BUSINESS LIVE: Wage growth slows; Persimmon profits slump; CMA flags vet sector concerns

(PA) – Aldi is to hand store workers their second pay rise this year.

The supermarket group said it will increase pay for its store assistants and deputy store managers from £12 an hour to £12.40 from June.

The announcement comes only weeks after it had lifted pay to £12 at the start of February.

Aldi claimed the move will make it the “UK’s best-paying supermarket” for shopfloor positions.

The German supermarket’s UK business, which has more than 1,000 shops, said it will also increase the base pay of store workers within the M25 from £13.55 to £13.65.

Aldi said the increases will take its investment in pay to around £79million this year.

The move comes after increases by rivals including Tesco, Asda and Marks & Spencer in recent weeks, ahead of the rise in the national minimum wage in April.

Giles Hurley, chief executive of Aldi UK and Ireland, said: “We firmly believe that our colleagues are the best in the business, so it is only right that they remain the best paid and we are committed to never being beaten on pay by any other supermarket.”

FirstGroup expects annual earnings to be ‘slightly ahead’ of previous forecasts, following a strong performance by its rail business.

The Avanti West Coast owner told investors that open access operations within its rail division were benefitting from healthy demand, ‘effective yield management,’ and the resolution of one-off infrastructure claims.

‘Shocking depreciation’ of electric cars last year has made half of motor dealers wary of buying them to stock their forecourts, according to a new report.

Owners of electric vehicles (EVs) are being warned to ‘expect little enthusiasm’ when trying to sell their battery-powered cars to dealerships, a poll of second-hand motor traders by HonkHonk suggests.

News of a British Isa has resulted in keen interest from This is Money readers since its announcement in last week’s Budget.

It will offer the chance to invest £5,000 a year tax free in UK assets, on top of the existing allowance to put £20,000 in cash or shares in each tax year.

British pet owners might be overpaying for medicines and prescriptions, Britain’s competition watchdog has said, as it considers launching a formal probe into the veterinary sector.

A Competition and Markets Authority (CMA) review launched in September over concerns that pet owners are being short changed found weak market competition, partly because of sector consolidation.

Almost a third of Britain’s 5,000 vet practices have been bought by six firms since 2013 – CVS Group, IVC, Linnaeus, Medivet, Pets at Home and VetPartners – according to the CMA.

CMA boss Sarah Cardell said: ‘Given these strong indications of potential concern, it is time to put our work on a formal footing.’

Jeremy Hunt announced two measures in the Budget last week aimed at making more homes available for first-time buyers and renters, by changing the rules for those that already own more than one home.

Russ Mould, investment director at AJ Bell, comments on the CMA investigation into the vet sector:

Pet owners are happy to splash the cash on their beloved furry friends, yet the competition watchdog is worried that they’re paying far too much for medicines or prescriptions.

These concerns have got so serious that the CMA is now launching a formal investigation. The implication is that veterinarians have been exploiting their customer base either through overcharging or not giving enough information so customers can choose from a range of treatments priced at different levels.

The watchdog also implies that some vet practices are too dominant in parts of the country and that is hurting competition.

The biggest vet group on the UK stock market is CVS and understandably its share price has crashed on the news that the watchdog is stepping up its probe. Pets at Home is also exposed, though its vet practices are only one part of a broader group which includes selling pet food and accessories.

Superdry is seeking an additional £20million of liquidity from a key lender, as the fashion brand struggles to implement a turnaround plan amid weak demand.

The group told shareholders on Tuesday it was in talks with turnaround specialist Hilco over an increase to its lending facilities of ‘approximately’ £10million for ‘necessary additional liquidity headroom to help facilitate the implementation of its ongoing turnaround plan and cost reduction programme’.

Superdry is also seeking an additional £10million to ‘assist with seasonal working capital peaks’ and a six-month extension to the maturity date of its existing facilities with Hilco through to February next year.

Persimmon’s profits more than halved last year after the housebuilder completed far fewer new homes and was hit by increasing costs.

