Weekly review

Equity view

Pub owner JD Wetherspoon reinstated its interim dividend on Friday after a solid increase in first-half underlying sales, but warned of the impact of rising labour costs on the business, which will hit each of its pubs by £1,500 per week. Chair Tim Martin said that increases in national insurance contributions and minimum wages, announced in the last Budget, would increase company costs by £60m a year.

Ferrexpo said on Friday that Ukrainian tax authorities have suspended VAT refunds for January totalling UAH 512.9m ($12.5m) for two of its subsidiaries, citing sanctions imposed on major shareholder Kostiantyn Zhevago. The FTSE 250 company said the decision affected Ferrexpo Poltava Mining and Ferrexpo Yeristovo Mining. It emphasised that the sanctions were personal to Zhevago and had not been applied to Ferrexpo itself or any of its subsidiaries.

Ceres Power reported a 132% increase in revenue to £51.9m for the year ended 31 December on Friday, supported by record order intake of £112.8m following new partnerships in Asia. The London-listed firm said gross profit rose to £40.2m, with gross margins expanding to 77% from 61% a year earlier. It said it signed manufacturing licence agreements during the year with Delta Electronics in Taiwan and Denso in Japan, alongside a system development partnership with Thermax in India.

UK-based gas producer Energean has pulled its $945m deal to sell some of its assets to private equity fund Carlyle due to pending regulatory approvals in Italy and Egypt. The two parties were unable to agree on an extension of a longstop date beyond March 20, Energean said in a statement on Friday. The two companies reached an agreement last June which would allow Carlyle to form a new Mediterranean-focused oil and gas company led by former BP chief executive Tony Hayward using assets in Egypt, Italy and Croatia.

Food company Cranswick on Thursday upgraded medium-term targets and said the current year outlook was unchanged, with robust demand for its core pork and poultry products continuing throughout the fourth quarter. The company said it was now aiming for mid-single digit organic revenue growth, 7.5% adjusted operating margin, increased from 6% and upper teens return on capital employed, up from mid-teens. Cranswick is still targeting mid-single digit adjusted EPS growth.

Prudential has hiked its dividend by 13% and accelerated its share buyback plan after profits rose by a tenth in 2024, with financial results in line with group guidance. The insurance and asset management company returned $785m to shareholders in 2024, and a further $260m since then, as part of its $2bn repurchase plan that will now complete by the end of 2025, ahead of the original mid-2026 schedule. The second interim dividend was 16.29 cents per share, taking the total payout for the year to 23.13 cents, up from 20.47 cents paid out in 2023.

Bloomsbury Publishing said full-year trading was ahead of expectations after a strong performance in the second half. The Harry Potter publisher said success within the consumer division was broadly based across the company’s portfolio. The £65m acquisition of academic publisher Rowman & Littlefield in May last year drove growth in the non-consumer unit and its digital resources operation grew for the full year despite budgetary pressures in academic markets.

Shaftesbury Capital has sold a 25% stake in its Covent Garden portfolio to Norwegian sovereign wealth fund Norges Bank Investment Management (NBIM) for £570m. The deal values the Covent Garden estate, which covers some 220 buildings across 1.4m square feet, at £2.7bn, in line with an independent property valuation at the end of last year. Shaftesbury Capital will retain control and management of the portfolio, 74% of which comprises retail, food and beverage outlets, and 26% leased to office and residential clients.

Rio Tinto has asked shareholders to vote against a resolution from hedge fund Palliser Capital to review the mining giant’s dual listing in London and Sydney, calling it “value destructive”. Palliser wants an Australia-only listing, claiming it would boost Rio’s share price. “Assertions about $50bn of value erosion due to the group's dual-listing are both unfounded and misleading,” Rio Tinto said on Wednesday. "A dual-listed companies structure unification is not required to provide the group with strategic flexibility".

Pfizer has fully exited its investment in UK-listed pharma group Haleon, selling off its remaining 7.3% stake for £2.5bn. The transaction marks an "important milestone" for Haleon, according to chief executive Brian McNamara, with Pfizer having held a 32% stake at the time of the company's spin-off from GSK in July 2022. "Nearly three years on from demerger, Haleon is in a position of strength and is well placed to capitalise on the significant opportunities ahead," he said.

