FTSE 100 Live: Pound dips to $1.11, Retail sales fall

Pound touches $1.11 as traders measure UK political risk factors

The UK’s turbulent politics were feeding through into the value of the pound as speculation over the identity of the country’s next prime minister reveberated around the City and across Westminster.

Its low point for the day took sterling to $1.1100 before it bounced to $1.1123, leaving it 1% lower for the day. While the dollar was stronger overall — the index tracking it against a series of other currencies was up 0.5% — the pound’s decline was steeper than its rivals from G7 countries. The euro was only down 0.5% against its US rival, while the Canadian dollar was 0.3% weaker against its nearest neighbour.

Michael Hewson, chief market analyst at CMC Markets UK, said that Liz Truss’s resignation after such a short time in power “brought about a brief respite to the political risk premium” over the pound, “it didn’t last very long given the realisation that it is hard to see how any replacement will be able to coalesce around any form of unity of policy in this carnival of chaos of a government.”

Hewson added: “The reality is that the Conservative party in its current form is so riven by partisanship that anyone who takes over, even Rishi Sunak who appears to be favourite, as is widely being predicted, there will always be those working in the background to undermine him. If, as is being speculated, Boris Johnson was to make a return then we really would be through the looking glass.”

Looking at the charts on sterling, he said: “We need to see a move above the $1.1500 area to stabilise. Interim support at $1.1150, and the lows last week at the $1.0920 area. A move below $1.0920 opens up a return to the $1.0800 area.”

Takeover saga at M&C Saatchi off as deal is ditched

The on-off takeover tussle for M&C Saatchi was off again today when suitor Next Fifteen effectively called off the hunt.
M&C has been in takeover turmoil for months. First then deputy chairman Vin Murria launched a bid, in effect going against the wishes of her own board. Although she controls 22% of the shares, her offer never gained popularity with the executives.
A rival bid from digital agency Next Fifteen then emerged and initially seemed likely to go through.

Today Next Fifteen conceded that shareholders are unlikely to back its offer, especially since Murria has made her own opposition clear.

Her investment vehicle ADV earlier said: “ADV continues to believe that although Next Fifteen Communications plc (NFC) is a credible buyer of M&C Saatchi, its offer price does not reflect the value of foregoing control and the significant synergies available to NFC. Based on the current implied value of NFC’s offer, ADV and Vin Murria intend to vote their shareholdings in M&C Saatchi against NFC’s scheme.”

The Next Fifteen offer is worth about 175p a share at the moment, compared with an M&C share price of 138p. But the stock has been well over 200p as recently as May.

M&C, perhaps the best known ad agency in Soho, has had a turbulent few years. An accounting issue in 2019 was later investigated by the City watchdog and led to the exit of co-founder Maurice Saatchi and other directors. In the end, the FCA took no action.

M&C said today its directors are “unable to recommend” the Next Fifteen offer, due to the fall in the value of the suitor’s shares. M&C is valued at £170 million by the stock market.

Revenues rise 16% to keep London Stock Exchange safe from chaos

THE LONDON Stock Exchange looks to have avoided the worst of the chaos in markets under brief PM Liz Truss.
In the third quarter it saw revenues rise 16% to £1.9 billion, a bit better than City analysts were expecting.

In August the group announced a £750 million share buyback deal. Today it said it has handed out £235 million of that so far.
The LSE bought data and analytics company Refinitiv for $27 billion in 2021, turning the exchange into a major market data player, but outages and sums invested in integration raised concerns among some investors.

David Schwimmer, CEO said: “We have delivered another strong quarter, with good growth across all businesses. The consistency of delivery in recent quarters demonstrates the strength of our business model, generating quality recurring revenues from a range of services that are highly valued by our customers.”

LSE shares slipped 212p to 7206p, valuing the business £41 billion.

“With sustained execution, a broad base of businesses and leading market positions, we remain well positioned,” Schwimmer said.

Wickes says falling timber prices ease price inflation at DIY chain

The home improvement chain, raised some hope today that the rate of cost inflation in the building trade is showing signs of having peaked.

The 230-store chain said cheaper timber in the third quarter meant “there has been some moderation in the rate of retail price inflation” since the first half, as sales from its stores open for at least a year rose 2.6% in the 13 weeks to October 1, helping it leave full-year profit guidance steady at between £72 million to £82 million.

Sales were hit by the heatwave in July and August, but strengthened from the start of September. Wickes is used by professional tradesman and do-it-yourself customers alike. It said its number of TradePro customers rose 10,000 to 720,000, while DIY sales remained lower year-on-year, but showed “no signs of further softening”.

Shares in the company fell 9p to 116p, a drop of 7%.

Shares in Royal Mail owner fall 4%, FTSE 100 lower

Shares in the owner of Royal Mail are down another 4% following a broker downgrade and as official figures point to weaker internet shopping volumes.

Liberum’s Gerald Khoo slashed his target price on International Distributions Services (IDS), which is the new name for Royal Mail, by 38% to 115p after flagging that the company’s problems go much deeper than current industrial action.

