UK retailer Mothercare saw shares jump on Friday despite interim sales dropping 15% on tougher trading conditions in the Middle East.

Mothercare shares were up 4.26% and trading at 490p at 10.32am.

Global retail sales through franchise partners totalled £137.2 million (compared to £162.1 million in 2022), marking a 15% decrease from the previous year (13% decrease when adjusted for currency fluctuations).

This decline was attributed to challenging trading conditions in the Middle East, which experienced a 20% decrease compared to last year.

The sales in the Middle East, especially in Saudi Arabia, have been dropping relentlessly.

It is also mentioned that fiscal and legislative shifts, along with new leisure options competing for consumer spending, are reshaping consumer behaviour.

Excluding Middle East sales, ongoing operations saw a 6% decline compared to the previous year at constant currency.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said that after these news reports, “Mothercare is in need of some self-care.”

She added that “tough trading conditions, especially in the Middle East, are causing problems for a company that’s already had to peddle extremely hard to stay afloat.”

The group’s revenue decreased to £29 million in the first half, down from £38.5 million last year and significantly below the £44.4 million recorded in 2020.

The company’s chairman, Clive Whiley, said in a statement that “these results are testament to our continued drive to preserve the strength of the Mothercare brand in a fast-changing retail and macroeconomic trading environment. Against significant headwinds in the Middle East, one of our core markets, we are pleased that our business model and disciplined approach to cost have resulted in an increase in profitability for the first half.”

Net debt increased to £15.8 million, compared to £11.6 million on September 24, 2022.

The company’s report further states that efforts are ongoing to address the pension scheme’s current deficit of £35 million (as of March 31, 2023), despite the reduction from £124.5 million since March.

Additionally, adjusted EBITDA increased by 12% to £3.6 million for the six months ending on September 23, 2023.

According to Sophie Lund-Yates, “an area that needs a laser-like focus from management is the net debt pile, which stands at many times the amount of the group’s cash profits.”

She added that “there’s also a sizable pension deficit to clear. For now, profits are being supported by deep cost cuts, but these can only go on for so long and won’t be enough in the long run.”

Chairman Clive Whiley says that the brand now hopes to expand its global presence. This involves entering new markets through various channels, such as e-commerce (direct or through marketplaces) or partnering with those holding online rights for a region.

This strategy will provide Mothercare with a chance for substantial growth, the statement explains, bringing synergies and increased profitability by leveraging the group’s strengths in supply, franchise partnerships, and international reach.

The FTSE 100 was almost dead flat at the time of writing on Thursday as the impact of stocks trading ex-dividend offset minor gains elsewhere.

Trade was thin with US markets closed for the Thanks Giving Holiday, and there was little for investors to get excited about in terms of corporate updates from FTSE 100 companies.

London’s leading index was weighed down by several high-yielding stocks trading ex-dividend. Companies trading without the right to their next dividend included Vodafone, National Grid and Land Securities.

A stronger pound also capped FTSE 100 gains after Flash UK PMI painted a better-than-expected picture for UK businesses.

“The UK economy found its feet again in November as the service sector arrested a three-month sequence of decline and manufacturers began to report less severe cutbacks to production schedules,” said Tim Moore, Economics Director at S&P Global Market Intelligence.

“Relief at the pause in interest rate hikes and a clear slowdown in headline measures of inflation are helping to support business activity, although the latest survey data merely suggests broadly flat UK GDP in the final quarter of 2023.”

GBP/USD rose to 1.2540 against the dollar, and the inverse relationship between the FTSE 100 and sterling meant the index underperformed Europe.

Intertek

Intertek was the FTSE 100’s top gainers after announcing a 7% increase in revenue year-to-date and confirmed mid-digit revenue growth guidance for the full year.

Intertek shares were 3.3% higher at the time fo writing.

IAG was among the fallers as the airline fell in sympathy with Jet2 after the peer released a mixed update saying bookings had slowed in recent weeks.

WTI Crude is down 0.88%, while Brent is down 0.94%. At the time of writing, WTI Crude is trading at $76.40 per barrel, while Brent costs $81.25 .

The loss follows the 4% drop in the oil prices yesterday.

Oil prices have been falling as ceasefire talks developed in the Middle East. Although, a ceasefire is yet to be agreed upon.

On Thursday the Israeli army announced it attacked approximately 300 Hamas points on Wednesday, despite ongoing intensive hostage negotiations.