Investment manager M&G swung to an annual loss in 2024 but posted a small, unexpected increase in adjusted earnings profits, helped by strong growth in asset management and cost cutting. The reported loss before tax totalled £347m, compared with a profit of £309m in 2023, which was dragged down by unrealised fair value losses on surplus assets in the annuity portfolio and fair value losses on interest rate hedging, M&G said.

FDM Group saw a big drop in revenues and profits in 2024, but shares rose strongly on Wednesday after the tech consultancy pointed to an "encouraging" start to 2025. Chief executive Rod Flavell said the company had seen a "modest uptick in client demand across the majority of the regions in which we operate" so far this year. However, he said it was still too difficult to predict the timing of a sustained recovery in FDM's end-markets. As reported in a pre-close update in January, full-year revenues were down 23% at £257.7m against a backdrop of "very challenging market conditions".

STEM-focused recruiter SThree has held on to its full-year guidance despite a weak first quarter with double-digit declines in fees for both contract and permanent positions. Group net fees were 15% lower year-on-year in the three months to 28 February at £78.4m, with the rate of decline unchanged from the fourth quarter, as fees in the bigger contract division (84% of net fees) shrank 15% and permanent placements fees fell 13%. Each one of its main trading regions reported declining fees, while its top three countries of Germany, the US and Netherlands saw fees drop 13%, 9% and 18% respectively.

Bytes Technology reported double-digit growth across all key financial metrics over the year to 28 February, with gross invoiced income topping the £2bn mark for the first time. In a pre-close trading update on Tuesday, the software, security, AI and cloud services firm said full-year gross invoiced income, gross profit and operating profit all rose at a double-digit rate, "demonstrating the strength of our business model and market positioning". Operating profits in particular grew at a mid-to-high-teens percentage, while gross profits rose 12%, with growth balanced across both corporate and public sector clients.

Indian billionaire Sunil Bharti Mittal has reportedly indicated that he is considering increasing his holding in BT Group after taking a 24.5% stake in the telecoms firm last year. The Financial Times cited people familiar with the matter as saying that Mittal, who bought the BT stake from Patrick Drahi’s Altice in August last year, has privately suggested that he could expand his position in the company - held via his Bharti Enterprises conglomerate - as it continues to restructure and cut costs under chief executive Allison Kirkby.

Close Brothers shares tanked on Tuesday after the merchant banking group swung to a hefty loss in the first half on the back of a £165m provision for motor finance commissions. Looking forward, the company also said that the reinstatement of dividends would be reviewed "once there is further clarity on the financial impact of the FCA review of motor finance commission arrangements and the Supreme Court appeals". Close Brothers reported a loss before tax of £103m for the six months to 31 January, compared with a £88.1m profit recorded a year earlier.

AstraZeneca announced on Monday that it is spending up to $1bn to acquire Belgian biotech firm EsoBiotec, which it says has the potential to "transform" cell therapy. EsoBiotec's in vivo delivery platform, administered through IV injection, is able to deliver genetic instructions to the T cells, programming them to recognise and attack cancer cells directly. Traditional cell therapies involve removing cells from a patient before being genetically modified outside the body (in vitro) and readministered as a medicine after immune cell depletion.

Landscaping, building, and roofing products group Marshalls has trimmed its dividend after a dip in profits in 2024, but pointed to a recovery in end-markets later this year. The company said its confidence is supported by the government's ambition to "reinvigorate" new house building and invest in infrastructure, bolstered by further reductions in interest rates. Marshalls reported revenues of £619.2m, down 8% on 2023, with the smaller landscaping division seeing a 17% drop in sales due to lower volumes, price pressures in the industry and a disposal in Belgium.

Energean remains committed to the sale of its portfolio in Egypt, Italy and Croatia to an outfit controlled by Carlyle International Energy Partners, it said on Monday. Mathios Rigas, chief executive of Energean, said: "Although the necessary regulatory approvals have not yet been obtained by Carlyle, we remain committed to closing the Transaction.

