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FTSE 100 Live: Ocado posts big loss, AO World upgrades earnings guidance

 (Evening Standard)
(Evening Standard)

Ocado continues to post big losses after annual results today revealed a deficit of £501 million, up from £177 million the year before.

The grocery warehouse technology business also fell back into the red at an underlying level due to cost pressures and investments to support growth at its retail division.

Other companies reporting results today include Serco and Travis Perkins, while online electricals business AO World told investors that underlying earnings will be higher than forecast in January.

FTSE 100 Live Tuesday

  • Ocado annual loss widens to £501m

  • Grocery inflation reaches new record

  • AO World ups earnings guidance

FTSE 100 closes down 58 points: Evening wrap

Tuesday 28 February 2023 16:39 , Simon Hunt

The FTSE 100 closed down 58 points at the end of the day’s trading session in London, after the index was dragged down by a set of disappointing results by the likes of Croda and Ocado. Ocado’s shares fell the most, down 11.4% after it posted a whopping £500 million loss.

But the pound gained over a cent today against the dollar to $1.21 in signs investors welcomed the conclusion of Rishi Sunak’s deal with the EU over the status of trade in goods and services in Northern Ireland -- but the deal has yet to get financial approval.

Wall Street stocks fall further as economic data points to stubborn Fed rate outlook

Tuesday 28 February 2023 14:43 , Michael Hunter

More strong-looking economic data from the housing market looked to give the Federal Reserve more room to stick with its programme of rate rises, taking more momentum from stocks at the end of a month of declines.

After a smaller-than-forecast slip on a key index tracking house prices, New York’s S&P 500 opened down 5 points to 3976.1. Before the numbers from the Office of Federal Housing Enterprise Oversight came out, futures makets were pointing to opening gains.

James Hughes at Scope Markets said: “US economic data remains something of a mixed bag with yesterday’s better than expected pending home sales print again adding weight to policy hawks at the Federal Reserve.”

US house prices slip by less than expected in December

Tuesday 28 February 2023 14:06 , Michael Hunter

A closely watched measure of US house prices fell by less than expected in December.

The Office of Federal Housing Enterprise Oversight’s house price index slipped 0.1% month-on-month, in line with the previous reading and arginally narrower than the 0.2% forecast.

It came as the latest sign of strength in the market, even as the Federal Reserve lifts US interest rates a long battle against inflation. Investors have been on watch for the housing market bottoming out after robust numbers recently for new home sales.

New York stocks set for modest gains after February fall

Tuesday 28 February 2023 13:53 , Michael Hunter

Wall Street’s S&P 500 is on course to tick higher at the start of the last trading day of February, a month over which it is down by over 2%.

According to futures trade, the broad New York stock index will add an around 2 points to 3990.0. Attention is expected to focus on house price data due out before the start of trade.

UK car loan market may have peaked at £41 billion in 2022, say experts

Tuesday 28 February 2023 13:29 , Michael Hunter

Brits borrowed a record £41 billion to buy cars in 2022, but experts said today that may be the peak, with loans for wheels left with only one way to travel.

As the cost of living crisis and rising interest rates put the brake on affordability, there is also the looming ban on the sale of new petrol and diesel vehicles in 2030, with buyers of electric equivalents increasingly funded by salary sacrifice schemes.

The Car Expert, an independent consumer advice site, has looked through numbers out last week from the Financing and Leasing Association and noted a drop in the proportion of new cars bought via loans. It fell to 84% from over 90%, a level held above for the last four years.

Read more here

Visa and Mastercard pause Bitcoin plans amid crypto winter

Tuesday 28 February 2023 13:18 , Simon Hunt

Visa and Mastercard have put the brakes on their plans to expand partnerships with crypto firms in the latest signs of shockwaves called by the FTX fallout.

The world’s largest payment companies have put new crypto product launches on hold until there is greater stability in the market and greater regulatory clarity, according to a report by the Reuters news agency.

A spokesperson for Visa said: “Recent high-profile failures in the crypto sector are an important reminder that we have a long way to go before crypto becomes a part of mainstream payments and financial services.”

EU slams Apple for anticompetitive App Store practice

Tuesday 28 February 2023 12:55 , Simon Hunt

An EU regulator has slammed Apple’s App Store for anti-competitive rules which prevent developers informing users of the range of purchasing options available to them.

