What to Watch: Caterer Compass dives, Pets at Home pops, and Topps Tiles hit by election

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A general view of a Pets at Home pet shop, vet surgery and pet grooming retail outlet store on July 3, 2018 in Southend on Sea, England. Photo: John Keeble/Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

Caterer Compass dives

Shares in FTSE 100 catering company Compass (CPG.L) slid 5.7% on Tuesday after warning of “deteriorating” conditions in Europe.

Compass said it was starting a cost cutting programme that would cost £300m over the next two years as it steels itself for a declining market in Europe.

“We are not immune to the macro environment,” chief executive Dominic Blakemore said.

“Deteriorating business and consumer confidence in Europe has impacted our Business & Industry volumes, new business activity and margin. Given these trends, we are taking prompt action in Europe and certain Rest of World markets to adjust our cost base.

“As well as offsetting short-term margin pressures, by taking this action from a position of strength, we will be better placed to capitalise on future growth opportunities.”

The cuts were announced alongside full-year results. Compass’ revenue rose 8.8% to £24.8bn but profit fell 5.4% to £1.6bn as the business began cost cutting.

Pets at Home pops

Shares in Pets at Home (PETS.L) surged almost 10% after the retailer told investors to expect full-year profit to come in at the top end of forecasts.

The group reported a 7.8% jump in half-year sales and a 18.9% surge in underlying pre-tax profit to £45m. Pets at Home now expects full-year profit to be at the top of its guided £87m to £93m range.

“We have executed our plans well and this has been reflected in the strong customer sales growth across the group,” chief executive Peter Pritchard said.

“We have much to look forward to in 2019-20 and beyond, and we now expect to return to profit growth a year ahead of our original plan.”

Topps Tiles hit by election

Flooring retailer Topps Tiles (TPT.L) has blamed the snap general election for poor recent sales.

“Trading conditions have become more challenging, with consumer demand weakening further since the General Election was called in late October,” chief executive Matthew Williams said Tuesday.

“Against this backdrop of heightened political and economic uncertainty, like-for-like sales in the first eight weeks have declined.”

Sales fell 7.2% in the first eight weeks of Topps’ new financial year, the company said.

Revenue rose 1.1% to £219.2m in the last financial year, while pre-tax profit shrunk 1.6% to £12.5m.

“Whilst we expect external events will continue to weigh on consumer confidence for the immediate future, we remain confident that our market-leading retail offer and growing commercial operations give us a strong platform from which to deliver sustainable growth over the medium and long term,” Williams said.

Shares fell 3.6%.

De La Rue crashes

De La Rue (DLAR.L) on Tuesday said that half-year profits fell 87% to £2.2m, with the banknote and passport maker announcing a suspension of dividend payments amid an investigation for suspected corruption.

The profit plunge was mainly driven by a near 300% decline in profits in its banknote business, which lost £12.5m in the six months to the end of September.

De La Rue blamed “lower volumes and margin due to adverse product mix” in the “increasingly competitive” market. Overall, revenue fell nearly 15% to £206m in the period.

The company last month warned that profits would come in “significantly lower” than expectations, its fourth profit warning in less than two years.

FCA bans mini-bond adverts

The UK’s top financial watchdog has moved to ban the advertising of high-risk ‘mini-bond’ investments online after a series of collapses that have left investors nursing millions in losses.

The Financial Conduct Authority (FCA) on Tuesday announced it was banning the mass marketing of mini-bonds to ordinary investors. The ban will come into force from January and will remain in place for at least 12 months while the FCA draws up permanent rules for the new sector.

Mini-bonds are high-interest fixed-term debt products — for example, a bond issuing 7% interest over 5 years. Bonds were traditionally only marketed to sophisticated public market investors but the internet, the low interest rate environment, and pension freedoms have led to a boom in these products being marketing to regular individuals.

While these investments often offer an eye-catching rate of return, the companies behind them often run a high risk of going bust and leaving investors with nothing. An estimated £1bn has been lost from mini-bond firms going under so far this year, according to BondReview.co.uk, a blog that follows the space. Many companies also downplay or hide the risks associated with the investment, often by claiming its falsely ISA eligible.

Alibaba’s dream debut

Shares in Chinese e-commerce giant Alibaba (BABA) surged this morning after it started trading for the first time in Hong Kong (9988.HK).

In one of the year's most anticipated stock offerings, the Alibaba stock price rose by 6.65% to close at HK$187.70, up from the HK$176 opening price.

The share rise helped it raise about $11.3bn (£8.8bn) in its secondary listing — making it the year’s largest initial public offering (IPO), overtaking Uber (UBER) for the top spot, according to data firm Dealogic. In May, the ride-hailing firm raised $8.1bn in its New York debut listing.

Markets trade sideways

European markets were trading sideways on Tuesday.

The FTSE 100 (^FTSE) was flat, Germany’s DAX (^GDAXI) was down 0.3%, France’s CAC 40 (^FCHI) was down 0.1%, and the Euronext 100 (^N100) was down 0.1%.

Connor Campbell, a financial analyst at spread betting firm SpreadEx, said the lack of momentum “reflects a lack of trade deal updates this Tuesday.”

“Though there was a call between key players Liu He, Robert Lighthizer and Steven Mnuchin, the post-discussion statement claiming that ‘both sides discussed resolving core issues of common concern’, had ‘reached consensus on how to resolve related problems’ and agreed to ‘stay in contact’ over their remaining differences was a tad too vague to spark significant growth,” he said.

Overnight in Asia, Japan’s Nikkei (^N225) closed up 0.3%, the Hong Kong Hang Seng Index (^HSI) was down by 0.2%, and China’s Shanghai Composite (000001.SS) was flat.

What to expect in the US

US stocks futures point to a quiet open. S&P500 futures (ES=F), Dow Jones futures (YM=F), and Nasdaq futures (NQ=F) were all flat.

49 companies are reporting in the US later today, including: