BUSINESS LIVE: Lloyds profits slump; Heathrow slams ‘anti-growth’ policies; PZ Cussons to sell St. Tropez

UK business has enjoyed its strongest growth for nearly a year – outpacing global rivals – in the latest sign that the recession has been left behind.

A closely watched survey compiled by data provider S&P Global showed private sector activity gathering pace this month with the healthiest expansion since last May.

A major car dealership is shuttering 16 branches across the UK whilst hundreds of jobs are set to be axed.

CarStore, which was bought from Pendragon by US firm Lithia in recent months, announced 250 of its employees will be given the boot.

PZ Cussons plans to sell its St Tropez self-tanning brand and review its operations in Africa, as the soap maker continues to struggle with foreign exchange headwinds and high debts.

St Tropez, purchased by PZ Cussons for £62.5million in 2010, is popular with celebrities, including reality television star Kim Kardashian and American model Ashley Graham, and is sold across 28 countries, according to the brand’s website.

London Heathrow anticipates its busiest ever summer this year, despite the looming threat of industrial action at Europe’s biggest airport.

The airport rebounded to profit in the first quarter of 2024 after a record 18.5 million travellers came through the airport.

Less than 3 per cent of fixed-rate energy deals work out cheaper than the Ofgem price cap – and many come with high exit fees for those wanting to switch.

Charity group Warm this Winter said that 292 fixed-rate tariffs (76 per cent) out of 383 cost at least £1,690 a year – the current level of the average Ofgem price-capped bill.

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Head of investment at Interactive Investor Victoria Scholar:

‘The FTSE 100 continues to stage gains after hitting fresh record highs on Tuesday thanks to supportive corporate updates and a weaker pound.

‘First quarter trading updates continue to take centre stage today with Reckitt Benckiser leading the charge on the UK blue chip index thanks to stronger than expected quarterly sales from the consumer goods giant.

Miners are also outperforming with Rio Tinto, Antofagasta, Anglo American and Glencore trading near the top of the FTSE 100.

‘At the other end, Lloyds is hovering near the bottom of the index after the British lender reported a drop in profits. And Burberry is sinking, dragged down by Kering which has plunged by almost 10% after warning on profit again.’

Lloyds Banking Group’s sank by 28 per cent in the first three months of 2024, new results show.

Lower net interest income as a result of peaking interest rates and higher operating costs put pressure on the group’s bottom line, limiting the bank to a statutory pre-tax profit of £1.63billion, in-line with estimates.

The group also flagged ‘elevated severance charges’ of £100million that contributed to an 11 per cent increase in operating costs.

The FTSE 100 continues its record run in early trading, as a strong earnings update from Reckitt Benckiser and gains in commodity stocks offset lacklustre a performance from Lloyds Banking Group after it reported a slide in quarterly profit.

The blue-chip index is on track for its sixth consecutive session of gains, what would be its first such winning streak since August 2023.

Reckitt Benckiser has jumped 4 per cent after its quarterly like-for-like sales growth beat estimates and the consumer goods group said it was on track to meet full-year revenue and profit targets.

Shares of mining giants such as Rio Tinto, Antofagasta and Glencore rose between 1.4 and 3.9 per cent as prices of most metals climbed on the back of a weaker US dollar.

Lloyds Banking Group is down 2.9 per cent after the country’s largest mortgage lender reported a 28 per cent slump in quarterly pretax profit as rising costs, peaking interest rates and intensifying competition in the mortgage market hurt income.

High Street cheer helped propel the FTSE 100 to an all-time high yesterday amid fresh signs the economy is bouncing back.

On another record-breaking day on the stock market in London, the FTSE 100 rose to a peak of 8076.52 in early trading, its highest ever level.

Matt Britzman, equity analyst, Hargreaves Lansdown:

‘Lloyds is doing exactly what it needs to do. Don’t focus on the year-over-year numbers too much. Yes, the drops look substantial from this time last year but that’s been expected for some time, the environment is simply not as favourable as it once was.

‘That said, Lloyds is showing why the UK banking sector is an attractive place to be right now. Consumers remain resilient to cost pressures and default trends look stable, at or below pre-pandemic levels. At the same time, the economic outlook is improving, and impairment charges came in lower than analysts had expected.

