London shares are becalmed in morning trading with the FTSE100 flat and mid and small cap indices nursing modest losses as traders shrug off sharp selling on Wall Street overnight which saw the Nasdaq give up 2.5 per cent as the rotation away from big tech picked up pace again.
More positively for domestically focused investors, GDP figures for November were published this morning which indicated that the UK economy had finally reversed the damage done by the pandemic, at least before Omicron swept through the country. GDP in November rose by 0.9 per cent month on month, way ahead of consensus expectations to take the gross domestic product of the UK economy above its February 2020 level for the first time. The dominant services sector rose by 0.7 per cent with manufacturing production and construction rising even more strongly.
But, the UK is not totally out of the woods yet, the rapid and dramatic emergence of the Omicron variant is likely to have dampened GDP figures for December and January but there is hope that once this wave subsides and we head into the spring and summer months, the economic recovery will resume although rising inflation and taxes could still have a dampening effect.
Currys dips on disappointing Christmas
Electricals retailer Currys (CURY) suffered a dip in Christmas sales with like for like sales in the UK and Ireland down 6 per cent in its key trading period of 10 weeks up to 8 January. While Omicron hit footfall across the retail sector, Currys said it has also suffered due to supply chain problems hampering stock levels. Key sellers over the period were consoles and VR headsets but management said it has detected some reluctance from consumers to splash out on big ticket items. Online sales were a source of hope with revenues from digital channels up 29 per cent on Christmas 2019 but overall the more cautious consumer environment has prompted management to shave £5m from its full year profit guidance, reducing it to £155m. Currys shares dipped 4 per cent in early trading. The company also said it it would spend £75m on a buyback of its shares.
For more on the wider retail sector’s Christmas performance read ‘Online shoppers allow retailers to enjoy a happy Christmas’.
Experian posts strong organic growth
Experian (EXPN) published a cheerful trading update this morning, setting out its growth ambitions.
The data services specialist expects organic revenue growth to reach 12-13 per cent for 2022, higher than its original prediction of 9-11 per cent. Its consumer services arm - which allows consumers to check their credit score - is particularly popular, with membership figures shooting up.
Geography has a big impact on Experian’s performance. North America is driving organic growth, and now accounts for 67 per cent of the group’s total revenue. Meanwhile, Latin America looks very promising: the company is expanding its footprint in the region both organically and through acquisitions, and annual sales are closing in on those in the UK & Ireland.
In contrast, UK revenue growth leaves something to be desired, particularly in the business-to-business division. However, Experian says it is making “good progress” in new client segments, such as ‘buy now pay later’. Ecommerce trends, and the development of new types of credit, could well boost demand for these services in developed markets.
Analysts are also upbeat. Shore Capital predicts that Experian’s strong growth trajectory is set to continue, and noted the “strategic position” enjoyed by Experian and its peers in the data economy.
The trading update was light on profit figures, but more will be revealed on 18 May when Experian publishes its full year results.
Foxtons returns Douglas & Gordon arm to management
Estate agency Foxtons (FOXT) is to offload the sales arm of the Douglas & Gordon business bought in March last year. It bought the business for £15.5m last year and is retaining the lettings arm but will return the sales arm back to chief executive James Evans for a “nominal” sum. It will recognise an impairment loss of £3m as a result.
The lettings arm is set to deliver an operating profit of £4m and the agency said the total cost of the original deal now works out at about 3.9-times expected earnings, which it described as an “attractive” valuation. D&G has also signed restrictive covenants protecting Foxtons’ lettings business.