He said longer-term prospects were hit by a lack of pricing power, with savings from redundancies only sufficient to stabilise margins on a temporary basis. “Repeated redundancy rounds do not appear sustainable,” Khoo said.

IDS recently warned that up to 10,000 Royal Mail jobs are at risk as it braces for a full-year loss of at least £350 million in its UK arm. Half-year results are due on 17 November.

Royal Mail shares were 630p during pandemic lockdowns in April 2020, a period of trading that ultimately led to the return of £400 million of surplus cash to shareholders.

They’ve since retreated to 193p, with the stock down another 4% or 7.8p today. Many postal workers and small investors still hold the shares, which made their debut nine years ago this month at a price of 330p.

The shares were among the big fallers as the FTSE 250 index slumped 1.2% or 212.13 points to 17,176.80, reflecting another grim batch of updates from the UK economy. Rail ticketing business Trainline and pavings firm Marshalls were caught in the sell off as their shares lost 4%.

The FTSE 100 index shed 0.7% or 51.04 points to 6892, fuelled by weak trading on Wall Street and the reaction to a poor trading update from social media platform Snap. Tech and growth stocks were under pressure in London, with Auto Trader down 27.5p to 490.7p and grocery warehouse business Ocado off 27.5p to 469.5p.

IHG sees third-quarter boost but warns of labour shortage strain

Hotel firm IHG saw a boost in third-quarter sales as holidaymakers resumed international travel but warned labour shortages in the hospitality sector continued to put a strain on the business. 

The Denham-based business, which runs the Crowne Plaza and Holiday Inn brands, reported a 28% jump in revenues per room over 2021, 2.7% ahead of pre-pandemic levels, while occupancy remained down 6%.

The firm opened 51 new hotels and added a further 89 to its pipeline of openings. The firm plans to add a further 278,000 rooms to its collection taking the totel number of rooms to over one million.

IHG CFO Paul Edgecliffe-Johnson said recruitment of hospitality workers “is one of our biggest challenges…in the UK and the US and most parts of Europe.”

“There is a shortage of labour in most of the markets in which we operate. We have systems that allow us to identify worker in the hospitality industry [but] with unemployment at record lows in the US it doesn’t look like it will get easier any time soon.”

IHG hotels sees growth on pre-pandemic levels but warns recruiting staff is “one of our biggest challenges” in the US and UK.

IHG also announced Edgecliffe-Johnson would be stepping down as CFO and group head of strategy after almost 20 years at the firm and 8 years on the board. Paul will leave in six months’ time and the company has begun the process of appointing a successor, IHG said.

IHG shares fell 4% to £4,383p.

Retailers add to FTSE 100 weakness, Royal Mail owner down 4%

Consumer-focused stocks are dominating the FTSE 100 index fallers board after this morning’s weaker-than-expected retail sales figures.

JD Sports Fashion dropped 4p to 96.3p, Next lost 116p to 4761p and Sports Direct owner Frasers Group retreated 18.5p to 628.5p.

BAE Systems lifted 7.2p to 816.6p, but the FTSE 100 index fell 46.48 points to 6897.43 as investors also reacted to Wall Street weakness.

The UK-focused FTSE 250 index lost 0.7% or 121.99 points to 17,266.94, led by a fall of 4% or 7.85p to 193.256p for Royal Mail business International Distributions Services.

The latest decline for the strike-hit business followed the decision of Liberum analysts to cut their price target from 185p to 115p.

Pressure on Chancellor after borrowing surge

The £20 billion borrowing figure is much higher than forecast, but revisions to estimates for previous months mean that the total in the first six months of the fiscal year is £400 million lower than the Office for Budget Responsibility (OBR) expected at this stage.

However, this is before taking into account the government’s energy price support and what’s left of the mini-budget tax cutting measures.

Capital Economics thinks borrowing will be closer to £210 billion in 2022/23, rather than the OBR’s March forecast of £99 billion.

Ruth Gregory, senior UK economist at the consultancy, said: “This means the Chancellor will need to reveal further policy measures of about £34 billion to fill the remaining fiscal hole and restore credibility in the eyes of the financial markets.”

Deliveroo shares rise after uptick in orders

Shares in Deliveroo grew 2.5% to 84p this morning after the firm reported a boost in the size of orders in the third quarter.

Orders grew 5% in the UK during the third quarter, while the size of orders increased too. However, order numbers contracted 7% internationally.

However, the firm re-adjusted its sales expectations to the bottom end of its forecast, attributing the cut to wider economic conditions.

The firm said it didn’t expect to reach profitability before the second half of next year.

Flutter appoints new chief financial officer

Flutter, the FTSE 100 gambling and gaming company, has reshuffled its senior ranks, appointing a new chief financial officer and setting up an new chief operating officer role.

The owner of the Paddy Power, Betfair and Sky Betting brands said Paul Edgecliffe-Johnson will join as CFO from the same job at hotels group IHG in the first half of next year. Flutter’s current CFO, Jonathan Hill , will move over to become its inaugural COO.

In the new job he will “maximise the benefits of Flutter’s global scale and support the strategic direction of the business,” Flutter said.