OPEC+ was supposed to meet on Sunday but was rescheduled to November 30th, which also did not reflect positively on oil.

OPEC+ sources informed Reuters that the situation is due to an issue with some African countries, but exact details are unclear.

On Wednesday, airline Jet2 plc released interim results, which show that although the revenue rose in the last half-year period, bookings have slowed in recent weeks.

Jet2 shares were down 4.48% at the time of writing on Thursday and were trading at 1,080.30 p.

A major contributor to higher revenue was increased prices. The average cost of a Jet2 package holidays increased by 11%.

The net ticket yield per passenger sector for flight-only services reached £124.09, marking an 18% rise from the previous year’s £105.00.

Operating profit rose 19% to £617 million.

The company further states that there were instances when their operational performance was directly affected by various disruptions, including the NATS failure, Rhodes wildfires, and Skiathos flooding, resulting in an approximate loss of £14.0 million in profitability.

According to Russ Mould from AJ Bell, “Jet2 says it has a ‘wonderful product for challenging economic times’ but you imagine internally the company must be aware it has benefited from extreme pent-up demand in the wake of COVID, which meant people were so keen for a week in the sun they would prioritise it above almost anything else”.

Mould also added that “where Jet2 does have credit in the bank is in how it deals with customers—notably being more straightforward and decisive than rivals during the period of pandemic disruption.”

The total cash balance, which includes money market deposits, reached £3,214.6 million, marking a 14% increase from the previous year.

For the Winter 2023–24 season, despite a 21% rise in on-sale seat capacity to 4.49 million, the higher-margin per passenger package holiday mix for departing passengers has increased by 2.6 percentage points, the Jet2 report explains.

It further states that, while recent bookings have been slightly slower, average pricing remains strong.

The company’s CEO, Steve Heapy, stated that “we are pleased to have delivered another strong financial performance during the first half of the financial year, despite the well-publicised external challenges faced. This clearly demonstrates that our end-to-end package holiday is a popular and resilient product and is the right product for price-conscious customers.”

However, Russ Mould said on the topic that “Jet2 says it has a ‘wonderful product for challenging economic times’ but you imagine internally the company must be aware it has benefited from extreme pent-up demand in the wake of COVID, which meant people were so keen for a week in the sun they would prioritise it above almost anything else.”

Adding that, “An all-in package holiday, of which Jet2 is selling more and more, offers certainty on cost, but that doesn’t make it cheap”.

The Jet2 report further states that, looking ahead to summer 2024, the current seat capacity of 17.19 million seats is about 12% higher than summer 2023.

The FTSE 100 started the day higher before sellers took the index lower through the session in the run-up to the Autumn Statement.

As we well know, past budgets have caused sharp swings in UK markets, but the raft of measures outlined by Jeremy Hunt barely moved UK equities, and bond yields remained steady.

The FTSE 100 was trading down 10 points to 7,471 at the time of writing.

The Chancellor was keen to cut taxes ahead of elections next year and delivered a cut to national insurance, and made full expensing of investment in business equipment permanent. The move allows companies to offset investment in IT and machinery against corporation tax.

The government would have been conscious of fallout in financial markets if they were too loose with tax cuts amid a downgrade to the UK’s growth forecasts.

Measures to help planning applications did little to help housebuilding shares, and news the government was considering a Natwest share sale to boost the population’s involvement in the UK equity market neither helped Natwest shares nor trading platforms such as Hargreaves Lansdown.

Taylor Wimpey was down 0.9% and Hargreaves slipped 0.8%. Natwest gave up 1.2%.

Kingfisher and Sage

The major movers on Wednesday were Kingfisher and Sage Group, who released very different trading updates and were met with very different reactions from shareholders.

Kingfisher was the top faller after saying poor weather caused a slowdown in their European business as total group revenue fell. The DIY company is suffering from lower spending after the pandemic and is facing macroeconomic headwinds. Their UK business showed strength with a minor sales increase as they increased market share.

Nonetheless, disappointment around the European business dragged shares 6% lower on Wednesday.

Sage shares surged as the software and solution company enjoyed growth across all areas, with exceptional growth in their cloud business. Sage Business Cloud revenue grew 25% to £1,628m as total group revenue increased to £2,184m.

Sage shares were 13% higher at the time of writing.