The FTSE 100 company reported pre-tax profits of £351.8million in 2023, plunging from £730.7million the prior year, as Britain’s property sector continued to be heavily impacted by higher interest rates and widespread economic uncertainty.

And the housebuilder expects the market to ‘remain subdued’ and ‘challenging’ in 2024, with looming interest rate cuts insufficient to significantly boost demand.

Banks were rocked by the Payment Protection Insurance (PPI) scandal during the early 2000s – and it seems another crisis is on the horizon.

The Financial Conduct Authority (FCA) started an investigation in January into the potential misselling of car loans between 2007 and 2021.

The City watchdog has softened its stance on cryptocurrencies such as bitcoin by opening up the London Stock Exchange to trading in crypto-linked products.

The Financial Conduct Authority (FCA) said yesterday it would ‘not object to requests’ to create platforms for trading in crypto-backed Exchange Traded Notes (ETNs).

The FTSE 100 has opened strongly this mornign with slowing wage growth boosting hopes of the Bank of England beginning monetary policy easing this year.

Money markets are now pricing in around 74 basis points of rate cut from the BoE, up from around 67 bps a day earlier.

Most of the major sectors traded in the green, although homebuilders are down 0.7 per cent with Persimmon dropping 3.3 per cent, after the homebuilder warned of subdued market conditions throughout this year.

The FTSE 250 is led by a 11.2 per cent surge in TP ICAP, after the broker said it was exploring options for its high-margin data unit Parameta, including the potential listing of a minority stake in the business while retaining ownership.

Markets will now shift focus to the US consumer prices due later in the day for further clues on the Federal Reserve’s interest rate outlook.

Nationwide’s members should be given the chance to vote on its planned takeover of Virgin Money, a Conservative peer has said.

Baroness Altmann, a former pensions minister, said it ‘would be wise’ of the building society to consult its more than 14m members over the £3billion deal which shocked the City when it was announced last week.

Imperial Brands has kicked off the second phase of its £1.1billion buyback as it tries to sweeten investors.

The tobacco giant behind Lambert & Butler cigarettes said it will repurchase up to £550million of shares by the end of October, on top of the £550million it has already completed.

The Bristol-based firm first announced the buyback last October following growing demand for vapes.

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

“Although the near-term outlook for Persimmon remains uncertain, the significant pent-up demand for homes remains unchanged. Persimmon’s average weekly sales rates fell around 16% in 2023, as high interest rates and the removal of the Help-to-Buy scheme have weighed on buyer affordability. As a result, total completions of new homes dropped by around a third to 9,922.

‘These lower volumes, coupled with high levels of build-cost inflation, saw operating profit margins roughly halve. This impact would have been worse if it weren’t for the group’s in-house materials business, which is a key differentiator to peers and offers some relief to inflating costs. Despite the difficult trading backdrop, there was a strong finish to 2023, with fourth-quarter sales rates showing signs of improvement.

Heading into 2024, there have been more positive signs. Easing mortgage rates, lower build-cost inflation, real wage growth and some strong responses to marketing efforts mean that Persimmon’s starting the new year out on the right foot.

‘The group’s extensive landbank, which is one of the largest compared to peers, is another key strength. That means there’s less pressure to go out and buy new plots, at a time when land prices are yet to fully reflect the uncertain housing market. While it may be a while before this happens, whenever the market does turn, Persimmon has the land to hike volumes quickly and benefit from the uplift.’

Domino’s Pizza Group has upped profit forecasts for 2024 after easing raw material profits helped earnings tick higher last year.

The London-listed company, a franchisee of US-based Domino’s Pizza Inc, is targeting £2billion in system sales by 2028, as it increases its stores to 1,600 by 2028 and £2.5billion of sales by 2033 from 2,000 stores.

