Capita, TUI, Ladbrokes: Business News in brief, Friday 9 December

Capita to cut 2,000 jobs after Brexit slowdown, Travel group forecasts 10% growth; Bookies' shares slump after MPs urge clampdown on betting machines

TUI travel has been hit by customers' terrorism fears (Reuters)

Capita to cut 2,000 jobs after Brexit slowdown

Outsourcing company Capita plans to sell a division that serves financial firms and cut more than 2,000 jobs as a Brexit-fuelled slowdown weighs on orders.

The planned disposal comes amid growing uncertainty among UK-based financial-services companies about the terms of the UK’s departure from the European Union. That has made clients reluctant to sign new deals, compounding problems stemming from internal missteps, Capita said.

“We’ve not performed as well as we’d have liked in recent months,” chief executive Andy Parker said. “This is partly because of challenging market conditions, as we’ve seen clients cut back on what we’d describe as discretionary elements, but also because of some structural issues we’ve seen inside our business.”

Last month, the company, which operates London’s traffic congestion charging system, announced it would reorganise 11 divisions to six. That will drop to five with the planned sale of the asset-services division, which works with fund companies and other financial clients. The changes are aimed at reducing debt and simplifying operations, the company said.

Other cost-cutting measures include the moving of some IT operations to India and the introduction of more automation over the next two years. That will reduce Capita’s headcount, which was around 69,000 as of December last year, by roughly 3 per cent, Parker said. The job cuts do not include asset sales, a spokesman confirmed.

Bloomberg

TUI Group forecasts profit growth of 10% a year until 2019

The travel firm says winter bookings were up by 5 per cent (Reuters)

TUI Group, Europe’s largest travel company, announced an extended profit forecast on Thursday in a show of confidence after posting 12.5 per cent annual core earnings growth despite disruption as holidaymakers avoided destinations such as Turkey.

TUI said it was extending its guidance for profit to rise by at least 10 per cent a year to its 2018/19 financial year from the 2017/18 period, citing its strong outlook, and future investment in hotels and cruises.

“The transformation of the business from a trading company into a integrated company with hotels and cruises at the core of the business will deliver the results,” chief executive Fritz Joussen told reporters.

Barclays analysts called TUI’s profit guidance “robust in a challenging environment”.

Looking to its new financial year, TUI said winter bookings were up 5 per cent, while for the summer season, when it makes the bulk of its profit, bookings from the UK market were up 9 per cent, driven by demand for holidays to long-haul destinations in the Caribbean, Mexico and United States.

That growing appetite for holidays further afield helped TUI post core earnings growth of 12.5 per cent in its 2015/2016 financial year, despite a difficult geopolitical backdrop.

Reuters

UK housing and jobs market stays resilient despite Brexit vote

House prices hit a seven-month high in November and companies hired more workers, surveys showed on Thursday, suggesting the economy is resilient five months after the Brexit vote.

The Royal Institution of Chartered Surveyors (Rics) said its measure of house price growth hit +30, up from +23 in October and higher than a forecast of +26 in a Reuters poll of economists.

However, the number of prospective buyers remains low and a recovery in the market is likely to be modest given the uncertain outlook for Britain’s economy, Simon Rubinsohn, Rics chief economist, said.

“This is significant not just for the housing market itself but also for the wider economy given how much of consumer spending is tied in with home purchases,” he said.

Prices rose in most regions but fell in London albeit at a slower pace than in recent months. Expectations for price increases in the capital over the coming year remained low as higher taxes on buy-to-let investors and on expensive properties continued to weigh.

Britain’s economy has fared better than many economists expected in the months after the Brexit vote in June. But it is likely to be put to a stiffer test in 2017 when inflation is expected to rise and hit the spending power of consumers.

A separate report released on Thursday by the Recruitment and Employment Confederation showed firms hired permanent staff in November at the fastest pace since February. Hiring of temporary staff also increased.

Reuters

PM finds US ally in Brexit tussle over London clearing

The PM has been struggling to find allies in recent months (Getty)

Theresa May has found an ally in the US as Britain and the European Union battle over London’s clearing industry.

