent since 2014. Sales prices are next to follow but with few forced sellers the level of price falls remains low,” said Richard Donnell of Hometrack.
The five boroughs with the steepest decline are City of London (7.9 percent), Camden (1.9 percent), Southwark (1.8 percent), Islington (1.4 percent) and Wandsworth (1.2 percent).
In contrast to London, cities across the UK are reporting high increases in house price growth.
The biggest increase in housing prices has been registered in Edinburgh, Liverpool and Manchester, which are seeing a growth of over seven percent.
Aberdeen and Cambridge have, however, also reported fall in house prices of 1.5 percent and 7.7 percent, respectively.
“We expect the number of markets with falling house prices to grow further in the coming months as buyers accept lower prices to achieve sales. The net result will be a negative rate of headline price growth for London by the middle of 2018,” said the report released by Hometrack.
Prices are not expected to grow in 2018. The Royal Institution of Chartered Surveyors said in December that it expected house price growth to “grind to a halt in 2018” due to the number of cautious buyers and low level of homes on the market.
EU markets watchdog to ban sale of binary options
The EU markets watchdog ESMA will ‘ban’ the marketing, distribution and sale of binary options to retail investors, it was announced on Tuesday.
“ESMA, along with National Competent Authorities (NCAs), concluded that there exists a significant investor protection concern in relation to binary options offered to retail investors,” it said in a statement.
“This is due to their complexity and lack of transparency.”
Binary options are traditionally high-risk products but have been marketed to inexperienced investors for some time. ESMA said it had been “concerned” about how these inherently high-risk speculative products were being offered and marketed, often through targeted advertising online.
Shares in spread-betting companies plunged on the news, with IG Group (LON:IGG) currently trading down 3.43 percent and CMC Markets (LON:CMCX) down 3.14 percent at 1041GMT.
UK Investor Magazine investigated the binary options industry back in 2016, warning readers to be careful with firms offering these investments. Read the article here.
GSK to buy Novartis’ stake in Consumer Healthcare Business
GlaxoSmithKline (LON:GSK) announced the acquisition of Novartis’ 36.5 percent stake in their joint venture, the Consumer Healthcare Business.
GSK will pay £9.2 billion for the stake in the business, which manufactures Sensodyne toothpaste, Panadol headache tablets and Nicotinell patches. The Consumer Healthcare Business was formed in 2015 as part of the three-part transaction between GSK and Novartis, and lat year reported sales of £7.8 billion.
In order to finance the deal GSK said it was initiating a strategic review of Horlicks and may sell that and its other nutrition products. Previously the company was in the running for Pfizer’s consumer healthcare unit, but dropped its bid last week.
The company said in a statement that: “GSK is initiating a strategic review of Horlicks and its other consumer healthcare nutrition products to support funding of the transaction, and to drive increased focus on over-the-counter and oral health categories. Combined sales of these products were approximately £550 million in 2017.”
Emma Walmsley, Chief Executive Officer at GSK, commented: “The proposed transaction addresses one of our key capital allocation priorities and will allow GSK shareholders to capture the full value of one of the world’s leading Consumer Healthcare businesses. For the Group, the transaction is expected to benefit adjusted earnings and cash flows, helping us accelerate efforts to improve performance. Most importantly it also removes uncertainty and allows us to plan use of our capital for other priorities, especially pharmaceuticals R&D.”
Shares in GSK are currently up 5.11 percent at 1,354.00 (1008GMT).
H&M reports 61pc fall in profits
Fashion giant H&M (STO: HM-B) has reported a 61 percent fall in profits from this time last year, blaming the unusually cold winter.
The world’s second-biggest clothing chain said profits fell due to lower sales and steep markdowns.
The group posted profits of 1.3 billion Swedish krona (£112 million), which is compared to the 3.2 billion krona worth of profits for the same period last year.
“Weak sales in the fourth quarter, partly caused by imbalances in the assortment for the H&M brand, resulted in the need for substantial clearance sales in the first quarter,” said Karl-Johan Persson, chief executive of H&M.
“The high level of clearance sales combined with unusually cold winter weather had a negative impact on the sales of the spring garments. In the first quarter the H&M group’s sales were unchanged in local currencies.”
“Many of our ongoing initiatives are giving good indications and results, even though they have not yet been implemented at a large enough scale to have a decisive effect on the overall results. The weak sales development combined with substantial markdowns had a significant negative impact on results in the first quarter,” he added.
H&M currently has 4,700 stores in 69 countries, most of them are H&M stores but a growing number of mid-market chains, & Other Stories and Cos.
This year, the group plans to open 220 new stores – 90 of these & Other Stories and Cos. Following the fall in profits, shares in H&M fell five percent in early trading to their lowest point since 2008. The fashion retailer remains positive and expects to see increased sales and growth in profit over the year. “We take a long-term view that, together with our knowledge and experience enable us to navigate through times such as this… back to healthy growth in both sales and profitability,” said the group.Citigroup issued broker notes on William Hill and Rolls-Royce
Citigroup issued broker notes on Tuesday on both William Hill and Rolls-Royce, reaffirming previous ratings after a month of activity for both companies.
Citigroup brokers reaffirmed their buy investment rating on William Hill PLC [LON:WMH] and set its price target at 380p.
Shares in William Hill (LON:WMH) jumped earlier in March after the UK’s Gambling Commission recommended new restrictions on fixed-odds betting terminals (FOBT) that were lighter than expected. The Commission said the maximum stake FOBTs should be dropped from £100 to £30.
William Hill shares are currently trading up 1.08 percent at 327.40 (0916GMT).
Citigroup also reaffirmed its buy investment rating on Rolls-Royce Group (LON:RR) and set its price target at 1083p.
Earlier this month Rolls-Royce shares rocketed 11 after posting a 25 percent profit rise well ahead of their own expectations.
Pre-tax profit for the 2017 year rose to £1.07 billion, a huge jump from the £813 million posted in 2016, with revenue increasing by 6 percent to £15.09 billion. The company held its dividend steadydeclaring a figure 11.7p per share for the full year.
Chief executive Warren East said Rolls Royce had made “good progress” during the year.
Rolls-Royce shares are currently up 1.01 percent at 876.40 (0916GMT).
Stagecoach shares drop after severe weather hits bus services
Shares in travel company Stagecoach (LON:SGC) saw shares sink 2.5 percent on Tuesday, after a weak performance for its UK bus company and business in North America.
UK bus regional revenue fell by 0.1 percent on a like-for-like basis, after severe weather across the country impacted on results. In London, bus revenues fell by a hefty 4.3 percent.
In its North American business, year-to-date like-for-like revenue had fallen by 0.6 percent.
Its rail service in the UK fared better, however, seeing like-for-like revenue at its UK rail division (but excluding South West Trains) grow by 3.2 percent in the 44 weeks to 3 March. Revenue at its joint venture with Virgin Trains grew by 2.8 percent.
“Our expectation of the group’s adjusted earnings per share for the year ending 28 April 2018 has not changed from when we announced our interim results in December 2017,” Stagecoach said.
Shares in Stagecoach are currently trading down 2.52 percent at 127.90 on the news (0848GMT).