(Alliance News) - Strong, but difficult, trading over the Christmas period for two UK high street stalwarts will lead to special dividends for their investors.
Next on Thursday said full price sales in the eight weeks to Christmas Day were ahead of expectations, and it will now pay a special dividend. Baker Greggs said annual sales increased, and it also is considering a special dividend.
Next said full price sales in the eight weeks to December 25 were up 20% from pre-pandemic times. The figure was GBP70 million ahead of guidance, the retailer noted.
Following its decent Christmas trading, Next has lifted profit guidance. It now expects pretax profit of GBP822 million for the financial year ending in January, which would be a 9.8% hike from pre-pandemic times. Its previous outlook was for pretax profit of GBP800 million. Pretax profit in the year that ended January 30, 2021 was GBP342 million.
For the year about to end, Next expects full price sales growth of 13% from two years earlier, also GBP70 million ahead of forecasts. For the following year, so the financial ending January 2023, it expects full price sales to rise 7.0% annually.
"Our headline sales growth expectations of 7.0% sounds uncontroversial. However, forecasting sales for the year ahead is unusually difficult and the buoyancy of recent months makes it all the harder," the retailer said.
The Christmas period was not without difficulty, however. Next said stock levels were "materially lower than planned" and it saw a hit to delivery service levels due labour shortfalls.
Next declared a 160 pence special dividend which will be paid by the end of this month. It will return to its "pre-pandemic ordinary dividend cycle in the year ahead", Next said.
Next shares were down 2.4%, a worse fall than the overall FTSE 100, and Greggs was down 2.3%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 1.1% at 7,435.72
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Hang Seng: up 0.7% at 23,072.86
Nikkei 225: closed down 2.9% at 28,487.87
S&P/ASX 200: down 2.7% at 7,358.30
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DJIA: closed down 392.54 points, or 1.1%, at 36,407.11
S&P 500: closed down 1.9% at 4,700.58
Nasdaq Composite: closed down 3.3% at 15,100.17
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EUR: down at USD1.1286 (USD1.1326)
GBP: down at USD1.3505 (USD1.3562)
USD: unchanged at JPY115.91 (JPY115.90)
Gold: down at USD1,799.85 per ounce (USD1,823.20)
Oil (Brent): down at USD80.28 a barrel (USD81.20)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's key economic events still to come
1100 CET EU producer price index
1400 CET Germany provisional consumer price index
0900 GMT UK SMMT vehicle registration figures
0930 GMT UK services purchasing managers' index
0830 EST US international trade in goods & services
0830 EST US initial jobless claims
1000 EST US ISM services PMI
1030 EST US EIA weekly natural gas storage report
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China's business activity growth in December accelerated at its strongest rate since July, survey results from IHS Markit showed. The Caixin China general composite purchasing managers' index rose to 53.0 points in December from a three-month low of 51.2 in November. The Caixin China general services PMI increased to 53.1 points in December from 52.1 a month earlier, marking a fourth straight month of expansion.
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The Japanese service sector witnessed a softer expansion at the end of 2021, figures from IHS Markit showed. The Japan services business activity index rose to 52.1 in December from 53.0 the month before, indicating a moderate expansion in business activity. A figure above 50.0 denotes growth. Despite the slight easing in the growth rate, the average reading over the fourth quarter was the strongest quarterly performance since the third quarter of 2019. The Japan composite PMI output index - which measures combined output in both the manufacturing and services sectors - dipped to 52.5 in December from 53.3 the month before.
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Companies in the UK are suffering a "huge headache" because of continuing supply chain disruption, soaring inflation and rising energy costs, a business group is warning. The British Chambers of Commerce said its study of almost 5,500 companies found that three out of five expect their prices to increase in the next three months – the highest proportion on record. Two thirds of respondents cited inflation as a concern, also a record high, while one in four were worried about rising interest rates. The BCC said its survey showed that the recovery had "stalled" in recent months, with firms facing "unprecedented" inflationary pressures.
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Demand for new cars in the UK increased by just 1% last year despite a surge in electric vehicles, new figures are expected to show. Around 1.65 million new cars were registered in 2021, compared with 1.63 million the previous year, the Society of Motor Manufacturers & Traders said. This is a "bleak picture" and "not what we'd hoped for", SMMT Chief Executive Mike Hawes said. He blamed the sector's failure to mount a stronger recovery from 2020 – its worst year since 1992 – on the global shortage of semiconductors and the impact of the pandemic.
