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Ladbrokes Coral was among a minority at the Cheltenham Festival cheering 7-1 shot Sizing John to an unexpected victory in the Gold Cup – capping off a week of upsets that left punters out of pocket, and bookies back in profit after two loss-making years.
It all came too late to affect the group’s full-year results, which this morning showed the effects of 2016’s winning streaks for punters at Cheltenham and at Chelsea FC.
But shareholders will be hoping Sizing John is a good omen for Lucky Jim Mullen who, as chief executive, needs a big result in a higher stakes game: the government’s review of fixed-odds betting terminals, which analysts suggest now provide 40 per cent of betting shop revenues. A severe crackdown on stakes or machine numbers could result in widespread shop closures for Ladbrokes and rivals.
Today, Ladbrokes would say only that revenue from all types of in-store betting machines was up 4 per cent in the calendar year, and it expects the government to give “some form of update…. in late Spring” but remains “encouraged by the statements that… have emphasised that all decisions will indeed be based on evidence.”
Last year, group revenue rose 11 per cent on a proforma basis (including 10 months of Ladbrokes and Coral separately and 2 months of the merged entity) to £2.4bn, driven by strong growth in digital and European retail operations. Proforma group operating profit came in at £264.3m, up 22 – largely in line with the profit guidance in January after allowing for disposed shops.
On a reported basis, however, Ladbrokes Coral made an operating loss of £202.4m, as a result of a £194.9m non-cash impairment charge and £128.7m of merger and integration related costs.
Mr Mullen said:
“The merger was the start of a journey. While we face some short term uncertainty with the [government’s] triennial review, the scale, talent and agility we have in this business represent real strengths going forward.”
One chief executive who recently won a high stakes gamble – or, depending on your point of view, nearly lost – was Thomas Cook boss Peter Fankhauser. Last month, only – or, depending on your point of view, as many as – one third of shareholders opposed his new share incentive plan, which stands to pay out as much as 225 per cent of his £700,000 salary. Fans of Mr Fankhauser point out that he didn’t ask for this accumulator, and note that shareholders and customers have been the real winners from his turnaround of the travel group. Either way, everyone gets to shout the odds this week – because Thomas Cook’s update this morning is followed by rival Tui’s tomorrow.
And Thomas Cook has shown that its improved trading continues. Summer bookings are up 10 per cent, with strong growth in sales of holidays in Greece and smaller European destinations. As a result, its full year earnings guidance is maintained.
In February, its rival Tui – which operates the Thomson and First Choice brands – said its bookings for the winter season were up 4 per cent and revenues were 8 per cent higher compared with the same period last year, as travellers avoided Egypt or Turkey on security grounds but booked in Spain and Greece instead.
Thomas Cook’s Mr Fankhauser said:
“Our decision to expand our holiday offering to Greece has helped support customer demand, with bookings to Greece up by around 40 per cent versus last year, while smaller destinations like Cyprus, Bulgaria and Croatia are also proving popular. After a slow start to the season and a tough year in 2016, we’re seeing early signs that customers are beginning to go back to Turkey and Egypt.”
Its Winter programme is now 90 per cent sold, and closing as expected, while summer 2017 is 42 per cent sold, 1 percentage point ahead of last year. However, the group did refer to “some margin pressure in parts of our business due to more competition”.
Wolseley, the FTSE 100 building materials, is hoping for better conditions in long haul destinations, it seems. Having endured a tough UK heating market and falling demand in the Nordics, it us hoping that its US business can prove resilient in the face of price deflation. Analysts at Merrill Lynch had certainly been looking forward to upbeat comments from management about US growth and dollar earnings.
And this morning, Wolseley said US revenue grew 9.9 per cent at constant exchange rates, as residential and commercial markets were “good” and the industrial market improved slightly. Overall, changes in foreign exchange rates increased revenue by £1.1bn. That helped total group revenue hit £8.5bn in the half year to January 31, a rise of 6.7 per cent or 3.2 per cent on a like for like basis.
Trading profit was up a quarter to £515m but reported pre-tax profit fell back to £328m, partly due to restructuring charges in the UK and Nordic regions.
It has now decided to exit the Nordics altogether, and – significantly – change its reporting currency to dollars from August.
Chief executive John Martin said:
“We have concluded our review of the Nordic operating strategy and identified a clear and executable plan to return the business to profitable growth. However, there are few synergies with the rest of the Group’s plumbing and heating businesses and we have initiated a process to exit our business in the region. We have excellent opportunities to generate attractive returns in our other businesses and we will focus resources there in the future.”
Meanwhile, Moss Bros – purveyor of outfits that are more Ascot than Cheltenham, more Mansfield than Marbella and more bank clerk than builder – has thrown off the high street gloom by reporting a 20 per cent rise in pre-tax profit to £7.1m for the year to January 28. Revenues were up 5.7 per cent to £127.9m.
Its online business reported further growth, with sales up 15.7 per cent, although that was slower than last year’s 36.3 per cent.
And, finally, Tesco has said it will set up an $85m compensation scheme for shareholders and bondholders affected by its 2014 accounting scandal.
It admitted it had misstated its profits during the first half of that year, with the discrepancy eventually growing to £326m. It went on to report a £6.3bn loss in 2015, one of the biggest in British corporate history.
Today, the supermarket chain said it had agreed with the Financial Conduct Authority to set up a compensation scheme for investors who bought assets between August 29 and September 19 in 2014.
The FCA, which will not be issuing a fine on the supermarket, said this was the first time it had used its regulatory powers “to require a listed company to pay compensation for market abuse”.
FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.