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- FTSE 100 up 28 points at 7,506
- Vistry soars, plans £1 billion return to shareholders
- TRG jumps as offloads loss-making Frankie & Benny’s arm
10:22am: European Commission cuts growth forecasts
The European Commission has cut its forecasts for growth across the EU, and in the eurozone.
The eurozone is now forecast to only expand by 0.8% this year, down from 1.1% forecast in the spring forecasts, and by 1.3% in 2024 (down from 1.6%).
GDP across the whole EU is also forecast to only rise by 0.8%, down from 1% expected before, and by 1.4% in 2024, (down from 1.7%).
Paolo Gentiloni, EU Commissioner for Economy, said: “multiple headwinds facing our economies this year have led to a weaker growth momentum than we projected in the spring.”
He noted: “Russia’s brutal war against Ukraine continues to cause not only human suffering but economic disruption.”
10:04am: Retail heads call on government not to lift property taxes
A group of top UK retailers are calling on the government not to increase their property taxes, saying it would cost them around £400 million.
Bosses from 44 firms, including Tesco, M&S and B&Q, are urging chancellor Jeremy Hunt to freeze their property taxes to avoid a roughly £400 million hike in tax bills.
They warn that an inflation-based increase to business rate would threaten “the viability of many shops and hindering the industry’s capacity to invest”.
In a statement they said: “Global supply chain issues are already likely to increase costs in the months ahead, including Russia’s withdrawal from the Black Sea Grain Initiative and targeting of Ukrainian grain silos, plus restrictions on Indian rice exports and ongoing labour market challenges.”
“Against this backdrop, the Government should not make the situation worse by adding significantly to our cost base – freezing the business rates multiplier at its current level would avoid this.”
9:31am: TRG’s Frankie & Benny’s sale welcomed
The City has given the thumbs up to plans by Wagamama owner, The Restaurant Group’s plans to sell its Frankie & Benny’s and Chiquto’s restaurants.
Analysts at Jefferies said the sale “removes a loss-making, group margin drag and sharpens the strategic focus to Pubs, Concessions and Wagamama.”
“Further divisional disposals are possible which would drive more deleveraging, and potentially dividends,” the broker suggested.
The involvement of activist investors is likely to continue highlighting the lowly valuation, as well as strategic opportunities, Jefferies thinks.
Shore Capital analyst Greg Johnson viewed the news “as a significant milestone for the Group, improving cash flow, limiting the ongoing drag to revenues and profitability and significantly enhancing margins.”
“Our near-term fair value of c70p per share is likely to remain broadly unchanged, although we see a compelling investment case building on improving margins and focus on its attractive growth channels,” he said.
On Friday, chairman Ken Hanna said he was stepping down after pressure from some shareholders.
9:05am: Rescue deal for Wilko collapses
Away from the markets, and news that a rescue deal for high street chain Wilko has collapsed, leaving the future of thousands of jobs uncertain.
The billionaire owner of HMV, Doug Putman, planned to keep up to 300 Wilko shops open, but his bid failed as rising costs complicated the deal.
????Breaking: Wilko rescue hopes dashed as HMV owner Doug Putman walks away from deal in the face of rising costs.
Grim news for 12,000 staff who will have to find new jobs.
Store estate will now be carved up between retail rivals.
Full Story on @TheSun shortly
— Ashley Armstrong (@AArmstrong_says) September 11, 2023
It leaves the future of more than 10,000 workers and hundreds of stores uncertain.
Some of Wilko’s remaining stores could be sold to rival retailers, such as Poundland or The Range.
Administrators are expected to announce the details of job losses and store closures in the coming days.
8:45am: Miners lead the way as blue-chips rally
The FTSE 100 remains firmly in the green in early exchanges, down up 69 points at 7,547, led by strong gains in mining stocks, as investors welcomed data over the weekend showing that deflationary pressures eased in China.
Fresnillio, Antofagasta PLC (LSE:ANTO), Anglo American and Rio Tinto are all more than 3% to the good after data showed China’s consumer prices returned to positive territory in August, while the country’s new bank loans jumped more-than-expected last month, reflecting signs of economic stabilisation of the top metals consumer.
The gains were reflected in Europe, with the Cac 40 up 0.5% in paris and Frankfurt’s Dax up 0.4%.
Housebuilders are a firm feature, with the sector given a boost by Vistry’s plans for bumper shareholders returns, and as analysts at Liberum suggested there was 20% upside potential in the sector.
“We are surprised by the lack of optimism in housebuilders’ shares as the peak in rates approaches, especially as NatWest cut its mortgage rates twice this week.”
“Rates peaking should be a trigger for better sentiment but should also reduce buyer uncertainty which might move some from the sidelines back into the market.”
