BUSINESS LIVE: Inflation holds at 2%; Reckitt hit by tornado; Babcock runs on nuclear power

The boss of Ocado has urged disgruntled shareholders to keep the faith as the group posted rising sales and narrowing losses.

Tim Steiner said investors should believe in the online grocer and technology company despite the stock falling nearly 90 percent in less than four years.

“I’m not worried about investors losing confidence, because they shouldn’t,” he said. “We have a clear plan and we are executing it.”

Babcock has posted a 34 per cent increase in annual profits, thanks to strong operating performance in the nuclear, land-based and aviation sectors.

The company said underlying operating profit for the 12 months to the end of March was 237.8 million pounds, while the British engineering company reiterated its medium-term guidance.

Net debt stood at £435 million, £129 million lower than the previous year, driven by strong cash generation.

Reckitt has warned that short-term sales of its Mead Johnson powdered infant formula will likely be affected after a tornado struck a third-party warehouse in Indiana, causing significant damage.

The Mount Vernon warehouse, currently inoperative following the July 9 tornado, is an important site for Mead Johnson Nutrition’s business that contains both raw materials and finished products, Reckitt said.

Reckitt said: ‘While Nutrition sales will likely be impacted in the short term, we are working closely with all our stakeholders, including customers and suppliers, to minimise disruption, leveraging our global supply chain and managing inventory in our other Nutrition warehouses across North America and held by our retail partners.

‘In addition, Reckitt has comprehensive property damage and business interruption insurance, which we currently expect to largely offset the impact on earnings.

‘We will provide a further update in our half-year results on 24 July.’

Luke Bartholomew, Deputy Chief Economist at Abrdn:

‘Today’s inflation report will keep the Bank of England’s August rate decision on a knife-edge.

‘The strength of hotel price growth suggests a so-called Taylor Swift effect on prices, but policymakers will almost certainly not take such dynamics into account.

‘More fundamentally, the persistent stickiness of services inflation will leave the Bank wondering how long inflation will remain at the 2% target once favourable base effects have passed and domestic price pressures begin to boost headline inflation again.

“Tomorrow’s wage data will provide further clues to these price pressures, and the Bank expects to see further moderation in wage growth. For now, we continue to expect a rate cut in August, but this will require further cooperation from upcoming data.”

Matthew Chapman, Associate Partner at McKinsey & Company:

‘Headline inflation remains on target. However, elevated core inflation and services inflation are likely to be a headache.

‘Persistent services inflation is creating upward pressure on the headline inflation rate. Price increases in summer spending sectors such as package holidays (8.7%), resorts (10.9%) and cinemas, theatres and concerts (7.4%) are all in the high single and even double digits. And these are sectors where consumers seem most inclined to splurge.

‘More than 65% of consumers plan to spend the same or more on experiences such as hotel and resort stays, short-term home rentals, out-of-home entertainment and restaurants over the next few months.

‘On the other hand, food inflation has eased considerably since the beginning of the year. And price increases for clothing and footwear have continued to slow, coinciding with the start of the summer sales period, which is expected to put consumers in a better position and offer some relief.

‘However, with prices still significantly higher than three years ago, many households are likely to continue to feel the pinch and spend more money on essential items such as fuel. They are focused on looking for opportunities to reduce non-discretionary spending by making cheaper purchases and increasing their savings.

“It may still take time to fully control inflation. In the meantime, companies should look for opportunities to focus on how they can manage economic pressures to protect margins while still delivering value to consumers.”

Consumer price inflation held within the Bank of England’s 2 percent target last month, data from the Office for National Statistics shows.

The reading, which was slightly higher than forecasts of 1.9 percent, further increases pressure on the bank to start cutting interest rates at its Monetary Policy Committee meeting in August.