Next on Thursday lifted profit guidance after second-quarter sales came in ahead of forecasts, partly thanks to dry weather in the UK encouraging people to dress up and go out.
Full-price sales for the second quarter that ended July 30 rose 4.5% year-on-year, slowing from a 22% climb in the first quarter, but still topping expectations. Compared to pre-Covid times, second-quarter full-price sales were 26% higher.
Next said full price sales were £50 million ahead of guidance.
‘In part, we believe this over-performance has been the result of unusually warm and dry weather in June and July. A marked return to formal dressing, perhaps driven by pent-up demand for social events, has also played to the strengths of the Next brand,’ it said.
Next lifted annual pretax profit guidance by £10 million to a new outlook of £860 million, which would be a 4.5% rise from £823.1 million in financial 2022.
Next added: ‘Sales in the first half of the year have been dominated by a sharp reversal of last year’s lockdown trends. Sales in retail stores recovered, while online growth appears to have reverted back to its longer term trajectory.
‘Many product trends have also returned to pre-pandemic norms. Lockdown winners such as home and sportswear retreated, while formalwear returned to favour. As anticipated, online returns rates and surplus stock also reverted to pre-lockdown levels.’
Next shares were up 2.0% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: marginally lower, down 1.28 points at 7,444.40
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Hang Seng: up 1.9% at 20,137.56
Nikkei 225: closed up 0.7% at 27,932.20
S&P/ASX 200: closed marginally lower, down 1.00 point at 6,974.90
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DJIA: closed up 416.33 points, or 1.3%, at 32,812.50
S&P 500: closed up 63.98 points, or 1.6%, at 4,155.17
Nasdaq Composite: closed up 319.40 points, or 2.6%, at 12,668.16
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EUR: up at $1.0165 ($1.0125)
GBP: up at $1.2142 ($1.2110)
USD: soft at JP¥134.19 (JP¥134.30)
Gold: up at $1,771.46 per ounce ($1,757.20)
Oil (Brent): down at $96.80 a barrel ($98.50)
(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
0930 CEST Germany construction purchasing managers’ index
0930 CEST eurozone construction PMI
0900 BST UK monthly car registrations figures
0930 BST UK construction PMI
1100 BST Ireland unemployment
1200 BST UK Bank of England interest rate decision
0830 EDT US initial jobless claims
1030 EDT US EIA weekly natural gas storage report
0830 EDT US international trade in goods & services
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Chinese military manoeuvres around Taiwan have gone into full swing with widespread firing exercises. The eastern military command of the People’s Liberation Army (reported that long-range shells were fired in the Taiwan Strait, which separates Taiwan from the mainland, and east of the island on Thursday. ‘Precision strikes’ were also made in the east for practice, Chinese state television reported. China had ordered the most extensive military exercises in a long time in response to Speaker of the US House of Representatives Nancy Pelosi’s visit to Taiwan.
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Despite the resumption of grain exports from Ukraine’s Black Sea ports under a UN and Turkish-brokered deal between Russia and Ukraine, the EU intends to continue its efforts to create alternative freight routes for Ukrainian grain exports. Despite the re-opening of maritime routes, an immediate return to pre-war levels of Ukrainian exports remains challenging and alternative export routes are still crucial, an EU Commission official told dpa. European Commissioner for Transport Adina Valean stressed that there was ‘room for improvement,’ in the alternative routes being worked on, citing a lack of freight wagons, barge operators and storage facilities for Ukrainian produce.
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BROKER RATING CHANGES
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Goldman Sachs raises NatWest to ’conviction buy list’ (buy) - price target 410 (350) pence
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Goldman raises Lloyds Banking to ’buy’ (neutral) - price target 65 (61) pence
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Goldman cuts HSBC to ’neutral’ (buy) - price target 705 (840) pence
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Goldman cuts Standard Chartered price target to 870 (1,030) pence - ’buy’
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COMPANIES - FTSE 100
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Hikma Pharmaceuticals lowered guidance. It said revenue in the first half of 2022 inched down 0.2% year-on-year to $1.21 billion from $1.22 billion. Pretax profit fell by a third to $215 million from $319 million. Hikma’s outlook cut came in its Generics arm. It now guides for annual revenue there between $650 million and $675 million, down from the previous $710 million to $750 million range. The unit’s core operating margin will land between 15% and 16%, down from 20%. Hikma blamed this on the ‘persistent challenges of the US generics market’.
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COMPANIES - FTSE 250
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Mediclinic backed a consortium’s takeover offer, which values the hospital chain’s share capital at £3.7 billion. On an enterprise value basis, including debt, it values it at £6.1 billion. SAS Shipping Agencies Services and Remgro will pay 504p per Mediclinic share. The consortium made the latest proposal in July. Mediclinic at the time said it would be ‘minded’ to recommend a bid of that sum to its shareholders. Mediclinic in July said it had received three further takeover offers from the consortium, after it rejected the its first offer in June. Mediclinic shares closed at 486p on Wednesday, giving it a market capitalisation of £3.58 billion.