The watchdog said Apple’s "anti-steering obligations" for developers are "neither necessary nor proportionate for the provision of the App Store on iPhones and iPads and that they are detrimental to users of music streaming services on Apple’s mobile devices who may end up paying more".

Apple said it would respond to the concerns raised.

Midday movers: St James’s place leads the FTSE 100 after record results

Tuesday 28 February 2023 12:05 , Simon Hunt

Investment firm St James’s place is leading the FTSE 100 index at lunchtime after investors were buoyed by its jump in pre-tax profits from £353.8m to £501.8m.

The market has been less kind to Ocado. The online grocer’s shares plunged as much as 10% this morning after it posted a near-tripling of losses. The stock price recovered slightly later in the morning.

Here’s a look at the biggest movers on the index so far today:

City Comment: Ocado needs more deals and less egg on face

Tuesday 28 February 2023 11:07 , Simon Hunt

Alright, full disclosure, Ocado was my share tip for 2023 at the start of the year. I had hoped that positive investor sentiment towards a pipeline of logistics tech deals with retailers all over the world would more than offset the difficult consumer landscape back home.

How wrong I was. The shares shed another 10% of their value this morning and are now down almost 14% since my recommendation.

Today’s data from Kantar suggests that 2023 will be another difficult slog. A world in which food inflation is blazing at 17.1% can only be good for the Aldis and Lidls of this world — but terrible for the Ocados.

The return to pre-Covid shopping patterns has also hurt the company, with the days when the shares raced to £20 and beyond during the lockdown era just a distant memory.It is more than 20 years since Tim Steiner and his Goldman Sachs pals Jason Gissing, Jonathan Faiman revolutionised grocery shopping with a vast hi-tech warehouse in Hatfield and a perky fleet of delivery vans. While those vans have done wonders for house prices in the aspirational London “Ocado-belt”, shareholders have been less fortunate: a £500 million loss in particular will be hard to forgive.

This surely has to be the year when the much vaunted Ocado Smart Platform starts to be rolled out at pace. A dozen deals have been signed so far but without an acceleration 2023 is going to end with a botched delivery: no jam once again for shareholders, but plenty of egg on face for me.

AO World upgrade boosts shares, FTSE 100 struggles

Tuesday 28 February 2023 10:19 , Graeme Evans

AO World’s shares jumped by as much as 16% today as online retailer made a second upgrade to earnings guidance in as many months.

The domestic appliances business soared in value during the early days of the pandemic, only to slide to a £12 million half-year loss in November as it grappled with cost of living and supply chain pressures.

AO has closed its German business and is working on a new strategy focused on cost reduction and margin improvement. An unscheduled update today revealed it is making faster-than-expected progress, aided by the resilience of consumer spending.

With five weeks of the financial year left, Bolton-based AO now expects underlying earnings in the region of £37.5 million and £45 million. Just over a month ago, it upped City expectations by £10 million to a range of £30 million and £40 million.

AO World shares today rose 9p to 65.25p as the best performing stock in the FTSE All-Share index.

Other stocks on the front foot today included outsourcer Serco, which pleased investors with a 19% hike in dividend alongside plans for a £90 million buy back of shares.

Full-year revenues rose by 2% to £4.5 billion despite Covid-related activity reducing by £480 million, with underlying profits up in line with expectations to £237 million. Serco’s shares were 6.5p higher at 155.5p in an otherwise lacklustre session.

The market mood was soured by higher-than-expected inflation readings in Spain and France as investors continue to worry that interest rates will stay higher for longer.

The FTSE 100 index has risen by more than 6% so far in 2023 but fell back 45.24 points to 7889.87 and the domestic-focused FTSE 250 lost 47.06 points to 19,839.04.

Top flight fallers included the speciality chemicals company Croda International, which dropped 242p to 6686p after forecasting that 2023 trading will be second half weighted.

Among smaller stocks, hostels operator Safestay jumped 15% or 3p to 23p as it revealed annual revenues stronger than City expectations at around £19 million as the business returns to normal following Covid disruption.

Man’s on the up

Tuesday 28 February 2023 09:43 , Simon English

MAN Group defied strife in the fund world with profits up 18% to £779m for 2022.

Funds under management also grew by several billions to $143 billion and it remains confidence of producing “alpha” returns – performance that is better than underlying stock markets.