Flooring products manufacturer Victoria has announced that chief financial officer Brian Morgan is to leave the company after three years of service, causing shares to rise strongly on Monday. Morgan, who is set to step down in late-June, has "decided to seek a role outside Victoria" now that the negotiated refinancing of its debt is now well advanced, the company said. Victoria has appointed Alec Pratt, a senior finance leader with 16 years' experience in investment banking, as Morgan's replacement.

Economic news

London’s Heathrow airport will be closed for at least a day with counter-terrorism officers investigating a fire at a local electricity substation overnight on Friday which caused a power outage, hitting more than 1,300 flights homes and likely to disrupt air travel globally for days. Flights that were already enroute to the west London airport were forced to divert to other airports. Video footage showed an enormous blaze at the substation in Hayes, west London in the early hours of Friday morning which also affected 16,000 homes. Passengers have been told not to travel to the airport “under any circumstances” and warned “significant disruption” is expected in the coming days.

UK borrowing significantly overshot expectations in February, according to data released on Friday by the Office for National Statistics. The government borrowed £10.7bn in February, up £100m on the same month last year. This was the fourth highest figure on record for that month and well above the Office for Budget Responsibility’s forecast of £6.5bn. It was also above economists’ forecast of £7bn. Borrowing is the difference between what the government spends on the public sector and what it gets in income from tax and other receipts.

Consumer confidence in the UK improved slightly in March, but remained "fragile", the results of a closely followed survey showed. Consultancy GfK's consumer confidence index for March rose by one point from the month before to reach -19.0 (consensus: -21.0). Neil Bellamy, Consumer Insights Director at NIQ GFK, called attention to the fact that the latest reading was "more positive" than those of -40 or less registered as recently as early 2023 on account of the cost-of-living crisis.

The Bank of England left the cost of borrowing at 4.5% on Thursday, in a widely-expected decision. In its last meeting before next week's Spring statement, the Monetary Policy Committee voted by a majority of eight to one to leave interest rates unchanged. External member Swati Dhingra argued for a 25 basis point cut. At the MPC’s last meeting in February, a majority of 7-2 voted for a 25bps cut.

The UK unemployment rate was unchanged in January, while wage growth slowed slightly but remained "relatively strong", according to figures released on Thursday by the Office for National Statistics. The unemployment rate came in at 4.4%, unchanged from December. Regular pay excluding bonuses rose 5.9% in the three months to January, the same as a month earlier and remaining at the highest level since the three months to April last year.

Demand for larger homes is driving house price growth across the UK, industry data published on Thursday suggested. The research, based on the Halifax house price index, showed terraced houses and detached properties had seen some of the strongest price growth over the last year. Overall, UK property prices rose 3.7% in January, up from just 1% at the start of 2024.

UK consumer sentiment improved slightly in March, according to a new survey out from the British Retail Consortium on Thursday, bouncing back after a record-low reading in February. The BRC's consumer sentiment monitor found that 15% of consumers expect the state of the economy to improve over the next three months, up from 13% when asked last month. While the proportion of those predicting a deterioration held steady at 50%, the overall balance improved to a net -35%, up from -37% – the worst on record and some 40 points lower than the last positive reading seen in July 2024.

Southern Water is seeking debt relief from some of its creditors, it was reported on Wednesday, as its owner Macquarie Asset Management injected fresh capital into the struggling UK utility. According to Bloomberg, which cited people familiar with the matter, the company had approached creditors holding riskier debt at the holding company level, asking them to accept losses on a portion of their £380m in outstanding loans. However, creditors were apparently resisting the terms and pushing for better conditions.

Exercise mats, pre-cooked pulled pork and VR headsets have all been added to the basket of goods used to calculate inflation, the Office for National Statistics confirmed on Tuesday. A total of 23 items have been added to the basket, and 15 removed, leaving a total of 752 goods and services. The contents of the basket is updated every February, to help ensure the consumer prices index reflects longer-term trends in consumer spending.

UK consumers grew a little more pessimistic about their finances in March as job insecurity persisted, according to a survey released on Monday. The S&P Global UK consumer sentiment index - which tracks financial wellbeing, labour market conditions, household spending, savings and debt - dipped to a 15-month low of 45.3 from 45.4 in February. This was above the long run average, but weaker than the recent highs recorded in the second half of last year.

