BUSINESS CLOSE: Tui returns to profit

Just before close, the FTSE 100 was 0.83% up at 7,590.19.

Meanwhile, the FTSE 250 was 0.46% higher at 18,928.22.

Recognise Bank has boosted the rate on two fixed-rate savings accounts shooting them to the top of the best buy tables, after a slight lull in top fixed deals being launched.

(Reuters) – CVC Capital Partners is exploring a potential stock market listing of German perfume and cosmetics retailer Douglas, people familiar with the matter told Reuters on Wednesday.

The private equity house is working with advisers at Rothschild & Co to prepare the initial public offering (IPO), which could happen as early as next year, said the people, asking not to be identified because the discussions are private.

The potential IPO could value Douglas at up to €7billion ($7.68billion), one of them said.

The news comes as IPO markets in Europe and the United States are starting to warm up after a long drought caused by the impact of rocketing interest rates and Russia’s invasion of Ukraine.

German companies are gearing up for a revival in stock offerings, with medical glassmaker Schott Pharma, road payments group DKV Mobility, midsize lender OLB Bank and defence contractor Renk all eyeing market debuts in the latter part of the year.

Some have set their sights overseas, such as sandal maker Birkenstock, which is planning to list in New York.

CVC acquired Douglas in 2015 from rival buyout firm Advent International in a deal worth almost €3billion at the time.

Reuters reported in early 2020 that the private equity house was exploring a sale or IPO of the beauty group, but the plans never materialised as COVID-19 spread across the world.

TP Icap shares rose sharply after the group unveiled better than expected first-half figures, as a spike in commodity prices helped offset dwindling equities income.

The broking group’s underlying profit came in at £163million, up 15 per cent year-on-year and ahead of Shore Capital’s £156million estimate.

Workers at Gatwick Airport have announced a fresh raft of strikes, including August Bank Holiday weekend, prompting fresh fears for more summer holiday chaos.

Unite Union announced that 230 ground handlers and passenger assistance workers will be walking out in the continuing row over pay.

E.On has reiterated plans to pass on lower power and gas costs to millions of its customers, weighomg on profits this year.

It comes in response wholesale prices falling back from record levels seen last year after Russia cut gas deliveries to Germany.

Office space specialist CLS Holdings has swung to a significant loss as interest rate hikes take their toll on the commercial property market.

The FTSE 250 company reported a £106.4million pre-tax loss for the six months ending June, compared to a £21.4million profit in the equivalent period last year.

Victoria Scholar, head of investment at Interactive Investor, comments on the second-quater GDP figures, which are set to be released on Friday:

Second quarter GDP is expected to grow by 0.2% year-on-year, in line with the first quarter also at 0.2%, which was the weakest rate in two years as rising inflation and higher interest rates take their toll. Quarter-on-quarter, Q2 GDP is seen coming in flat dropping from a reading of 0.1% in Q1.

A trio of bank holidays in May hurt activity in the manufacturing and construction sectors as workers enjoyed the extra days off. In June, the celebrations ended, providing a back-to-work boost for the economy.

According to June’s retail sales figures, the record-breaking heatwave supported sales in supermarkets and department stores, partly driven by high inflation which flattered food sales, lifted by higher prices rather than stronger volumes. Lower fuel prices versus last year during the energy crisis are also likely to provide a tailwind to fuel sales and in turn June’s growth figure.

However, the boiling hot temperatures are likely to have dampened productivity, particularly in agriculture and construction. They also caused problems in the transport sector with passengers on trains and planes facing delays and cancellations.

WeWork is warning US regulators there is ‘substantial doubt’ about its ability to stay in business over the next year, citing financial losses, cash needs and a drop in memberships.

The New York-based workspace-sharing company, once valued at $47 billion, said its ability to stay in operation is contingent upon improving its liquidity and profitability over the next 12 months.

Coca-Cola Hellenic Bottling Company has boosted its annual guidance following a bumper performance during the first half of the year.

The anchor bottler revealed operating profits more than doubled to €557.3million (£480million) for the six months ending June, despite consumer weakness and higher energy and ingredients costs.

Flutter Entertainment earnings soared in the first half after the gambling giant’s fast growing US operations turned a profit for the first time,

FTSE 100 Flutter, which posted first half core earnings growth of 76 per cent, told investors on Wednesday the first period of profitability for its Fanduel brand marked a ‘transformation point’ for the group’s prospects.

The Dublin-based group said this made it the first online betting operator to turn a profit in the US, adding that it achieved this six months ahead of schedule.

The UK’s economy will not recover from the Covid-19 pandemic until the end of next year, a report warns today.

Britain is instead on course for ‘stuttering growth’ over the next two years amid ongoing pressure from high interest rates and increased unemployment.

Bellway will build fewer homes this year and expects sales completions to drop ‘materially’ amid a sharp housing sector slowdown driven by higher mortgage rates.

Interest rate rises  have driven up mortgage rates and triggered affordability concerns, putting off prospective buyers, while a decline in house prices has hurt margins for housebuilders.

In the year to 31 July, Bellway’s average selling price came in at £310,000, down from £314,399 the previous year.

Six English water companies are facing legal action over allegations of underreporting pollution incidents and overcharging customers.

If the cases are successful the companies – Severn Trent Water, Thames Water, United Utilities, Anglian Water, Yorkshire Water and Northumbrian Water – could end up paying over £800million in compensation.

Tui has unveiled its first quarterly post-pandemic profit on the back of robust bookings and travel demand.

The group reported underlying earnings before interest and tax of around £145million for the three months to the end of June, as well as approximately £4.6billion in revenue.

Tui said the financial impact of recent wildfires, encompassing cancellations, lost margin, compensation, repatriation flights and welfare costs, had added over £21million to its full-year 2023 results.

