BUSINESS LIVE: Underperforming water firms to pay compensation

Joshua Warner, market analyst at City Index:

“ASOS has been on the right path since escaping the red in June, as it attempts to turn around the business by becoming more agile, simpler and efficient and remained profitable and cash-generating in the second half.

‘However, profits were at the lower end of its target range and cash flow will be much lower than expected as sales remain under pressure. ASOS attributed this to “timing effects”, but it will ultimately lead shareholders to think that it will take longer for ASOS to turn around its fortunes.

‘ASOS remains a recovery play as it prepares to shift to its new business model once inventory levels have returned to a more normal size and its shift to a faster stock model is proving successful as its case for Test shows that products rotate three times faster than usual. .

“Accelerating the share recovery will not only be key to improving profitability and cash flow, but also paving the way for ASOS to reduce net debt.”

Meta Platforms has handed over one of the two buildings it leases to FTSE 250 Britihs Land in London’s Regent’s Place, as technology companies become cautious about office property due to prevailing macroeconomic uncertainties.

The property company said waiving the lease would result in earnings per share dilution of around 0.6p for the half year.

British Land said it was “comfortable” with current market expectations for fiscal 2024 despite the Facebook owner’s move, as it saw better-than-anticipated collection of historic Covid-19 arrears.

British industrial technology company Smiths Group has posted a 20 per cent rise in operating profit for the 12 months to the end of July as demand for scanners, valves and connectors soared, helped by decarbonisation trends.

The FTSE 100 group, which makes airport security scanners as well as specialist products used in the oil, gas and hydrogen sectors, made a profit of £501m for the year and said it expected further growth on next year.

Paul Keel, CEO, said:

‘We had another strong year of progress in fiscal 2023 as we further accelerated our growth, sharpened our execution and developed our talented people. We achieved year-over-year improvement on all five of our medium-term financial commitments, including record organic sales and EPS growth.

‘Innovation is fundamental to our purpose of improving our world through smarter engineering, and new product launches contributed more than three percentage points to our growth.

‘We continue to invest in R&D as artificial intelligence and other digital technologies play an increasingly important role in allowing us to support our customers more effectively. “We are also further developing our capabilities to capitalize on the growing megatrends we are exposed to in the key markets we serve, including the energy transition and the world’s growing need for greater security.”

Asos’ sales fell 15 per cent in fourth-quarter sales and the group warned that second-half profits are expected to be at the lower end of its forecast range.

However, the retailer has said its turnaround plan is moving forward.

Asos announced a review of its business model last October after the economic crisis and a series of operational problems hit its profits and shares.

The strategy is to prioritize profits over revenue growth by reducing the amount of shares held by Asos, cutting costs and improving its cash position.

Underperforming water companies, including Thames Water, will be forced to repay £114m to their customers next year, industry regulator Ofwat said on Tuesday.

David Black, chief executive of Ofwat, said:

‘The goals we set for businesses were designed to be challenging: driving improvements for customers and the environment.

‘However, our latest report shows they are falling short, resulting in £114 million being returned to customers through bill reductions. While this may be welcome for taxpayers, it is very disappointing news for everyone who wants the sector to run better.

‘It won’t be easy for companies to regain public trust, but they have to start with better service for customers and the environment. “We will continue to use all our powers to ensure the sector delivers better value.”