CEO Luke Ellis said: “Looking ahead, there is a significant opportunity for active investment managers, particularly those with the ability to offer alpha irrespective of the direction of prevailing market trends and in a liquid, highly customisable format.”

John Cryan, a director since 2015 and chairman since 2020, said today he will retire from the board by the end of the year.

Ellis admitted the year has been tough. He said: “One clear, dominant force drove financial markets in 2022: inflation. Combined with other factors, like the aftershocks of the pandemic and the war in Ukraine, this resulted in 2022 becoming "one of the worst years on record for a 60/40 portfolio".

Abrdn struggles in “toughest year in investing"

Tuesday 28 February 2023 09:22 , Simon English

Struggling abrdn crashed to a loss of £615 million as new CEO Stephen Bird tried to shake up a sprawling business.

It was one of the “toughest investing years in living memory”, he says Bird.

The business born from the merger of Standard Life and Aberdeen Asset Management had a difficult birth and its toddler years are proving no easier.

The company saw outflows of £10.3 billion, as markets fell and nervous investors pulled money out.

Rivals such as Jupiter and Schroders suffered similarly, calling into question the whole stock-picking trade.

Abrdn assets under management fell by 8% to £500 billion. He is moving to simplify the company by reducing costs. Nearly 60 funds have been merged or closed.

Last year Abrdn bought funds platform interactive investor for £1.5 billion. That seems to be working out, with revenue jumping 40% to £176 million, but it is an increasingly competitive market.

Further, probably smaller, deals could come. Abrdn shares rose 2p to 215p today. By some measures abrdn was in profit.

Bird said: “We are building a stronger abrdn. As we exit year two of our three-year strategic plan, the structure of our group is now broadly set. We are increasingly well positioned for growth. In one of the toughest investing years in living memory, the resilience we have created in our business model helped us to deliver adjusted operating profit of £263 million.”

Abrdn managed to hold the dividend at 14.6p. With share buybacks thrown in, that means around £600 million was handed out to beleaguered investors.

Some of the top names in the fund game, notably Terry Smith and Nick Train, struggled to negotiate markets last year.

FTSE 100 lower, Man Group leads FTSE 250

Tuesday 28 February 2023 08:30 , Graeme Evans

European markets are on the back foot, with the FTSE 100 index down 0.3% or 25.96 points to 7909.15 in a weaker-than-expected performance.

Ocado and speciality chemicals business Croda International led the fallers board amid a downbeat reaction to their annual results. Their shares are down 8% and 5% respectively, off 49p to 575.8p and 322p to 6606p.

Wealth businesses Abrdn and St James’s Place are the results-day winners, lifting by 6.2p to 219.6p and 37.5p to 1274.5p.

Man Group rose 8% and outsourcer Serco lifted 3% in the FTSE 250 index but Travis Perkins fell 8%.

Ocado shares slide 9% after losses almost triple

Tuesday 28 February 2023 08:09 , Simon Hunt

Shares in Ocado slid as much as 9% after markets opened in London this morning after the online grocery business posted a near-tripling of pre-tax losses to top £500 million, on top of a 3.8% decline in retail sales.

Ocado said the loss came as a result of inflationary pressure from fuel, energy and labour costs, as well as increased budgetary pressures on consumers which caused them to reduce their average shopping basket. The firm, which has a delivery partnership with M&S, said it was unable to pass all its increased costs on to costomers and instead ramped up its voucher scheme to improve customer loyalty.

Joshua Warner, City Index Market Analyst, said: “Ocado’s results for 2022 fell short of expectations. Revenue barely grew as a drop in sales at its grocery venture with Marks & Spencer Group offset growth from its Solutions business that provides its automation and warehouse technology to other companies.

“The adjusted Ebitda loss is also disappointing considering Ocado had hoped to breakeven. Profits were wiped out from the grocery business as it slipped into the red and its International Solutions arm continues to report large losses.”

Grocery inflation reaches new record as Aldi takes more market share

Tuesday 28 February 2023 08:06 , Simon Hunt

Grocery inflation hit 17.1% in the four weeks to 19 February, according to retail data from Kantar, the highest level since it began tracking supermarket prices.

Aldi continued to be the fastest growing retailer in the UK, with sales up 26.7% over 12 weeks, closely followed by Lidl with a 25.4% rise over the same period.

Tesco also saw a 6.6% rise in sales over the period, while Morrisons saw its revenues decline 0.9%.