‘There are still pressure points, from customers switching to higher-rate accounts to a mortgage market that’s not as profitable for banks as it was a few years ago. But both those trends are easing. Don’t expect to see loan growth shoot the lights out and it was perhaps one area of weakness from these results, along with higher costs.

‘But it doesn’t have to deliver too much growth here right away. Continued performance like this paves the way for the structural hedge to do its job. Lloyds is expecting hedge earnings to generate an extra £700mn in 2024.

‘Investors will be pleased to see no further impairments taken in preparation for the outcome of the FCA’s review into motor financing. This is the key unknown that could keep the brakes on Lloyds’s upside in the short term.’

Zoe Gillespie, investment manager at RBC Brewin Dolphin:

‘Lloyds’ numbers have begun to slow, which was to be expected as interest rates appear to have peaked and competition in the mortgage market heats up.

‘While the bank’s profits and net interest margin may have been squeezed, they are still at strong levels.

‘More generally, Lloyds appears to be in relatively rude health and in a good position to manage the potential fall of interest rates later in the year.

‘With such steady performance, Lloyds’ focus may soon turn to more strategic questions around its future direction, adding to the £6 billion sale of Scottish Widows’ in-force bulk annuity portfolio announced earlier this year.’

The chairman of Natwest has declared it is ready to bring an end to the ‘sorry tale’ of government involvement as a public sale of shares in the lender draws closer.

Rick Haythornthwaite, who took over in January, told the bank’s annual general meeting in Edinburgh: ‘A return to private ownership is now in sight.’

And he said he was confident that Paul Thwaite – the bank’s fourth chief executive since it was rescued from collapse in 2008 – would be the last to answer to Treasury shareholders.

Soap maker PZ Cussons will divest several of its assets across the globe, including its popular self-tanning brand St. Tropez, to reduce its debt levels.

The Imperial Leather and Original Source maker has been hammered over the last year by wild currency swings, with the firm’s heavy exposure to Nigeria’s Naira proving to be particularly challenging.

PZ Cussons said: ‘St. Tropez has grown significantly since acquisition, establishing a leading position in its key premium self-tanning market of the US.

‘Given the strength of the brand’s equity, there remains significant long-term growth potential in the US and in both new geographies and category adjacencies.

‘This growth will however be harder to realise under PZ Cussons’ ownership, given the need to allocate resources across our diverse geographic and category footprint.

‘We therefore plan to realise shareholder value by initiating a process to sell the brand to an owner better placed to capture the brand’s significant long-term potential.’

Heathrow execs have lashed out against ‘anti-growth policies’ like the so-called tourist tax, which they say are holding back the airport and travel industry.

The criticism came despite a record 8.5million passengers travelling through Heathrow in the first three months of the year.

The airport said: ‘Ministers should rethink anti-growth policies like the “tourist tax” that discourage international visitors from spending in the UK; and unnecessary travel visas for transiting passengers that risk the UK’s global connectivity and Heathrow’s hub status.

‘A supportive policy environment for aviation would deliver a much-needed economic boost by encouraging people to visit, spend and do business here in the UK.’

Ithaca Energy is to join forces with the UK arm of an Italian oil major in a deal worth more than £750million.

The FTSE 250 North Sea producer has agreed to buy most of the upstream oil and gas assets owned by Eni UK for around £754million.

Lloyds Banking Group profits sank 28 per cent in the first quarter after peaking interest rates and rising competition in the mortgage market squeezed margins.

The British bank has posted a first quarter pre-tax profit of £1.6billion, down from £2.3billion a year ago and in line with estimates.

Group chief executive Charlie Nunn said: ‘The Group is continuing to deliver in line with expectations in the first quarter of 2024, with solid net income, cost discipline and strong asset quality. Our performance provides us with further confidence around our strategic ambitions and 2024 and 2026 guidance.

‘Guided by our purpose, we are continuing to support customers and successfully execute against our strategic outcomes, as highlighted in the third of our strategic seminars last month. This underpins our ambition of higher, more sustainable returns that will deliver for all of our stakeholders as we continue to Help Britain Prosper.