BUSINESS LIVE: M&S profits soar 75%; Reach to cut 450 jobs; ITV suffers weaker studios demand

A major bank has issued an urgent warning over online purchase scams ahead of the busy festive season.

TSB said it had seen a 35 per cent spike in online purchase fraud, which now accounts for over half of all scam cases.

JD Wetherspoon’s boss has hailed a sustained ‘gradual improvement’ in revenues, following strong food and drinks demand since late July, and easing cost pressures.

The pub chain, which operates 816 outlets across the UK, reported like-for-like sales growth of 9.5 per cent in the 14 weeks ending 5 November.

Britain could face a decade in the economic ‘doldrums’ if Jeremy Hunt gives in to Tory pressure for tax cuts instead of investing in public services, experts warned today.

The National Institute of Economic and Social Research (NIESR) said it believes interest rates have peaked and that wages will rise by just over 7 per cent in 2023 and 2024.

House prices will fall 6.5 per cent between now and the second quarter of 2025, with 50,000 more households falling into negative equity, a new report warns.

Think tank the National Institute of Economic and Social Research (NIESR) forecasts that UK economic growth is on track to remain ‘anaemic’, and prolonged higher interest rates will further dampen consumer and business demand

Car insurance premiums have risen 29 per cent in a year to a record average high of £561, heaping more pressure on struggling households.

Insurers say the rising cost of replacement parts and labour were behind the surge in annual insurance costs in the third quarter of 2023.

Angry shoppers are turning their backs on major retailers that use parcel company Evri to deliver their online orders, according to This is Money’s sister title Money Mail.

Water company bosses pocketed a record £10million in salaries last year despite mounting outrage over sewage pollution.

Financial records show that the sums paid to chief executives on the water industry ‘gravy train’ soared by £876,000 in 2022/2023 compared to 2021/2022.

ITV has warned its advertising income could decline by about 8 per cent this year amid tough 2022 comparatives and continued weakness in the linear ad market.

The broadcaster’s advertising sales fell by 7 per cent to £1.23billion in the first nine months of 2023 as more Britons switched from watching television to using streaming platforms.

WeWork’s collapse has marked a stunning downfall for what was once the world’s most valuable start-up.

The office-sharing company – which rode the venture capital boom and was valued at nearly £40billion at its peak – filed for a Chapter 11 bankruptcy in the early hours of yesterday after days of speculation over its future.

Victoria Scholar, head of investment at Interactive Investor:

‘JD Wetherspoon reported first quarter like-for-like sales in the 14 weeks to 5th November up 9.5%. Chairman Tim Martin said ‘inflationary pressures have eased’, but said energy costs are still far higher than before the pandemic.

‘Shares in Wetherspoons are trading higher today, extending its year-to-date gain to over 50%. However the stock has pulled back from the May highs. Demand at Wetherspoons has remained pretty resilient even in the face of a weaker consumer and cost of living pressures thanks to its low price point on food and drinks.

‘However, some consumers have been substituting their pub visits for spending on cheaper food and drinks in supermarkets to consume at home instead. Martin has long been vocal about the ‘tax inequality’ that he believes punishes the hospitality sector and favours supermarkets.

‘The hospitality industry has had a tough time lately, grappling with cost inflation, sluggish demand, strikes, the shift towards working from home, and labour shortages, an issue that’s likely to flare up again over Christmas as companies look to attract seasonal temp workers.’

An estimated 450 full-time jobs are being axed at Daily Mirror publisher Reach as the group looks to slash costs further.

The group, which also owns the Express newspapers and the Daily Star, said the job cuts come amid plans to reduce operating costs by between 5 and 6 per cent in 2024.

Mark Crouch, analyst at eToro:

‘After multiple false dawns over the years, Marks & Spencer’s turnaround looks like the real deal this time. This is a very strong update from the retailer, carrying on the momentum from its August trading update.

‘Unsurprisingly, M&S’s food section drove profits and revenue growth over the past three months, although the firm’s clothing and home, and international divisions also registered growth. The only disappointment – and a continuing one, at that – is the company’s joint venture with Ocado, which continues to be lossmaking.

‘While finances are still tight for many households, M&S’s focus on value and price reductions has shored up sales, which makes us confident that it can maintain its strong performance going into the all-important Christmas trading season.’

Borrowing costs fell sharply yesterday after a leading Bank of England official suggested interest rates could be cut in the middle of next year.

Amid signs of life in the housing market, the yield on two-year gilts dropped more than 0.1 percentage points to a five-month low of 4.6 per cent while the ten-year yield was down a similar amount to 4.22 per cent.

Fiona Orford-Williams, director of TMT at Edison Group:

‘ITV’s Q3 numbers this morning show a continuation of tough linear advertising conditions, as expected, but a slightly stronger showing from the Studios division and good progress at ITVX.

‘The sluggish overall backdrop, with Q4 advertising revenues set to be judged against tough comparatives which include last year’s FIFA World Cup, has prompted some shift in content spend into 2024. Q423 from Studios was set to be on the light side anyway, with delivery weighted earlier in the year, but it should still be able to reach the lower end of the target EBITA range of 13-15%.