Melrose Industries was a weak feature, down 1.5% as RBC downgraded to sector perform from outperform.
8:15am: FTSE 100 on the front foot, Vistry soars
The FTSE 100 has started the week on the front foot ahead of a key week of economic updates in the UK, Europe and across the pond.
At 8:15am, London’s blue-chip index was up 46.95 points, 0.6%, at 7,525.14 while the FTSE 250 advanced 81.22 points, 0.4%, at 18,544.41.
Richard Hunter, head of markets at interactive investor said “a busy economic week will keep traders on their toes.”
US inflation figures, UK employment and average earnings data and the European Central Bank’s rate call all lie ahead this week.
In company news, Vistry PLC jumped 12% after it said it will exit private homebuilding and focus solely on construction for affordable housing and rental landlords.
The builder plans to merge its housebuilding business with its partnerships operation.
It also expects to return as much as £1 billion of surplus capital to shareholders through a combination of dividends and buy-backs.
Peel Hunt said: “Given the shift in strategy, we are changing our valuation approach from being a sum of the parts based one to being solely focused on PE.”
“This sees us up our target price to 1300p.”
Elsewhere, Wagamama owner, The Restaurant Group PLC (LSE:RTN), has paid Big Table £7.5 million to take its loss-making leisure arm, which includes Frankie & Benny’s, off its hands.
Analysts at Stifel said: “We value the business at £0 million in our SOTP valuation but see this transaction as positive for the investment case on the basis that it improves the financial profile of TRG in margin, earnings and leverage terms.”
7:55am: Vistry targets bumper returns to shareholders
Plenty to digest at Vistry Group PLC which plans to focus operations on partnerships by merging its housebuilding operations with its partnerships business.
The strategic shift came as the housebuilder unveiled half-year results and said it intended to distribute £1 billion to shareholders over the next three years.
Chief Executive Greg Fitzgerald said the move, “best enables sustained growth in housing output, provides greater benefits to our partners, while maximising value and long term returns for shareholders.”
Vistry is targeting a 40% return on capital employed and expects a significant release of capital as assets from the housebuilding division are redeployed into partnerships.
It is also aiming for revenue growth of 5% to 8% . p.a., operating profit of £800 million with a 12%+ operating margin.
Vistry said the £1 billion returns to shareholders would be made via dividends or buybacks starting with a £55 million buyback, expected to commence in November.
It said a buyback would replace a dividend this year given it feels the current share price significantly undervalues the group.
Vistry intends to pursue a two times adjusted earnings ordinary distribution cover in respect of a full financial year, with distributions made through either dividends or share buybacks.
Guidance of in excess of £450 million for adjusted pre-tax profit for 2023 was reiterated as the firm reported adjusted pre-tax profit fell 8.4% to £174.0 million from £189.9 million while EPS slumped 43.2% to 38.3p from 67.4p.
Cost savings from the integration of Countryside are expected of at least £35 million in the full-year, ahead of targeted £25 million.
7:29am: Wagama owner sells Frankie & Benny’s and Chiquito’s
The sale of two well-known names on the high street to start the week.
The Restaurant Group (TRG) PLC is paying Big Tabe Group £7.5 million to tale its loss-making leisure business off its hands.
The owner of Wagamama said it was selling 75 sites to Big Table, principally comprising of the brands Frankie & Benny’s and Chiquito.
TRG said the sale “will significantly accelerate the group’s core strategic goals of adjusted Ebitda margin accretion and deleveraging.”
The transaction will create a high-quality retained group consisting of the three divisions of Wagamama, Pubs and Concessions which have delivered very strong like-for-like sales and adjusted Ebitda growth during the first half of 2023, with appealing long-term prospects, the firm added.
The deal is expected to be marginally EPS accretive in its first full year following completion and accelerate TRG’s adjusted Ebitda margin accretion plan in excess of 100bps in its first full year following completion.
TRG said it is “continuing to actively explore its strategic options to further accelerate margin accretion and deleveraging.”
The deal should complete in the fourth quarter.
7:00am: London expected to start the week on the front foot
Blue-chips in London are expected to open make a bright start to the week ahead of a big week of economic news.
Spread betting companies are calling the FTSE 100 up around 32 points, after closing up 36.47 points at 7,478.19 on Friday.
The economic calendar this week has UK unemployment data on Tuesday, US inflation figures on Wednesday and the European Central Bank’s next interest rate decision on Thursday.
In China, the National Bureau of Statistics reported that consumer prices in the country edged up slightly on an annual basis in August.
The consumer price index was 0.1% higher annually in August, compared to a 0.3% deflation in July.
In Monday’s UK corporate calendar, there are half-year results from Vistry, WANdisco and MP Evans.
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