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BROKER RATING CHANGES
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BERNSTEIN CUTS JOHNSON MATTHEY TO 'MARKET-PERFORM' ('OUTPERFORM') - TARGET 2,500 (4,100) PENCE
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BERENBERG RAISES WH SMITH TO 'BUY' ('HOLD') - TARGET 1,900 (1750) PENCE
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BERENBERG CUTS JD WETHERSPOON TO 'HOLD' ('BUY') - TARGET 10,50 (1,650) PENCE
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COMPANIES - FTSE 100
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B&M European Value Retail said total revenue in the third quarter ended December 25 was largely flat at GBP1.40 billion, inching up 0.1% at constant currency. Annual like-for-like revenue in the UK alone fell 6.2%, though it grew 14% from two years earlier, before the onset of the pandemic. "The group has delivered a very strong golden quarter, with our two-year like-for-like performance demonstrating strong retention of new customers. Our decision to take receipt of imported Christmas stock early in the season meant we were able to provide customers with great products at great prices," Chief Executive Simon Arora said. B&M said it now expects annual adjusted earnings before interest, tax, depreciation and amortisation guidance in the range of GBP605 million to GBP625 million. This is ahead of current analyst consensus of GBP578 million.
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Glencore has closed the sale of Ernest Henry Mining, the owner of the Ernest Henry copper-gold mine in Australia, in a deal valued at AUD1 billion, or USD715 million. In terms of the acquisition, Glencore has received AUD800 million and will receive a further AUD200 million in 12 months time from New South Wales-based Evolution Mining. Glencore, the Anglo-Swiss mining company headquartered in Baar, Switzerland, will offtake 100% of the copper concentrate produced at Ernest Henry.
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COMPANIES - FTSE 250
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Greggs outlined plans for a special dividend. The baker expects to be in a position to make an distribution of GBP30 million to GBP40 million this calendar year. "A decision on the size and timing of any special dividend distribution is expected to be made in the first half of 2022, subject to trading conditions," the company said. In the year that ended January 1, sales amounted to GBP1.23 billion, up 52% annually from GBP811 million and rising 5.3% from GBP1.17 billion from two years earlier. Annual like-for-like sales were down 3.3% from pre-pandemic times, though in the fourth quarter alone, they rose 0.8%. Greggs expects annual results to top previous expectations. It hailed "good" operational cost control in the final quarter but warned inflationary pressures are to "remain elevated in 2022". Greggs, which has been addressing CEO succession as Whiteside approaches retirement age, said it has named Roisin Currie as his replacement. Currie's appointment is effective from May. Currie is currently retail & property director. Whiteside will step down from the board at the end of May's annual general meeting. Prior to joining Greggs in 2010, Roisin worked at Asda where she was people director.
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COMPANIES - MAIN MARKET AND AIM
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Ad agency M&C Saatchi confirmed it has received a preliminary takeover approach from Main Market-listed acquisition vehicle AdvancedAdvT. Vin Murria, the executive chair of AdvancedAdvT, also is an M&C Saatchi director, so M&C Saatchi said it will form an independent committee to consider any offer made. AdvancedAdvT, which is backed by Marwyn Investment Management, announced on Wednesday that it had bought a 9.8% stake in M&C Saatchi, spending GBP24.0 million. "No proposal has been received but the board has been told to expect one in the near term. Accordingly, there can be no certainty that an offer will be made, nor as to the terms on which any offer might be made," M&C said. "The board confirms that the new strategy announced in Q1 2021 is already delivering, with the company's performance consistently exceeding expectations, demonstrated by a succession of positive trading upgrades."
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South32 said it has decided to participate in the reopening of the Alumar aluminium smelter, which has been dormant for six years. The Perth, Australia-based mining company has an interest in the Alumar aluminium smelter, which is located at Sao Luis in the state of Maranhao in Brazil. The other joint-venture partner, the US's Alcoa, also will form part of the restart of the smelter. The smelter has been on care and maintenance since 2015. To support the restart, South32 expects to invest USD70 million for the financial years 2022 and 2023.
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COMPANIES - GLOBAL
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French regulators have hit Google and Facebook with EUR210 million in fines over their use of 'cookies', the data used to track users online, authorities said. The EUR150 million fine imposed on Google was a record by France's National Commission for Information Technology & Freedom, beating a previous cookie-related fine of EUR100 million against the company in December 2020.
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Honda Motor said its automobile production and sales joint venture in China will build a new dedicated electric vehicle production plant in Wuhan. The Tokyo, Japan-headquartered automobiles, motorcycles, and power equipment manufacturer said the joint venture, Dongfeng Honda Automobile, will build the plant to establish sufficient production capability for the expansion of the company's electric vehicle lineup in the coming years. Honda is aiming for production to begin in 2024. The plant will be built in Wuhan Economic Development Zone in the Hubei province in China. Wuhan is where Covid-19 was first detected in late 2019.
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Thursday's shareholder meetings
Spinnaker Acquisitions PLC - GM re Homeserve Labs reverse takeover
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By Tom Waite; thomaslwaite@alliancenews.com
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