BUSINESS LIVE: Metro Bank deposits dip; TRG bidder pulls out; Persimmon lifts build target

Anthony Codling, head of European housing and building materials research, RBC Capital Markets:

‘Persimmon is performing well in the face of housing market headwinds and is on track to deliver full year results in-line with expectations.

‘The Group is doing a good job managing prices and incentive levels, with incentive levels lower than we had anticipated. However, those headwinds are likely to remain in 2024.

‘Volumes may increase next year as more outlets are opened, but pricing and ongoing build cost inflation are likely to keep margins flat. Over the tone of today’s trading statement as neutral, which in this market we see as a good result.’

Mark Crouch, analyst at eToro:

‘This is a very strong update from Associated British Foods, which has navigated the inflationary environment and shaky customer demand well over the past year.

‘ABF’s agriculture division has struggled due to falling demand for pork in China and disease affecting the pig and poultry sectors in Europe, but its other divisions are flying.

‘The one everyone always wants to know about is Primark, the jewel in the ABF crown. Carefully selected price increases allowed the budget clothing retailer to significantly boost revenues without putting off customers, while successful collaborations with the likes of Stacey Soloman and Rita Ora have gone down well with shoppers.

‘Looking at group financials, it’s a case of strength across the board. Net debt has risen considerably, but much of this has been invested back into the business to fund ABF’s rapid expansion, particularly in retail.

‘ABF’s decision to increase its dividend by 37% will also go down well and will most likely draw investor attention to its shares, which are already up nearly 49% over the past 12 months before today’s results.’

British grocery inflation has fallen below 10 per cent for the first time since July 2022, according to fresh data that will provide some relief for consumers as they enter the key Christmas shopping period.

Market researcher Kantar said annual grocery inflation was 9.7 per cent in the four weeks to 29 October, down from 11 per cent in last month’s report.

‘While the drop … is positive news and something of a watershed, consumers will still be feeling the pinch,’ Fraser McKevitt, head of retail and consumer insight at Kantar, said.

‘We’re only seeing year on year price falls in a limited number of major categories including butter, dried pasta and milk.’

Associated British Foods has forecast ‘meaningful progress’ in its new financial year, driven by a strong recovery in the margin of its Primark fashion business thanks to lower material and freight costs, and a big improvement in its sugar business.

The group, which reported profit growth of 5 per cent for 2022/23, anticipates further growth in Primark’s sales in the 2023/24 year, driven by some 1 million square feet of new retail space and ‘modest’ levels of like-for-like sales growth.

It said lower material and freight costs should result in a ‘substantial recovery’ in Primark’s gross margin and overall it expects Primark’s adjusted operating profit margin to recover strongly from the 8.2 per cent made in 2022/23.

‘At this early stage we believe that the adjusted operating profit margin will be above 10 per cent with further improvement dependent on levels of consumer demand,’ it said.

One of Unilever’s biggest backers has welcomed the shake-up at the consumer goods giant under its new boss.

Last month chief executive Hein Schumacher told investors the company would be dialling down its woke agenda to focus on the bottom line after years of under-performance.

Persimmon is set to build more homes this year than previously forecast, even as elevated mortgage costs and a prolonged cost-of-living squeeze keep buyers away.

The FTSE 250 firm now expects to build 9,500 homes in 2023, above its August forecast of 9,000 units, as it pointed to improved sales since the start of October.;

Dean Finch, chief executive, said

‘While the near term is likely to remain challenging and we remain disciplined on costs, we continue to position the business for growth when the market recovers, as demonstrated by our further progress on planning in the period.

‘The Group’s national network of outlets providing a high-quality product at a range of attractive prices is a crucial strength in this market.’

The owner of PizzaExpress Wheel Topco will not make an offer for The Restaurant Group, citing current market conditions.

‘Wheel Topco confirms that, due to market conditions, it does not intend to make an offer for TRG,’ the company said in a statement.

Metro Bank deposits shrank another 5 per cent in the third quarter, but the troubled lender told investors the increase in outflows prior to last month’s capital raise had now returned to ‘more normal ranges’.

The bank revealed a £325miliion capital raise in October and a £600million debt refinancing, after urgent talks to bolster its balance sheet.

Deposits as at 30 September stood at £15.61billion, down from £16.37billion a year earlier.