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Low-cost airline easyJet today revealed a £40 million hit from the Middle East crisis but still reduced losses to £126 million in the final quarter of the year.
Other companies reporting today included JD Wetherspoon while the funds manager Abrdn has announced it is planning to cut 500 jobs.
London’s top flight is higher after Wall Street’s S&P 500 index closed at a new record and streaming giant Netflix announced strong quarterly results.
FTSE 100 Live Wednesday
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EasyJet reveals Middle East impact
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Abrdn confirms 500 job cuts
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Netflix shares jump on earnings cheer
‘Spoons fights back from Covid lockdowns
08:11 , Simon English
Wetherspoon is back on the up post pandemic, opening two new pubs in London Heathrow and London Euston railway station.
That leaves it will 814 pubs in all. In the 25 weeks to January 21, sales were up 10.1% on a year ago – better than most rivals can offer.
Wetherspoon chairman Tim Martin said:”Wetherspoon, like the hospitality industry, has seen a consistent but slow recovery, following the pandemic. Although inflation is, in general, reducing, labour and energy costs are far higher than pre-pandemic. A main issue for the pub trade is that labour costs are around 30% of sales, compared to around 10% for supermarkets.”
He added: The price of a pint in a supermarket is about £1, so a 10% increase in labour costs (which are around 10 pence per pint) necessitates a one pence increase in the selling price to cover costs. However, for pubs, the average selling price of a pint is around £4.50. The labour per pint is therefore around £1.35 (30% of £4.50), necessitating a 13.5 pence increase in the selling price to cover extra costs.”
“The inevitable consequence is that increased labour costs raise the differential in prices between the hospitality industry and supermarkets. At the same time, pubs pay far higher VAT and business rates than supermarkets, further exacerbating the price disparity.”
Zoo Digital in another profit warning amid slow rebound from Hollywood strikes
08:00 , Daniel O’Boyle
Subtitling firm Zoo Digital has warned it’s “taking longer than expected” to get back to business as usual following last year’s Hollywood strikes, meaning its losses will be bigger than thought.
The business was hit hard by the strikes last year, as the lack of new films and television programmes meant less demand for its localisation services.
While the strikes have ended, Zoo says “it is now clear that the completion of entertainment products is taking longer than expected”.
The business ended 2023 with net cash of $8.9 million, and says it has unused debt facilities available to keep it liquid.
Shares have already tumbled by 70% since April, and are likely to fall further today.
Middle East strife hits easyJet
07:39 , Simon English
Conflict in the Middle East sent easyJet plunging to a £126 million loss in the last quarter, but it remains optimistic for the rest of the year.
Passenger numbers are up and bookings for the summer arewell ahead on a year ago.
The company said: “The onset of conflict in the Middle East on 7 October had short term impacts from a pause in flights to Israel and Jordan (which currently remains in place) and a temporary slowdown in flight bookings for the wider industry. Demand and bookings have recovered strongly from late November. “
CEO Johan Lundgren added: “”We see positive booking momentum for summer 2024 with travel remaining a priority for consumers. Flight and holidays bookings took off strongly during the traditional busy turn ofyear sales period, as customers opted to secure their summer holidays to firm favourites like Spain and Portugal alongside destinations further afield like Greece and Turkey. “
Passenger revenues rose 16% to £1.1 billion compared to a year ago.
Lords Group Trading to benefit from rising demand for air source heat pumps
07:35 , Joanna Bourke
Building supplies firm Lords Group Trading has reported a slip in like for like sales, but it is eyeing growth from an expected shift in demand towards air source heat pumps.
The firm, which has 48 stores, 15 of which are in London, saw total revenue last year improve 2.8% to £463 million, but comparable sales fell 1.2%.
But it said a transition towards renewable energy sources across the UK housing stock will increase demand for renewable products including air source heat pumps.
