Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Marks & Spencer
There’s a trading update out from Marks & Spencer LON:MKS this morning, showing some positive signs for the business. Food sales were up by 2.5% over the last 13 weeks, with the figure being significantly more impressive if hospitality and travel sites are stripped out of the equation. Online clothing sales have however been faring well, but with the division as a whole struggling, especially with lower sales in the formal wear category, the company is booking additional storage space to keep lines for next year. However, further down in the note is the news that the company plans to shed 7000 jobs over the next three months. A ‘significant’ proportion of this reduction will be through retirement or voluntary redundancy, with a significant adjusting item to be expected in the half year results accounting for this cost.
Persimmon
Half year results are out from housebuilder Persimmon LON:PSN this morning, covering the period to June 30th. Despite the disruption from COVID-19, some 4900 homes have been completed, down from 7584 a year earlier. Margins have been eroded slightly, but the company has a strong order book which ought to offer some reassurance. The interim dividend has however been pared back to just 40p, from the 235p paid out a year ago. Medium term risks from Brexit, economic uncertainty and indeed a return of COVID-19 remain front of mind, but the company remains in a strong trading position with some £821m of liquidity on hand.
Capita
Capita LON:CPI has published its half year results too, noting that the COVID-19 pandemic has hit at a time when the company had expected to see revenue growth. Income has however retreated by 9%, part of the reason that pre-tax profits have been hammered, although a £42m charge for untaken holiday is also a key driver here. COVID is expected to remain a drag on the company’s performance in the second half and the expectation is that a move to sustainable cashflow has been delayed by 1-2 years as a result. It may be buried way down in the report, but last week Capita was awarded with a 5 year extension to running the congestion charge scheme in London, so it’s not all bad news, but this remains a commodity business that is clearly far from insulated against the effects of the pandemic.
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