The group, which has about 1,319 stores in the UK and Ireland, posted system sales of £1.5billion for the full year to 31 December

The company had earlier raised prices to keep up with the high costs of raw materials, but as costs have started to ease the company has had to grapple with lower deliveries, as customers turn more cautious on their spending amid a cost of living crisis.

It posted a 3.6 per cent rise in its underlying core profit to £138.1million.

Thomas Pugh, economist at RSM UK:

‘With the unemployment rate still low at 3.9% and pay growth sitting at 5.6%, most Monetary Policy Committee (MPC) members won’t see a reason to rush towards cutting interest rates at its meeting next week.

‘That said, wage growth is slowing much more quickly than the headline figure suggests and inflation will soon be back below 2%. That will set the stage for a first rate cut in the summer and for interest rates to end the year at 4.5%.

‘Admittedly, there are still concerns about the quality of the employment data. Indeed, the ONS has not yet re-endorsed the new data as official statistics and warns users to take care when using them. But there is plenty of evidence that the labour market is easing. The number of people in employment dropped by 21,000 on the quarter to January and the number of payrolled employees rose by just 20,000 in February.

‘More important for the inflation outlook are the pay figures. Private sector wage growth excluding bonuses, the measure most reflective of underlying pay pressures, slowed from 6.2% to 6.1%. And the 3m/3m annualised measure, which is a better indicator of current pay pressures, was a little over 3%, about half the headline rate.

‘Just as importantly for households, real wages grew by 1.4%. That, combined with tax cuts coming in April and rising consumer confidence should give a boost to consumer spending in the second half of this year, helping a consumer spending driven economic recovery. Indeed, we expect the economy to materially improve from the summer onwards.

‘Overall, even though pay growth is still double the 3% – 3.5% that the MPC thinks is consistent with 2% inflation, there are clear signs that monetary policy will soon need to become more accommodative.

‘Pay growth is slowing and inflation is falling more quickly than expected so it probably won’t be long before rate cuts are on the table even if the unemployment rate remains stubbornly low.’

Artificial Intelligence tools are not saving workers any time and have become as unpopular as the commute to the office, a survey has suggested.

A poll found that for 52 per cent of employees who use the technology, it either does not save them time or adds more time to their work.

The findings contradict hopes that AI will deliver a big boost to productivity that can help lift the economy out of stagnation.

Britain’s competition watchdog has ‘provisionally’ decided to launch a formal market investigation into the veterinary sector after an initial review raised multiple concerns.

The Competition and Markets Authority’s concerns include weak competition, lack of information for consumers to choose the best veterinary practice and pet owners potentially overpaying for medicines.

Persimmon expects market conditions to remain subdued throughout this year, with the near-term outlook ‘uncertain’, after the housebuilder reported a profit slump of around 52 per cent.

The FTSE 250 firm’s pre-tax profit came in at £351.8million for the 12 months to 31 December, below market expectations of £359.5million.

Group CEO Dean Finch said:

‘The Group successfully navigated the challenging market conditions in 2023. Completions were ahead of expectations, margins were industry-leading, we maintained our strong balance sheet and we continued to deliver further improvements in our product quality and service.

‘Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged. Customers want quality homes in the places where they want to live and work, and affordability is crucial.

‘During the year we have continued to take further steps to strengthen the business and we are well placed to meet this demand through our three excellent brands offering different price ranges with overall private average selling prices that are below the market average.

‘The investments and operational changes that we have made in the past few years mean that we are trusted by our customers to deliver consistently high-quality homes.’

Japan could be on the verge of raising interest rates out of negative territory after revised figures showed the country narrowly avoided recession.

The economy grew by 0.1 per cent in the fourth quarter, compared with an initial reading of a fall of 0.1 per cent.

That could give the Bank of Japan leeway to raise interest rates for the first time since 2007 when it holds its policy meeting next week.

UK wages before bonuses slowed to a slightly weaker than expected 6.1 per cent in the three months to 31 January as, the unemployment rate rose more than forecast to 3.9 per cent, fresh data from the Office for National Statistics shows.