Lords said it is well placed to benefit from a shift in demand towards air source heat pumps, “with successful and growing trading relationships with six air source heat pump manufacturers and achieving 60% revenue growth across its wider renewables range last year”.
Abrdn confirms 500 job cuts with more money pulled out of its funds
07:22 , Daniel O’Boyle
Funds giant Abrdn has confirmed that it will cut 500 jobs, mostly in its struggling investment arm.
It comes as customers pulled another £12.4 billion out of Abrdn funds in the last six months of 2023. The business faced net outflows of more than £5 billion in the previous six months.
CEO Stephen Bird said: “Market conditions have remained challenging for our mix of business, and this is reflected in our year-end AUMA, flow numbers, and margins.
“The board and I are committed to taking these significant cost actions now to restore our core investments business to a more acceptable level of profitability.”
The news of the job cuts was first reported yesterday.
Netflix shares jump on earnings cheer, FTSE 100 seen higher
07:20 , Graeme Evans
Netflix shares jumped 9% after last night’s closing bell as Wall Street reacted to the streaming giant’s best subscriber growth since early in the pandemic.
The rise of 12.8% to 260.3 million lifted fourth quarter revenues by 12.5% to $8.8 billion (£6.9 billion), with operating profit up to $1.5 billion (£1.2 billion).
Hargreaves Lansdown analyst Sophie Lund-Yates said: “The meaningful growth in subscriber numbers is partly a result of password sharing crackdowns, but is also testament to Netflix’s ability to keep us glued to screens.
“Full year-margin expectations have been upgraded thanks in part to the higher volume of Netflix fans joining the service, and that nugget of news is being celebrated the loudest.”
Before the release, the S&P 500 index edged higher to set a new record high while the Dow Jones Industrial Average finished slightly lower following a negative reaction to figures by industrial conglomerate 3M.
Yesterday’s boost from speculation of China stimulus measures continued as the Hang Seng index and the Shanghai Composite added another 1.8% today.
The FTSE 100 index closed broadly flat last night and is this morning expected by CMC Markets to open 24 points higher at 7509.
Rio Tinto: A number of our people in plane crash
07:08 , Daniel O’Boyle
FTSE 100 mining company Rio Tinto today said an aeroplane carrying “a number of our people” has crashed in Canada’s Northwest Territories, resulting in fatalities.
Further details were not immediately available.
Rio Tinto chief executive Jakob Stausholm said: “I would like to extend our deepest sympathy to the families, friends, and loved ones of those who have been affected by this tragedy. As a company we are absolutely devastated by this news and offering our full support to our people and the community who are grieving today.
“We are working closely with authorities and will help in any way we can with their efforts to find out exactly what has happened.”
Recap: Yesterday’s top stories
06:42 , Simon Hunt
Good morning from the Standard City desk.
There have not been too many occasions in recent years when the ONS number crunchers have delivered economic data markedly better than City forecasts.
The £7.8 billion borrowed by the government in December was the lowest for the month since 2019, admittedly a pretty low bar to set given what has come since then. But it was well below the £11.4billion pencilled in by City scribblers.
Borrowing is now on course to undershoot the OBR’s projections by £5 billion in the current financial year, and much more next year. In the time honoured phrase, that gives the Chancellor “wiggle room” to deliver crowd pleasing tax cuts of up to £20 billion when he rises to his feet in the Commons on March 6, according to the commentators.
But let us not get too carried away.
There is a “glass half empty” way of looking at today’s numbers too. The state is still having to borrow more than £100 billion a year to keep the show on the road.
The now £2.69 trillion of debt, expressed as a proportion of economic output, rose another 1.9 percentage points to 97.7% in the year to December. That is the highest since the early 1960s.
Jeremy Hunt is obliged by the necessities of the political cycle to deliver the biggest vote winning package of tax cuts he can in March.
But long after the dust has settled on the election result later in the year he will be judged on whether he delivered a responsible and sustainable Budget in the long-term interests of the country.
Here’s a summary of our other top stories from yesterday:
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