Fraser McKevitt, head of retail and consumer insight at Kantar, said: “The battle to offer best value for consumers continues in this intensely competitive sector, particularly as the traditional retailers look to protect market share from the discounters.”

Tesla rally boosts S&P 500, FTSE 100 seen flat

Tuesday 28 February 2023 07:46 , Graeme Evans

A rally for cyclical and growth stocks helped markets on both sides of the Atlantic yesterday, with the FTSE 100 index up 0.7% and the S&P 500 finishing 0.3% higher. In New York, Tesla rallied 5% higher and the index of Big Tech stocks improved 1.5%.

The final session of the month begins with CMC Markets forecasting a flat session in London, with the index of blue-chip stocks currently up 6.5% so far in 2023 at 7935.

In contrast, US markets have struggled this month due to the prospect of several more rate rises from the Federal Reserve. These worries mean the S&P 500 is only up 3.6% year-to-date and the Dow Jones Industrial Average is flat, offset by a 10% rise for the Nasdaq 100.

AO World lifts earnings guidance for second time in 2023

Tuesday 28 February 2023 07:32 , Graeme Evans

Online electricals retailer AO World today upgraded earnings guidance in a further boost for the company’s recently-launched turnaround strategy.

AO said steps to simplify the business and become more efficient have outperformed expectations and been delivered quicker than expected.

It has also been helped by a “resilient underlying customer base”, meaning that earnings for the year to March will now be in the region of £37.5 million and £45 million.

AO also upgraded guidance in mid-January, when it said it forecast earnings between £30 million and £40 million.

Derwent London says confidence is coming back as it reports a £280 million loss of 2022

Tuesday 28 February 2023 07:26 , Michael Hunter

The capital’s biggest real estate investment trust, Derwent London, said today that confidence is returning to the market in line with an improving outlook for the the economy.

But it reported a loss before tax of almost £280 million for 2022 from a profit of over £250 million a year earlier.

Paul Williams, chief executive, said: “Global events in 2022 caused a marked increase in uncertainty. However, we have seen confidence return to the market in recent months as the economic outlook has improved.”

It also announced almost £15 million of new lettings, including at 25 Baker Street and the Featherstone Building in the City.

Ocado losses balloon to £500 million

Tuesday 28 February 2023 07:14 , Graeme Evans

Losses at Ocado widened to £500 million last year as the online grocery business battled a trifecta of soaring inflation, weak consumer sentiment and an end to pandemic restrictions which had helped boost sales the year before.

The firm posted a loss before tax of £501 million for 2022, while retail sales fell 3.8% to £2.2 billion.

Tim Steiner, Chief Executive Officer of Ocado Group, said: “Over the last year every company has had its business model tested by a combination of macro-economic and geopolitical headwinds.

“Ocado Retail, our UK JV with M&S, has shown its resilience against a backdrop of higher costs and smaller baskets, reflecting the Covid unwind and the UK cost of living crisis, by growing customer numbers and increasing online market share.

“As the Covid unwind fades and customer growth continues the business will start to recover the fixed costs of recent capacity commitments.”

Recap: Yesterday’s top stories

Tuesday 28 February 2023 06:40 , Graeme Evans

Good morning. Here’s a look at our top stories from yesterday.

  1. Associated British Foods revealed that Primark has traded “well ahead of expectations” amid a surge in footfall in the UK and Europe. The grocery-to-retail conglomerate expects Primark sales to be about 16% stronger in the first half of its financial year, including a 10% surge in like-for-like sales due to higher volumes and average selling prices.

  2. The pound rose to an intraday high of $1.20 after news emerged the UK has reached a deal with the EU over the Northern Ireland Protocol.

  3. Britishvolt, the company which failed to build a battery factory in the north-east of England, has been bought by Australian firm Recharge Industries, Recharge’s boss confirmed.

  4. An economic slowdown might be bad for most of us, but insolvency specialist Begbies Traynor is eyeing up more business. It said it is seeing “an encouraging level of new insolvency appointments across all market segments”.

  5. Ex-chancellor Sajid Javid is set to join Centricus Asset Management. The MP for Bromsgrove, who worked for American bank JP Morgan before joining parliament, is to become a senior adviser to the $40 billion investment firm.

Today we’re expecting:

  • Serco results

  • Ocado results

  • Travis Perkins results

  • Derwent London results

  • US house price index data

  • US consumer confidence data