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Companies roundup: Sainsbury’s takeover and Direct Line departures

Potential takeover of Sainsbury’s

Some unexpected share buying activity has raised the prospect of a takeover of J Sainsbury (SBRY). Wholesaler Bestway has acquired 81mn shares in the supermarket, which represents 3.45 per cent of its total share capital. The Costcutter owner said that “it is not considering an offer for Sainsbury’s”, but also provided contact details for institutional shareholders who are interested in selling shares to it. Sainsbury’s shares were up by over 4 per cent in early trading. 

AJ Bell investment director Russ Mould said that “should Bestway want to make a full bid down the line, it would have to make a convincing offer to get Qatar Investment Authority to want to part with its 14.3 per cent stake, and the same for Vesa Equity Investment which owns just over 10 per cent of the supermarket”. CA

Superdry shares nosedive after profit warning

Clothing retailer Superdry (SDRY) has issued a profit warning in its interim results – blaming declining wholesale performance on a “lagged recovery after Covid and shipment timing”. It has therefore revised its full-year pre-tax profit estimate to “broadly breakeven”, down from £10mn-£20mn. 

Despite the glum outlook, management did say that in-store demand recovered to 2019 levels over the Christmas period. Retail revenues were up almost 25 per cent in the 9 weeks to 31 December. The company’s shares had fallen almost 70 per cent by mid-morning. JJ

Intel see sharp slowdown in sales

Intel’s (US:INTC) share price dropped 10 per cent in after-hours trading off the back of an underwhelming set of full-year results. The chipmaker and designer, which has been struggling for years, blamed macro headwinds for its 20 per cent drop in revenue for the full year. Gross margin also dropped 12.8 percentage points to 42.6 per cent while earnings per share was down 60 per cent.

Computing is its biggest division and was down 23 per cent for the year. Personal computing demand has softened after the pandemic boom and Intel isn’t the only company struggling. Earlier this week, Microsoft (US:MSFT) announced personal computing revenue was down 19 per cent. “The PC ecosystem continued to deplete inventory for all of calendar year 2022,” said Intel chief executive Patrick Gelsinger.

The most disappointing part of the results were data centre and AI. In a year, when rivals Nvidia (US:NVDA)  and AMD (US:AMD) announced strong growth in data centre revenue, Intel’s fell 23 per cent. For the quarter, it was down 36 per cent. Management is planning to cut $3bn in costs in 2023 but doing that whilst also investing enough to take market share from incumbent data centre players will be difficult. AS

Read more on the global microchip industry here


EV prices hit profits at Motorpoint

Used car retailer Motorpoint (MOTR) reported a 17 per cent increase in revenue to £1.1bn in the three months to December, which it attributed to the mix of vehicles sold and price inflation. However, it warned that the amount of gross profit per car sold would fall below expectations, due to the “well documented fall in electric vehicle values” and a reduction in the level of finance commissions it receives as car finance costs rise. The company said it had invested an additional  £5mn in its digital offer and in new stores.
Motorpoint shares fell by 3 per cent. MF

Strikes cost Royal Mail £200mn

Industrial action at Royal Mail has cost the business £200mn, according to an update from the courier’s parent company. International Distribution Services (IDS) said Royal Mail banked an adjusted operating loss of £295mn in the nine months to December, caused in part by 18 days of strikes. It calculated that losses will sit between £350mn and £450mn for the full year – assuming there are no more walkouts. Management also warned that there could be more customer attrition in the fourth quarter, as well as voluntary redundancy costs. JS

FirstGroup admits to ‘unacceptable’ service 

Train operator Firstgroup (FGP) has conceded that its northern rail service is “unacceptable at present”. Rishi Sunak told parliament on Wednesday that FirstGroup could lose its TransPennine Express contract “if ministers conclude that the operator cannot be turned around”. 

FirstGroup blamed disruption on strikes, sickness and a training backlog. “The biggest and most immediate positive impact for customers would be for ASLEF to allow drivers to work overtime again. Late last year we were given authority from [the Department for Transport] to make a new overtime offer but this was rejected by ASLEF without putting it to their members.”

The group currently runs four fee-based train operating companies: TransPennine Express, Avanti West Coast, Great Western Railway, and South Western Railway. JS

On the Beach shakes off winter blues

On the Beach (OTB) shares rose by 7 per cent after the holiday retailer said that its total transaction value of holidays sold was up by 68 per cent since the start of its financial year in October against the same period in the previous year. This was helped by a material increase in bookings since Christmas. The company said that the growth it saw last year in premium, long-haul, and business-to-business is continuing. CA

YouGov sales on track but it’s tight-lipped on profits

Polling company YouGov (YOU) is on track to hit revenue forecasts – but is keeping quiet about the state of its profits. In a six month trading update, the polling company said its performance had been driven by custom research work. As a result, management “remains confident of achieving top-line growth for the full year in line with current market expectations” and hopes for some margin expansion.

However, Peel Hunt lowered its adjusted profit forecasts due to the “portfolio mix”. Last year, YouGov’s custom research arm achieved an adjusted operating margin of 22 per cent, compared with the data products division’s 36 per cent margin. JS

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