BUSINESS LIVE: Spring Budget looms; L&G misses profit expectations; Capita to make extra cost savings

Chancellor Jeremy Hunt today delivers a highly anticipated Spring Budget, faced with pressure to cut taxes and bolster faltering public services.

The Government is keen to woo voters ahead of a looming General Election, but Hunt will be cautious of a stuttering British economy and the constraints of his own fiscal rules.

(PA) – Galliford Try said that it has increased its order book in the last year as it benefited from higher spend from water companies.

The business said that its order book had swelled to £3.7billion at the end of December, compared to £3.5billion a year earlier.

The business reported that revenue rose 20.6% to £819million in the six months to the end of December. Pre-tax profit rose from £11.7million to £15.6million in the same period, Galliford said.

“I am very pleased with the group’s performance in the first half of the financial year,” said chief executive Bill Hocking.

“There is strong momentum in the business and our continued excellent performance is a reflection of our disciplined strategy, committed people and long-established relationships with our supply chain and clients.

“The group has delivered increased revenue and divisional operating margin, as we make accelerated progress towards our strategic objectives, and we will continue to provide long-term sustainable value for our stakeholders.”

Galliford focuses on construction for the public sector or regulated businesses such as the water industry.

It said that its environment unit is benefiting from high levels of spending from its clients in the water sector.

The building arm saw a 12% rise in revenue to £446million during the period, and operating profit rose by £1.3million to £10.6million before amortisation.

Premier Foods shares rose sharply on Wednesday after the Angel Delight owner revealed an agreement to suspend its pension deficit payments from next month.

The deal with RHM Pension Scheme Trustee will offer Premier Foods a £33million increase in free cash flow for the financial year ending in March 2025, the group told shareholders.

The John Lewis Partnership (JLP) is increasing its minimum rates of staff pay by 10 per cent from the beginning of April.

The group, which owns John Lewis department stores and the Waitrose supermarket chain, said minimum hourly rates would rise to £11.55 across the UK, which is above the Government’s national living wage, which will increase by 9.8 per cent to £11.44 an hour.

Legal & General Group earnings slumped last year, despite achieving record new volumes across its insurance divisions.

The financial services giant saw its profits plummet by 42 per cent to £457million in 2023, due partly to costs related to its Modular Homes business and a write-down on its stake in electric vehicle subscription service Onto.

Quilter is reviewing historical services provided to customers amid heightened regulatory scrutiny of how wealth managers charge their clients.

The FTSE 250 firm told investors on Wednesday the review may lead to ‘remedial costs’, but added that it was too early to quantify what those might be.

Food sales at Marks & Spencer are growing twice as fast as they are at Aldi.

In another sign the middle class favourite has got its mojo back, sales over the past 12 weeks were 11.9 per cent higher than a year earlier.

Capita has earmarked an additional £100million of annual spending cuts, as the group’s new boss vowed to boost its competitive edge after swinging to a loss.

The group posted a loss of £106.6million for 2023, down from a £61.4million profit the prior year and ‘reflecting business exits, cost reduction programme expenses and 2023 cyber incident costs’.

Chief executive Adolfo Hernandez told investors on Wednesday he would plough ahead with a ‘rapid reduction’ in costs, following a separate £60million-a-year savings drive announced at the end of 2023.

Fiat has launched a lower-cost hybrid version of its new electric family car as UK bosses warned that slowing demand for EVs had forced their hand.

The new self-charging 600 Hybrid from the Italian brand costs up to £10,000 less than the equivalent all-electric 600e model – and eliminates the range and charging anxiety motorists face due to there being too few public chargers.

A typical Greggs worker will be handed a £700 bonus after it raked in bumper profits and said sales would double by 2026.

Chief executive Roisin Currie said around 25,000 of its 32,000 staff will be rewarded in their March pay packets after ‘another year of rapid growth’.

London-listed stocks have edged higher at the open amid caution in the run-up to the Spring Budget..

Legal & General is down 4 per cent, leading losses on the FTSE 100, after the life insurer missed expectations for 2023 operating profit amid tough market conditions, dashing residual investor hopes of a share buyback.

