BUSINESS LIVE: GDP returns to growth; Metro Bank losses narrow; The Gym Group plots more site launches

Porsche expects weaker returns this year as it pushes ahead with electric models.

The luxury sports car maker, which is majority owned by Volkswagen, warned that profitability will be hit this year, with margins set to drop as low as 15 per cent.

The profits and share prices of the country’s major insurance companies are booming as they impose ever-higher premiums on customers.

But it’s not just the insurers that are reaping the rewards of this premium bonanza — the Government is also rubbing its hands in glee.

Metro Bank has confirmed 1,000 staff will be axed by mid-April as part of the lender’s £80million cost-cutting drive.

The lender’s cost cutting drive followed a balance sheet crisis last year that saw Metro Bank finally secure fresh financing and a debt refinancing package, amid fears for its survival.

Morrisons has clocked up a fresh £1billion loss as it continues to struggle under private equity ownership.

The supermarket chain, which was bought by Clayton Dubilier & Rice for £7billion in October 2021 after an intense bidding war, has found life as a private company hard.

London-listed stocks have edged higher at the open after fresh ONS data showed the UK economy returned to growth at the start of 2024, while corporate earnings also add to the positive mood.

Metro Bank has gained 1 per cent after the lender posted a smaller annual loss, supported by its cost-cutting efforts and as outflows stabilised towards the end of the year after an eleventh-hour capital injection.

Balfour Beatty has surged about 9 per cent, on track for its biggest one-day gain since August 2022, after the infrastructure firm reported a better-than-expected full-year revenue.

Flutter Entertainment has added almost 3 per cent after JP Morgan upgraded the gambling group to ‘overweight’ from ‘neutral’.

British American Tobacco is launching a share buyback for the first time in two years as it sells parts of its stake in India’s biggest cigarette firm.

The maker of Dunhill is selling around 4.5 per cent – or roughly 436.9million shares – of its 30 per cent holding in ITC.

Russell Pointon, director of consumer at Edison Group:

‘CEO Will Orr spoke to the ‘solid foundations’ reflected in the results, which will underpin the newly unveiled Next Chapter growth plan. This initiative aims to optimise returns from existing assets, expand the footprint with the addition of 10-12 quality sites in 2024 and potential to add many more thereafter, and explore new revenue streams.

‘Looking ahead, 2024 has seen a promising start, reflected in a 12% increase in LFL revenue and a 7% growth in membership, reaching 909,000 by February.

‘Should The Gym Group execute on its growth plan effectively, it will be able to drive sustainable profitability and cash generation, which will position itself for continued success in the competitive fitness industry landscape.’

Rob Morgan, chief investment analyst at Charles Stanley:

‘Clear signs of economic weakness would give confidence to the Bank of England to cut interest rates later this year.

‘Although inflation is still twice the Bank’s 2% target, it should continue to fall and gradually approach that level by the autumn.

‘Yet with employment and earnings holding up alongside an economy that is now showing signs of resilience, an imminent rate cut seems unlikely. The Bank will want to see a more substantial decline in wages, and in more sticky services inflation, before reducing borrowing costs.

‘There are signs this will eventually come through. Job vacancies continue to fall, which indicates companies are wary of over hiring in an uncertain environment, but until these weaker indications are reflected in other data the Bank will be minded to keep rates on hold for the time being.’

The Gym Group plans to open up to 12 new sites this year, with around 50 planned over the next three years.

The London-listed gym operator told investors its ‘next chapter’ growth plans will ‘strengthen the core to increase returns’ from its existing estate, fund the rollout of new sites and ‘broaden growth by finding additional revenue streams’.

‘We have maintained positive momentum in revenue through the second half to deliver results that have offset cost inflation, in line with our guidance.

‘With a strong start to 2024, and clear signs that demand for health and fitness has never been stronger, these are solid foundations on which to build our Next Chapter growth plan.

‘Over the next three years, we aim to strengthen the performance of our core business and accelerate The Gym Group site rollout.

‘There continues to be substantial headroom for low cost gyms in the UK and we are fully focused on our aim of making high value, low cost fitness even more accessible for all.’

Roger Barker, director of policy at the Institute of Directors:

‘This is an encouraging green shoot, given the weakness of the retail sector over the Christmas period.

‘Interestingly, the professional services sector appears to be experiencing some weakness at the current time, with output in areas like legal and accounting services, and consultancy, registering material declines.

‘Despite a positive start to the year, the UK economy remains in a relatively fragile position. The case for an early cut in interest rates by the Bank of England is still a strong one.’

Metro Bank losses narrowed last year, supported by its cost-cutting efforts and as outflows stabilised towards the end of the year after an eleventh-hour capital injection.

The lender, which was launched in 2010 to challenge the dominance of Britain’s big banks, reported an underlying loss before tax of £16.9million, compared with a loss of £50.6million last year.

Boss Daniel Frumkin said:

‘Looking forward, I remain confident in our ability to be the number one community bank.

‘The work we have undertaken this year has laid the path to become a structurally profitable business and our focus towards the SME, Commercial and specialist mortgages sector presents an exciting opportunity in an underserved area of the market.

‘I remain grateful for the continued support of our colleagues, customers and shareholders as we embark on the next chapter of our journey.’

Starling Bank has poached energy supplier Ovo’s chief executive as the group considers a listing.

The disruptor bank said Raman Bhatia, 45, who previously led HSBC’s digital bank in the UK and Europe, would take over from interim chief executive John Mountain in the summer, subject to regulatory approval.

Jeremy Batstone-Carr, European strategist at Raymond James Investment Services:

‘This economic revival has been brought by a rebound in retail sales, and forward-looking indicators confirm that the economy will continue to brighten in the months to come.

‘The retail sector’s bounce back has proved sufficient to offset stagnation in other parts of the economy, notably industrial production and manufacturing output. The retail sector has also counteracted strikes by junior doctors and rail workers which dampened activity in the transport and healthcare sectors.

‘More encouragingly, the Bank of England’s cautious forecast for growth of 0.1% over Q1 of 2024 is on track to be exceeded. Nonetheless, continuing evidence of inflationary pressures will likely dissuade interest rate setters from cutting borrowing costs just yet.’

Tom Stevenson, investment director at Fidelity International:

‘The UK’s short and shallow recession may already be over. GDP growth in January was, as expected, 0.2%, fuelled by a stronger service sector.

‘Despite the return to growth, there was still a modest contraction for the three months from November to January compared to the prior three months. Alongside yesterday’s rise in unemployment and slowing wage growth, this shows that the UK economy is not out of the woods just yet.

‘The Bank of England is likely to sit on its hands during the first half of the year as it waits for a clearer picture of where growth and inflation are heading.

‘The recovery from the shallow recession during the second half of 2023 does, however, build on the more positive tone from the Office for Budget Responsibility which last week raised its forecasts for growth to 0.8% for 2024 and 1.9% in 2025.

‘The improving outlook for the UK economy is likely to lead to a positive shift in sentiment towards the UK stock market which has fallen behind international peers during the sharp recovery from last autumn’s low point.’

The UK economy returned to growth in January with GDP up 0.2 per cent for the month, having fallen into recession in the final quarter of 2023, according to fresh data from the Office for National Statistics.