Arm has posted a loss a month before its proposed listing in New York.

Revenue fell 11 per cent to £480million in the three months to June.

London-listed stocks are trading higher this morning, with the FTSE 100 led by Coca-Cola HBC after the bottler’s upbeat annual revenue outlook.

Beverage stocks have gained 0.8 per cent, with Coca-Cola HBC rising 3.3 per cent after the company lifted its annual revenue target.

Leading the FTSE 250, TP ICAP has jumped 11.6 per cent after the world’s biggest inter-dealer broker reported a higher half-year profit.

Bank stocks have rebounded after a sell-off in the previous session, as global sentiment improved after Italy’s government eased its stance on new banking levy.

Amazon has been accused of pushing small businesses to the edge of collapse after warning it would hold onto thousands of sellers’ cash temporarily.

The US tech giant told small firms using its platform in the UK and continental Europe that it will withhold their sale proceeds for over a week, triggering fears businesses will not have the cash to keep going.

Songs performed by country music star Carrie Underwood have been sold to London-listed music royalty firm Round Hill Music.

The music investment fund bought the rights from New York based Big Loud Shirt Industries.

As a result, Round Hill owns popular songs such as Before He Cheats and Undo It by the 40-year-old 2005 American Idol winner.

Oli Creasey, equity research analyst at Quilter Cheviot:

‘The financial year just finished looks like a relatively good one for Bellway. Housing completions and company revenue both fell marginally (c. -2% to -4%), despite the last 12 months being a challenging environment.

‘However, this is partly a timing issue – many of the full year 22/23 sales will have been agreed before mortgage rates rose sharply, and the indications are that full year 23/24 will be considerably more challenging for the company.

‘The company’s private reservation rate has fallen by -36% during the year, and management stated that mortgage rates in June and July 2023 returned to the levels reached during the Liz Truss government, significantly impacting the volume of sales.

‘We note that the order book (sales agreed but likely to complete in FY 23/24) has fallen around -40% year-on-year, suggesting volumes next year will be significantly lower. Bellway’s outlook statement acknowledges this, with completions expected to decrease materially.

‘This sounds bleak, but is in-line with the experiences of other large housebuilders. As with the other builders, sales pricing has remained relatively robust (-1%), which has provided support to company revenues. The margin has fallen c. 250bps, largely due to inflation of build and other costs, but we do expect these inflationary effects to moderate in the coming year.’

Emma-Lou Montgomery, associate director for personal investing at Fidelity International:

‘The sun doesn’t always shine on Tui, but the Anglo-German tour operator has just seen its first profitable third quarter since the pandemic and says it’s on track for a strong summer season.

‘Some 5.5m holidaymakers travelled with Tui in the three months to the end of June, helping push group revenue up 19% to €5.3bn, compared to €4.4bn over the same period last year. That’s 11% above pre-pandemic levels.

‘The 2023 holiday season hasn’t been without its challenges though, with 8,000 holidaymakers recently evacuated as the wildfires raged across Europe. But sun-seekers are a determined bunch and the drop-off in demand proved to be only a blip, with Tui saying bookings for the last week were up 5% against summer 2022.

‘The financial impact of the wildfires on Tui will inevitably last far longer, adding around €25m to Tui’s full year 2023 costs – but the group says business is ‘close to normal’ and earnings are set to be ‘substantially higher overall this year.’

The pound slipped to its lowest level in five months as traders bet the Bank of England will start cutting rates in 2024.

Traders are pricing in two more rate hikes for 2023 as the Old Lady looks to tame inflation.

But this could be followed by 50 basis points of cuts for next year, according to traders, despite the Bank last week signalling it would keep policy ‘sufficiently restrictive for sufficiently long’.

Gamblign giant Flutter saw a 76 per cent jump in first half core earnings jumped 76% as its fast growing US Fanduel brand turned a profit for the first time in a transformation point’ for the group’s prospects.

The group, which owns Paddy Power and Betfair, saw customer growth of 28 per cent year-on-year in the six months to 30 June to 12,285,000.

Flutter’s US revenue overtook that of its most profitable UK and Ireland market in 2022, recording adjusted earnings before nasties of £49million for the period versus a £132million loss last year.

That contributed to reported EBITDA of £765million across the group, versus the £731million forecast by analysts.

Flutter expects full-year adjusted US earnings of £90million to £190million as it invests further in the second half and earnings in the rest of the group of up to £1.6billion.

Bellway has warned it will build fewer homes in the current fiscal year as the housebuilder faces further margin pressures amid a slowing housing market.

The group built 10,945 homes in the fiscal year ended 31 July, slightly down from the guidance of 11,000 units.

Bellway said it expected its underlying operating margin for its last financial year to be around 16 per cent, down from 18.5 per cent in the year-ago period, hurt by high build costs and overhead inflation.

‘The backdrop of macroeconomic uncertainty and cost of living pressures affected consumer demand during the year and, given affordability remains constrained by higher mortgage interest rates, underlying trading conditions are likely to remain challenging in the near term,’ Bellway chief executive Jason Honeyman said.

Shares in Italy’s largest banks slumped after the country’s government slapped a surprise windfall tax on the industry.

US banks, meanwhile, were also knocked by a series of downgrades from Moody’s.

The credit rating agency warned the sector could find its profits under pressure from an economic slowdown and the effects of higher interest rates.

TUI has posted its first post-pandemic quarterly profit after the tour group cashed in on a rebound in travel demand, with its boss pledging to grow profitability ‘significantly’ going forward.

The tour group posted underlying earnings before interest and tax of €169million (£145.2million) for the quarter, as well as €5.3billion in revenue.

‘We are investing today to continue to significantly grow profitably in the future,’ said TUI chief executive Sebastian Ebel.