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Go-Ahead received a new takeover offer from a consortium consisting of Kinetic Holding and Globalvia Inversiones. They had already agreed on a 1,500p per share takeover. The offer has been raised to 1,550p. The bid comprises of a 1,450p cash element and a special dividend of 100p per share. It values Go-Ahead at £669 million. The new offer is recommended unanimously by the Go-Ahead board and also has support from a list of institutional investors in Go-Ahead, including abrdn, Jupiter, M&G and Schroders. Go-Ahead shares closed at 1,508.00p on Wednesday, valuing it at £651.1 million. Former suitor Kelsian in July had confirmed it would not make an offer to buy Go-Ahead. ‘This transaction will create a leading global, multi-modal, mass transit platform and unlock value for all stakeholders. Given our track record and experience we will provide long term capital and expertise to support the acceleration of Go-Ahead’s strategy and transition to net zero,’ Kinetic CEO Michael Sewards and Globalvia CEO Javier Fortea said.
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Serco raised guidance. Revenue and profit in the first half of 2022 increased. The outsourcer also upped its dividend. ‘We did much better in the first half than we expected in January, and as a consequence also expect to do better than we originally anticipated in the full year,’ Chief Executive Rupert Soames said. Revenue inched up 0.5% to £2.18 billion from £2.17 billion. Pretax profit was up 10% to £114.0 million from £103.7 million. Serco lifted its payout by 18% to 0.94 pence per share from 0.80p. Serco now expects underlying trading profit of around £230 million. It had previously forecast £225 million. However, Serco cautioned: ‘Second-half profit is expected to be lower than the first six months due to our Test & Trace work having ended, usual seasonality on some contracts including our CMS healthcare eligibility contract in the US, lower volumes on our immigration services contract in Australia, above-budget pay increases and one-off payments to non-management staff. The first-half second-half split of profits in 2022 is expected to be similar to 2021.’
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COMPANIES - SMALL CAP
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Coca-Cola Europacific said it now expects yearly pro-forma comparative revenue growth in the 11% to 13% range, lifted from previous 8% to 10% guidance. Operating profit is to climb by between 9% and 11%, and not 6% and 9% as previously guided. CEO Damian Gammell said: ‘Given our strong first-half, we are raising revenue, operating profit and free cash flow guidance for FY22. This demonstrates the strength of our business and ability to deliver continued shareholder value.’ In the six months to July 1, revenue jumped 40% to €8.28 billion from €5.92 billion. Pretax profit almost doubled, jumping to €898 million from €455 million.
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COMPANIES - GLOBAL
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Toyota Motor reported a serious drop in profit in the first quarter of its financial year, but upped its annual revenue outlook as the Japanese carmaker looks to ‘strengthen’ its supply chain. In three months to June 30, the Toyota City-based company’s first quarter, net income slumped 18% to JP¥758.25 billion, about $5.67 billion, from JP¥926.54 billion. Net attributable income also fell 18%, sliding to JP¥736.82 billion from JP¥897.83 billion. Sales revenue in the first quarter improved 7.0% to JP¥8.491 trillion from JP¥7.936 trillion, helped by the conversion of foreign sales into a lower yen. Looking ahead to the year ending March 31, 2023, Toyota is guiding for net attributable income at JP¥2.360 trillion, which would represent a 17% drop on financial 2022 but is up from previous guidance of JP¥2.260 trillion. Sales revenue is now guided to be JP¥34.500 trillion, a 9.9% rise on the year prior, and raised from the previous outlook of JP¥33.000 trillion. Toyota continues to expect a small increase in the number of vehicles sold in financial 2023.
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Deutsche Lufthansa said its freight operations propelled the airline group to its first net profit since the start of the coronavirus pandemic. Between April and June, Lufthansa recorded a net profit of €259 million, its first positive quarter since the end of 2019. Lufthansa was ‘back in the black’, CEO Carsten Spohr said in a statement, describing the pandemic as ‘the most severe financial crisis in our history’. The group – which includes Eurowings, Austrian, Swiss and Brussels Airlines – made huge net losses of €6.7 billion in 2020 and €2.2 billion in 2021 as the pandemic shut down large parts of the airline industry. Lufthansa was saved from bankruptcy by a government bailout in June 2020.
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Thursday’s shareholder meetings
Glantus Holdings PLC - AGM
Investec PLC and Ltd - AGM
STM Group PLC - AGM
Starcrest Education Ltd - AGM
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