’There is also softness in overall global content demand to contend with, from lower advertising revenues across the industry as well as the repercussions from the US writers’ and actors’ strikes. Over the medium-term, guidance for 5% organic revenue growth to 2026 for Studios remains in place. The group’s digital revenue target of £750m by 2026 also remains unchanged. The phasing across the earlier part of that timeframe is what remains in question.

‘The inclusion of the Media Bill in yesterday’s King’s Speech is important for ensuring prominence of the public service broadcasters’ offering on digital streaming platforms. ITV and STV will be keen to see this put into action as soon as possible.’

J D Wetherspoon sales improved in the first quarter of its financial year, helped by easing costs and steady demand for its lower-than-average priced drinks and food despite the cost-of-living crisis.

The group, which owns and operates 816 pubs across the UK and Ireland, said it would spend about £70million this year to improve its pubs.

Chairman Tim Martin said:

‘Sales in the first 14 weeks of the financial year have continued the pattern of gradual improvement which has followed the ending of lockdowns and restrictions. Inflationary pressures have eased, but energy costs, in particular, remain at far higher levels than pre-pandemic, putting pressure on suppliers and the wider economy.

‘The company is increasing investment in existing pubs in the current financial year to approximately £70 million (FY23: £46.9 million). Areas of investment include new staff rooms, changing rooms, glass racks above bars (to cater for increased usage of brewers’ “branded” glasses) and air conditioning.

‘The company currently expects an outcome for the financial year in line with market expectations, and will provide further updates as the year progresses.’

PwC will cut around 600 jobs in the UK as staff have been reluctant to leave on their own, according to a report.

The accounting giant confirmed that it planned to make ‘voluntary severance offers’ to some of its staff as attrition numbers were lower than usual.

PwC did not mention any job numbers, but the Financial Times reported that it is targeting around 500-600 cuts.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Good progress in Clothing and Home, where Marks & Spencer has struggled in recent years, has to be commended. It shows the extent to which the company has regained its style credentials and it is particularly admirable given the pressure on sales of discretionary items amid the cost-of-living crisis.

‘The M&S brand focuses on quality and value, and has succeeded in drawing shoppers in. But exiting the first half, unusually warm weather across September and October has naturally left investors apprehensive about the sales of winter clothing. They’ve weakened from their first-quarter highs but there’s still plenty of time for sales to recover, especially as the weather’s begun to turn heading into the festive Christmas frenzy.

M&S food was the standout performer in the first half, with demand here arguably more protected from high levels of inflation. At a more premium end of the market, M&S’ core customers aren’t as sensitive to price. Coupled with impressive margin growth, total underlying operating profits jumped significantly.

‘There’s also been good headway on the group’s reshape programme, which looks to pivot to new locations and refresh existing stores to create a more productive estate. Full-year guidance has been maintained, albeit performance is expected to be weighted towards the first half, with the group likely wanting to get through the Christmas period any potential move of the dial on expectations.

‘But the real talking point was the reintroduction of dividend payments, which should put a spring in investors’ steps. The yield is relatively low, but it marks a moment of significance for the group, and it’s a real statement of confidence around the outlook for the business from M&S’ management.

‘The group plans to hold a capital markets day this afternoon where investors will be hoping to hear more detail on its £400m cost-cutting programme, as well as updates on the levers being pulled to fuel further growth in market share and margins.’

Weaker demand from free-to-air broadcasters for ITV content will impact its studios business in the fourth quarter, the media group has warned.

ITV told shareholders it expects to see growth of around 3 per cent for the unit in 2023, down from its previous mid-single digit forecast.

ITV has been growing its studios business and ITVX streaming service to help smooth volatility in advertising demand.

It said the strategy delivered total revenue growth of 1 per cent for the first nine months to £2.98billion, despite a total ad revenue fall of 7 per cent over the period.

Owner of the Mirror newspaper Reach is set to slash 450 full-time jobs as part of a cost-cutting drive.

Reach said it expected to replicate its 2023 plan to achieve a 5 to 6 per cent reduction in annual operating costs, which ‘is on track to be delivered’, in the next financial year.

It told shareholders the move would ‘strengthen its position as a leading digital publisher and mitigate against the backdrop of continuing inflationary pressures’, while driving ‘better customer value’.

Jim Mullen, chief executive of Reach, said:

‘Our industry has a history of change and the future will undoubtedly involve yet more. That’s why it’s essential we set ourselves up to win, by making our operations suited to an increasingly fast-paced, competitive and customer-focused digital world.”

‘Hard work over the last few years means we have established ourselves as a leading digital publisher. But there’s more to do and today is about organising our business to deliver against that challenge.’

Marks & Spencer smashed profit forecasts in the first half with earnings before tax and nasties coming in more than 75 per cent higher at £360.2million, but the retail giant urged cation ahead amid the impact of high borrowing costs and a volatile geopolitical environment.

Analysts has expected the group to post a profit of £276million for the quarter, up from £205.5million made in the same period last year.

The 139-year old clothing and food group said its trading momentum had been maintained through October and it was planning for a good Christmas, with customers already responding positively to its ranges.

But it cautioned the economic outlook remained uncertain and flagged the impact on the consumer from the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather.