BUSINESS LIVE: CMA intensifies Barratt-Redrow probe; Deliveroo posts a profit; Beazley earnings double

Beazley shares soared on Thursday as the group upgraded its annual guidance after first-half profits nearly doubled.

The Lloyd’s of London underwriter’s shares surged 11 per cent to £7.07 on Thursday morning, making them the top FTSE 100 performer and taking gains since the year started to around 37 per cent.

The fate of Barratt Development’s £2.5billion takeover of rival housebuilder Redrow could rest on one Shropshire town, following a regulatory intervention.

Britain’s competition watchdog on Thursday flagged concerns about a possible ‘substantial lessening of competition’ in a local area around a Barratt development, warning the deal could face more intense scrutiny if these issues aren’t addressed.

Adam Vettese, market analyst at eToro:

‘Undoubtedly the key take-away from Deliveroo’s results is the huge milestone of making their first profit, which after an £80+million loss a year earlier is no mean feat. After the pandemic home delivery boom, the firm has had to endure the cost of living crisis, where discretionary spending on things like a weekend takeaway won’t have made the cut on consumers’ squeezed budgets.

‘The metric the company likes to use is GTV – Gross Transaction Value – and this is showing an upward trend on the basket value customers are spending, whilst demand is normalising as we see inflationary pressures begin to ease.

‘Looking ahead, the guidance is expected to be in the upper half and the company plans to return cash to shareholders via £150m buybacks. Investors will hope this positive print is the start of a road to recovery for the shares after a lacklustre IPO and a catastrophic 75% plunge from its high in 2021.Consumers quite likely have lasting habits that favour home delivery and now with strain on the budget potentially easing, there could be many more profit making updates from Deliveroo to come.’

With the Labour Government committed to building a substantial number of homes, investors looked beyond a poor first-half performance from brickmaker Ibstock and bought stock on hopes for a windfall.

Ibstock had a tough first half as elevated mortgage rates kept the housing market challenging.

Glencore has scrapped plans to spin off its coal business, labelling the move ‘common sense’.

The decision comes after an overwhelming majority of its shareholders voted to keep hold of the highly profitable, but heavily polluting, division.

London-listed stocks are bad in the red this morning, tracking global market sentiment, while investors assess corporate updates and top players trade without entitlement to their dividend payouts.

The benchmark index logged its best day in more than four months yesterday, extending a broad recovery to a second session after a heavy sell-off rattled stock markets on Monday.

Precious metal miners lead declines on the index with a 2 per cent loss this morning, despite an uptick in gold prices. The index was weighed down by Fresnillio, which traded without entitlement to its latest dividend payout.

Many top players like AstraZeneca, BP Natwest and Standard Chartered also trade ex-dividend, pushing the heavyweights over 1% lower each.

Bank shares are down 1.4 per cent after two sessions of gains. The index declined broadly, as most sub-sectors traded lower.

However, non-life insurers have gained 2.5 per cent thanks to a 10 per cent gain in Beazley, which upgraded its combined ratio forecast for 2024 after first-half pre-tax profit nearly doubled. to $728.9 million.

Entain has also climbed 7.2 per cent on raising its annual net gaming revenue and earnings forecast after a better-than-expected second-quarter performance.

The automobile and auto parts sector has climbed 2.5 per cent, as TFI Fluid Systems gains 11 per cent after its half-yearly results.

Meanwhile, a survey showed that Britain’s jobs market showed further signs of cooling in July and employers increased pay more slowly.

Rachel Reeves yesterday met with the so-called ‘Maple 8’ pension funds as she urged UK schemes to learn from the Canadians.

The Chancellor held a round table of Canada’s biggest retirement fund bosses in Toronto (pictured) – launching a push for British funds to follow their example and use their pension pots to ‘fire up the UK economy’.

Matt Britzman, senior equity analyst, Hargreaves Lansdown:

‘Markets may have simmered down but this roller-coaster week isn’t over yet. UK markets opened lower in a move that unwinds a good chunk of yesterday’s gains. Corporate earnings are starting to slow but there’s plenty for traders to get their teeth into.

‘Deliveroo hit two of its major financial milestones over the first half centred around positive free cash flow and profitability. Commentary suggested encouraging behaviour from those looking for a quick bite to eat, but second quarter volumes were weaker than expected across both the UK and international markets.

‘Elsewhere, Ladbrokes owner Entain delivered a good half and upped guidance, while Persimmon saw a boost from higher selling prices – more detailed comments below.

‘US futures point to a muted open today after major indices lost ground yesterday. This felt like a normal move triggered by a string of disappointing earnings rather than a panic sell-off like we saw earlier in the week.

‘Travel stocks had a poor evening and brought the S&P500 lower – Airbnb, Hilton, and Disney all told a story of weaker demand for hotel rooms and theme parks in a further sign that the consumer is weakening.

‘Today’s US jobless claims will be watched very closely to help paint a better picture as to whether concerns around labour market weakness are warranted.’

