BUSINESS LIVE: Spring Budget looms; L&G misses profit expectations; Capita to make extra cost savings

A typical Greggs worker will be handed a £700 bonus after it raked in bumper profits and said sales would double by 2026.

Chief executive Roisin Currie said around 25,000 of its 32,000 staff will be rewarded in their March pay packets after ‘another year of rapid growth’.

London-listed stocks have edged higher at the open amid caution in the run-up to the Spring Budget..

Legal & General is down 4 per cent, leading losses on the FTSE 100, after the life insurer missed expectations for 2023 operating profit amid tough market conditions, dashing residual investor hopes of a share buyback.

Precious metal miners are up 1.3 per cent as gold prices hover near record-high levels on hopes of easing interest rates, while rate-sensitive real estate companies and real estate investment trusts have added around 1 per cent each.

British wealth manager Quilter will review historical services provided to customers amid heightened regulatory scrutiny of charging by fund managers.

Quilter said the review may lead to ‘remedial costs’, but that it was too early to quantify what those might be.

‘…we are commencing a review of historical data and practices across our network to determine what, if any, further action may be required,’ the firm said, following a regulatory request for data on servicing from 20 advice firms last month.

The company also reported annual profit above analyst expectations on Wednesday, helped by steady demand from affluent clients for financial advice and portfolio management.

Analysts at JPMorgan welcomed the profit beat in a note, but said the risk of remedial costs could weigh on the stock, citing the experience of rival St James’s Place.

Matt Britzman, equity analyst, Hargreaves Lansdown:

‘Full-year results missed the mark for Legal & General as operating profit came in lower than expected. The investment management arm continues to feel the effects of higher interest rates. Average assets under management were down 12% on the prior year, largely a result of valuations coming under pressure from rate hikes.

‘But Legal & General is a diverse beast, and the retirement business is the biggest driver of operating profit. It’s one of the world’s leading bulk annuity providers and is benefitting from a resurgence in the market. Companies with pension plans can pay L&G a lump sum to take the liabilities off their hands. As rates have moved off the lows seen in recent history, it’s become a more attractive market for both those looking to de-risk and those like L&G in the business of taking on these liabilities.

‘The UK is the most mature global market, but L&G has its eyes set further afield. Activity in overseas markets like the US, Canada and the Netherlands is increasing. Including the UK, there’s around $6trn of pensions liabilities floating about, with the percentage transferred to insurers barely touching double digits. That gives plenty of scope for L&G to keep growing.

‘Some may have hoped for a few more details from the new CEO on his strategy, but investors will have to wait until the announced capital market day in June for more details.’

Outsourcing giant Capita expects to make an additional cost saving of £100million a year by mid-2025, adding to planned spending cuts announced in November.

The group has already outlined plans to cut £60million a year starting at the beginning of 2024, with around 900 ‘indirect support function and overhead roles’ affected.

But Capita said it has now identified ‘further material efficiency improvements which are essential to ensuring our competitive position in the market’.

As a result it will this year ‘be taking steps to realise a further £100million of annualised cost savings by mid 2025, which will be partially reinvested in growth’.

Boss Adolfo Hernandez said:

‘We have yet to deliver the operational excellence that will enable us to create the right platform for future growth or achieve our full potential for the benefit of shareholders.

‘Looking forward, we will focus on precision in execution, co-creating solutions with clients and accelerating the use of technology and leveraging our technology partnerships to drive improvement in our operating and financial performance.

‘We need to deliver a rapid reduction in our cost base and are on track to deliver the net £60m annualised cost savings, from Q1 2024 as announced in November. Today we are announcing further material efficiency improvements of £100m to improve our competitive position.’

Legal & General profits missed analyst forecasts in 2023 as the British insurer faced ‘challenging’ market conditions, with its investment management business suffering a drop in earnings of almost a fifth.

Group operating profit came in at £1.75billion for the year, compared to expectations of £1.67billion.

Legal & General Investment Management, which is one of the UK’s biggest investors, posted a 19 per cent fall in operating profits to £274million as its assests under management fell 3 per cent to £1.16trillion.

Chief executive Antonio Simoes said: ‘We are on course to achieve our five-year targets, and demonstrated resilience in challenging markets.’

The economy has turned a corner.

That has been Jeremy Hunt’s mantra as Britain emerges from a downturn – and it is one that is likely to be repeated in today’s Budget.

Labour’s accusation, however, is that the Tories have crashed the economy.

In truth, Britain’s resilience has proved the most doom-laden forecasts wrong. Yet growth – at just 0.1 per cent in 2023 – has been nothing to shout about.