International events

Existing-home sales in the United States rebounded strongly in February, according to the National Associationof Realtors, which pointed to "encouraging signs" for the American housing market. Completed sales for single-family homes, townhomes, condominiums and co-ops came in at a seasonally adjusted annual rate of 4.26m in February, down 1.2% from last year but 4.2% ahead of the previous month. That followed a revised 4.7% monthly decline in January. Analysts had expected a further fall to 3.95m from January's 4.09m level.

Manufacturing activity across Philadelphia expanded at a more modest pace in March, according to the region's Federal Reserve Bank, with growth in new orders and shipments easing and input prices hitting their highest in nearly three years. The Philly Fed manufacturing current general activity index fell to 12.5 from 18 in February, but came in ahead of the consensus estimate of 8.5. This was the second straight decline in the index since it reached a three-and-a-half-year high of 44.3 in January.

Initial claims for unemployment benefits in the United States rose by just 2,000 last week, according to data from the Department of Labor on Thursday. Jobless claims totalled 223,000 in the week ended 15 March, up from 221,000 the week before, which was revised higher by 1,000. This was more or less in line with the consensus forecast of 224,000. The four-week moving average edged higher to 227,000 from 226,250 previously.

Construction activity across the eurozone edged higher in January, with growth slowing for the second straight month, according to data out on Thursday from Eurostat. Total construction output increased by just 0.2% over the first month of the year, compared with a 0.4% gain in December and 1.0% growth in November. Building construction increased 0.9% in January after falling 0.2% the month before, while civil engineering output slumped 1.0% after growing 0.1% previously, and specialised construction activities contracted 0.1% after growing 0.4% the previous month.

Producer prices across Germany rose by less than expected in February, official data showed on Thursday. According to Destatis, the Federal Statistical Office, producer prices of industrial producers were 0.7% higher year-on-year in February. That was higher than January’s 0.5% rise, but below the 1% increase analysts had been expecting. Month-on-month, prices fell 0.2%, also below forecasts for a 0.1% uptick.

Switzerland’s central bank reduced its policy interest rate by 25 basis points to 0.25% on Thursday, marking its fifth consecutive cut since March 2024. The decision from the Swiss National Bank (SNB) aligned with economists' expectations, and brought borrowing costs to their lowest since September 2022. It said the move aimed to maintain appropriate monetary conditions amid persistently low inflationary pressures.

Rate-setters in the US voted to stand pat on rates, but said that they would slow the pace at which the central bank reduced its balance sheet until a deal was reached on the government debt ceiling. The target range for the Fed funds rate would therefore remain at 4.25-4.50%. And while top officials' latest macroeconomic projections were for slower growth and higher growth due to the new administration's tariff policies, Fed chief, Jerome Powell, said his base case was that the resulting upwards pressure on inflation would be "transitory".

Mortgage applications in the United States pulled back last week after a significant uptick over the preceding two weeks, as long-term mortgage rates rose for the first time in more than two months. In the week ended 14 March, mortgage applications declined by 6.2% on a seasonally adjusted basis from one week earlier according to the Mortgage Bankers Association. That followed an 11.2% jump in the first week of March and a 20.4% surge in the last week of February as mortgage rates tracked long-date Treasury yields lower.

The Bank of Japan maintained its key policy rate steady at 0.5% on Wednesday, as expected. The decision was reached unanimously at a two-day policy meeting. The BoJ said in a statement: "Concerning risks to the outlook, there remain high uncertainties surrounding Japan's economic activity and prices, including the evolving situation regarding trade and other policies in each jurisdiction and developments in overseas economic activity and prices under such situation, developments in commodity prices, and domestic firms' wage- and price-setting behaviour.

Germany's parliament has approved an historic package of spending and debt limit reforms, potentially clearing the way for a massive boost in defence and infrastructure spending for Europe's biggest economy. The Bundestag passed the measures with 513 votes in favour, above the 489 required for a two-thirds majority. There were 207 votes were against.