A once high-flying asset manager will pay out £215million to investors who have cash trapped in illiquid funds linked to German financier Lars Windhorst.

The Financial Conduct Authority (FCA) has said H2O Asset Management must return money to shareholders after it failed to carry out proper due diligence on hard-to-sell securities tied to Tennor, a group founded by Windhorst.

The government of Giorgia Meloni is to double a levy on foreign residents.

The £86,000-a-year payment, which exempts people moving to the country from tax on overseas earnings, gifts and inheritance for 15 years, will rise to £172,000.

Billionaires have flocked to the country to take advantage of the tax system, after the levy was introduced in 2017, amid hope it would benefit the economy.

Persimmon profits fells in the first half, but the housebuilder lifted its new build target target to the top-end of its forecast range, as easing mortgage rates and UK rate cuts boost recovery hopes in the homebuilding sector.

British homebuilders are optimistic of a near-term turnaround in fortunes as easing mortgage rates and the first UK rate cut in more than four years are expected to spur home sales in a sector where demand has remained subdued for more than a year.

Persimmon said it was on track to build about 10,500 homes for the full year, even as its pre-tax profit dropped 3 per cent to £146.3million for the six months to 30 June.

‘Persimmon is a growing company with growing opportunities. The first half of the year has been strong with improved sales rates and robust average selling prices, despite ongoing affordability challenges.

‘Strengthening consumer sentiment, improving macro-economic conditions and the government’s welcome and ambitious planning reforms that demand more of the high quality, affordable homes that are Persimmon’s core strength, are all supportive of our ambition to grow this year and in the future.’

Beazley upgraded guidance for 2024 after fthe insurer’s first-half pre-tax profit nearly doubled to $728.9million, boosted by growth in its property risks premiums.

Beazley, which offers insurance for cyber liability, property, marine, reinsurance, accident and life, and political risks, said the undiscounted combined ratio is expected to be around 80 per cent, from a previous forecast of low 80s.

A combined ratio – measuring an insurer’s profitability – of above 100 indicates an underwriting loss. A lower figure indicates better profitability.

The insurer, which commands about 8 per cent of the global cyber insurance market according to analysts, had soothed investor concerns by leaving its annual forecast unchanged last month following the CrowdStrike outage.

Deliveroo has finally achieved the twin milestones of profit and free cash flow in the six months to end-June, as demand from customers stabilised.

The food delivery business reported a profit of £1.3million, compared to a loss of £83million a year ago, and free cash flow of £3.2million – up from a negative cash flow of £27.7million.

Founder and chief executive Will Shu said:

‘Looking ahead, while there is continued uncertainty in the external environment, I am encouraged by the inflection we are currently seeing in consumer behaviour in many of our markets.

‘The Deliveroo platform is more powerful than ever, and we remain responsive to the external environment while continuing to optimise our proposition for consumers, riders and merchants.

‘We operate across attractive verticals, in large, underpenetrated markets, and it’s clear that there is a lot of room for growth in our industry.’

The FTSE 100 rallied as global markets bounced back after a sharp sell-off earlier this week sparked by fears over a US recession and tensions in the Middle East.

The blue-chip index rose 1.75 per cent, or 140.19 points, to 8166.88, as the Bank of Japan dampened talk over further interest rate rises. Last week the central bank raised rates for the second time in 17 years.

‘As we’re seeing sharp volatility in domestic and overseas financial markets, it’s necessary to maintain current levels of monetary easing,’ said Shinichi Uchida, Bank deputy governor.

Responding to the CMA’s findings, Barratt and Redrow said they are ‘working together’ to ensure the deal becomes effective ‘as soon as practicable in the second half of the year’.

Barratt boss David Thomas:

‘We are pleased that the CMA has found there would be no harm to competition in all but one of the areas in which Barratt and Redrow overlap.”

‘We remain confident that the combination of Barratt and Redrow will be approved and that it is in the best interests of our customers and wider stakeholders. Together we plan to build on our shared strengths and create an exceptional homebuilder, in terms of quality, service, and sustainability, helping to deliver the homes the country needs.’

Redrow chief executive Matthew Pratt:

‘Barratt and Redrow are two leading housebuilders, with strong reputations for quality, service and sustainability that have been decades in the making.

‘Once the CMA process has completed, we are looking forward to our future as one team, accelerating the delivery of high-quality homes that the country so urgently needs.’

Barratt Development’s £2.5billion takeover of homebuilding rival Redrow could be set for an in-depth ‘Phase 2’ investigation after a regulatory probe flagged competition concerns.

The Competition & Markets Authority said it had concerns about ‘the local area around a Barratt development in Whitchurch’, which includes nearby towns such as Nantwich, Ellesmere and Market Drayton.

The regualtor is concerned the deal could lead to higher prices and lower quality homes for homebuyers in the area, where both firms have a presence.

It said: ‘Barratt and Redrow now have the opportunity to submit proposals which address the CMA’s concerns in the local area around the Tilstock Road development, to avoid the deal moving to an in-depth Phase 2 review.’