Precious metal miners are up 1.3 per cent as gold prices hover near record-high levels on hopes of easing interest rates, while rate-sensitive real estate companies and real estate investment trusts have added around 1 per cent each.

British wealth manager Quilter will review historical services provided to customers amid heightened regulatory scrutiny of charging by fund managers.

Quilter said the review may lead to ‘remedial costs’, but that it was too early to quantify what those might be.

‘…we are commencing a review of historical data and practices across our network to determine what, if any, further action may be required,’ the firm said, following a regulatory request for data on servicing from 20 advice firms last month.

The company also reported annual profit above analyst expectations on Wednesday, helped by steady demand from affluent clients for financial advice and portfolio management.

Analysts at JPMorgan welcomed the profit beat in a note, but said the risk of remedial costs could weigh on the stock, citing the experience of rival St James’s Place.

Matt Britzman, equity analyst, Hargreaves Lansdown:

‘Full-year results missed the mark for Legal & General as operating profit came in lower than expected. The investment management arm continues to feel the effects of higher interest rates. Average assets under management were down 12% on the prior year, largely a result of valuations coming under pressure from rate hikes.

‘But Legal & General is a diverse beast, and the retirement business is the biggest driver of operating profit. It’s one of the world’s leading bulk annuity providers and is benefitting from a resurgence in the market. Companies with pension plans can pay L&G a lump sum to take the liabilities off their hands. As rates have moved off the lows seen in recent history, it’s become a more attractive market for both those looking to de-risk and those like L&G in the business of taking on these liabilities.

‘The UK is the most mature global market, but L&G has its eyes set further afield. Activity in overseas markets like the US, Canada and the Netherlands is increasing. Including the UK, there’s around $6trn of pensions liabilities floating about, with the percentage transferred to insurers barely touching double digits. That gives plenty of scope for L&G to keep growing.

‘Some may have hoped for a few more details from the new CEO on his strategy, but investors will have to wait until the announced capital market day in June for more details.’

Outsourcing giant Capita expects to make an additional cost saving of £100million a year by mid-2025, adding to planned spending cuts announced in November.

The group has already outlined plans to cut £60million a year starting at the beginning of 2024, with around 900 ‘indirect support function and overhead roles’ affected.

But Capita said it has now identified ‘further material efficiency improvements which are essential to ensuring our competitive position in the market’.

As a result it will this year ‘be taking steps to realise a further £100million of annualised cost savings by mid 2025, which will be partially reinvested in growth’.

Boss Adolfo Hernandez said:

‘We have yet to deliver the operational excellence that will enable us to create the right platform for future growth or achieve our full potential for the benefit of shareholders.

‘Looking forward, we will focus on precision in execution, co-creating solutions with clients and accelerating the use of technology and leveraging our technology partnerships to drive improvement in our operating and financial performance.

‘We need to deliver a rapid reduction in our cost base and are on track to deliver the net £60m annualised cost savings, from Q1 2024 as announced in November. Today we are announcing further material efficiency improvements of £100m to improve our competitive position.’

Legal & General profits missed analyst forecasts in 2023 as the British insurer faced ‘challenging’ market conditions, with its investment management business suffering a drop in earnings of almost a fifth.

Group operating profit came in at £1.75billion for the year, compared to expectations of £1.67billion.

Legal & General Investment Management, which is one of the UK’s biggest investors, posted a 19 per cent fall in operating profits to £274million as its assests under management fell 3 per cent to £1.16trillion.

Chief executive Antonio Simoes said: ‘We are on course to achieve our five-year targets, and demonstrated resilience in challenging markets.’

The economy has turned a corner.

That has been Jeremy Hunt’s mantra as Britain emerges from a downturn – and it is one that is likely to be repeated in today’s Budget.

Labour’s accusation, however, is that the Tories have crashed the economy.

In truth, Britain’s resilience has proved the most doom-laden forecasts wrong. Yet growth – at just 0.1 per cent in 2023 – has been nothing to shout about.