London is the dominant centre for clearing euro derivatives – a key financial service that the EU has long sought to relocate to a euro-zone country like France or Germany. Clearinghouses emerged again as a flash point after Britons voted to leave the bloc. But a US official this week cautioned against forcing clearing to relocate.

“It is a mistake to restrict where clearing can occur,” Timothy Massad, chairman of the Commodity Futures Trading Commission, said in a speech on Tuesday. “Markets benefit from large pools of liquidity. Market participants benefit from managing as many of their transactions together as possible,” he said.

Clearinghouses stand between traders and collect collateral to prevent a default from spiralling out of control. Regulations since the 2008 financial crisis have heightened the importance of central clearing, making those operations a focal point in the financial system.

Because a swap in one currency may offset the risk of a swap in another, keeping them together in one clearing pool is seen as more efficient, saving bank and asset-manager clients money on collateral.

Bloomberg

Bookies’ shares slide as MPs urge clampdown on betting machines

The Government is proposing limits on maximum stakes

Shares in bookmakers slumped on Thursday as MPs proposed a drastic clampdown on fixed-odds betting terminals.

William Hill and Ladbrokes Coral were down 7.2 per cent and 6.8 per cent, respectively after an all-party parliamentary group published its interim findings. A final report will be published in January.

The maximum stake should be reduced from £100 to only £2, they said, and the Government should also consider slowing the speed of spin on the machines to reduce the amount wagered in a session.

A fixed odds betting terminal is a touch screen machine found in betting shops that allows players to bet on the outcome of various games such as roulette with fixed odds.

Introduced 15 years ago, the machines have become a lucrative business for high street betting shops and helped them to survive despite the growth of online gambling.

Charities have warned that the machines are highly addictive and they can result in gamblers losing hundreds of pounds in less than a minute. Some opponents also argue that the machines can be used to launder money from criminal activities.

“The Government has a duty to protect the most vulnerable in our society and to act in the public interest,” said Carolyn Harris, a Labour MP who is chair of the group.

Reuters

Ocado hails double-digit sales growth despite order sizes hit

The delivery service’s sales jumped 13.1 per cent

Online grocer Ocado has delivered double-digit sales growth, but saw order sizes take a hit from the enduring supermarket price war.

Retail sales jumped 13.1 per cent to £398.1m in the 16 weeks to 27 November, up from £351.8m over the same period last year.

Average order sizes fell 2.9 per cent to £105.61m in the fourth quarter, as it felt the force of “continued industry-wide price deflation” and customers buying fewer goods more often after joining its Smart Pass membership service.

Chief executive Tim Steiner said the firm had taken steps to support its expansion by opening a new distribution centre in Andover, Hampshire.

PA

Airlines project ‘soft landing’ in 2017 after record profits

The world’s leading association of airlines is lowering its projection for record net profits this year, while predicting a 16 per cent drop next year due to rising oil prices.

The International Air Transport Association (IATA) forecasts an industry-wide profit of $35.6bn (£28.2bn) this year, down from its previous projections for $39.4bn due to slower economic growth and rising costs. Profit is expected to be $29.8bn in 2017.

IATA CEO Alexandre de Juniac said Thursday that such profits next year would round out the industry’s best three-year performance: “That’s a very soft landing and safely in profitable territory.”

Mr de Juniac cited continued economic, political and security risks, but said the industry’s more resilient after years of restructuring. He cautioned profits are not evenly distributed, with the best performance centred on North America.

AP

Michael Jordan wins China court ruling after years-long case

China's highest court on Thursday ruled in favour of basketball legend Michael Jordan at the culmination of a years-long case over use of the Chinese rendering of his globally-known name and trademark.

The former NBA star has been in a dispute with a sportswear company based in southern China called Qiaodan Sports since 2012. He had previously argued unsuccessfully in Beijing courts that they had used his Chinese name “Qiaodan” by which he has been known since he gained widespread popularity in the mid-1980s, his old jersey number 23 and basketball player logo to make it look like he was associated with their brand.

The Supreme People’s Court on Thursday announced that it was overturning two rulings by Beijing courts against Jordan from 2014 and 2015 that had found there wasn’t sufficient evidence to support the athlete’s allegations over the use of his image. It also ordered the trademark bureau to issue a new ruling on the use of the Chinese characters in the brand name “Qiaodan”.

AP