BUSINESS LIVE: Royal Mail losses widen; Young’s to acquire City Pubs; Mars subsidiary to buy Hotel Chocolat

London-listed shares are underwater this morning after a three-day run of gains, while luxury group Burberry is tumbling after it said it would struggle to meet sales targets.

Burberry shares have fallen 9.5 percent and are on track for their biggest one-day percentage loss since the height of the pandemic-induced sell-off in March 2020, after the company said it was hit by a global slowdown the luxury editions.

Hotel Chocolat has risen 164.4 percent to its highest level in a year and a half after the British chocolatier specialist agreed to a £534 million takeover bid from Mars.

Meanwhile, shares in Shell, Hargreaves Lansdown and B&M European Value fell as they traded without dividend rights.

Mars’ £534m takeover deal has seen Hotel Chocolat’s shares rise 164.4 per cent at opening.

Derren Nathan, head of equity research at Hargreaves Lansdown

The new CEO of ‘International Distribution Services’, Martin Seidenberg, is finding it more difficult than initially thought to turn around His Majesty’s postal service. And he has escalated the agenda to Downing Street, calling for a relaxation of the Group’s legal duties.

‘This is in light of the sharp declines in the volume purchased as a result of digitalization and competition in the market. His comment that it is simply not sustainable to maintain a network built for 20 billion letters, while Royal Mail only delivers 7 billion, is a comment that resonates.

“But investor confidence, which has been restored recently, is likely to take another hit as the profitability horizon is further expanded. A lot of work is being done behind the scenes to restore public confidence in Royal Mail, and flawless execution of Santa’s delivery list will be important in rebuilding trust.

‘While the international division GLS generates healthy profits, growing economic pressure has also kept margins under control here.

‘The fact that this side of the business should be able to support a dividend this financial year will be music to the ears of some investors, but given that Royal Mail is a long way from making a contribution it is likely to be more of a symbolic gesture then a gesture. a meaningful payoff.”

Specialist chocolatier Hotel Chocolat has agreed to a £534 million takeover bid from Mars after the pair agreed the food giant was well positioned to help the small retailer expand internationally.

Stephen Alexander, Chairman of Hotel Chocolate, said:

‘Hotel Chocolat is a brand with strong long-term prospects and today’s deal will enable it to grow further and faster.

“Joining forces with Mars will deliver great value through the cash offering to Hotel Chocolat shareholders and the combination will create exciting opportunities for Hotel Chocolat employees as part of Mars.”

Young’s has agreed to buy rival City Pubs for a value of around £162 million, the brewery and pub chains announced this morning.

Simon Dodd, CEO of Young’s, said:

“We are pleased to announce the proposed acquisition of City Pubs, with the full recommendation of their board. City Pubs is an excellent company that we have been following for some time, and which is closely aligned with Young’s in both strategy and culture.

‘Like us, City Pubs operates premium, individual and well-invested pubs and rooms, with an emphasis on the highest standards of customer service. Both companies have performed well in a difficult trading environment recently, which is testament to the strength of our business models, people and customer approach.

“We believe that City Pubs is an excellent fit for Young’s and that the combination of the two companies presents an attractive opportunity for all stakeholders. It will enable us to expand our estate through the addition of a complementary, high-quality café and bedroom portfolio, with the potential to benefit from significant operational synergies to be realized by both groups of shareholders, through the partial share offer.”

Diageo boss Debra Crew admitted it was difficult to predict when the company could resolve the problems in Latin America that led to a surprise profit warning and sent its shares 16 percent lower.

The world’s largest spirits maker said last week that sales in Latin America and the Caribbean, which makes up about 11 percent of sales, would fall by more than 20 percent.

Royal Mail’s adjusted operating losses widened from £219 million to £319 million in the first half, dragging otherwise profitable owner International Distribution Services to a total loss of £169 million.

IDS told investors this morning that it expects to pay a modest dividend from its GLS unit this year and that adjusted operating performance would be around breakeven this fiscal year.

Martin Seidenberg, CEO of IDS, said:

‘We have two companies with great potential: Royal Mail and GLS. Now that I have been working for three months, I am more convinced of this than ever.

‘When I arrived I took action to stabilize Royal Mail after performance fell due to industrial action and customer losses. We delivered on that plan through rigorous cash management, controlling our costs and ruthlessly prioritizing high-return projects.

‘My top priority now is to improve quality. I know from experience that quality is the key to customer satisfaction and sustainable growth. That’s why we do everything we can to give our customers Christmas. This includes recruiting 16,000 seasonal workers, opening five temporary sorting centers and launching an incentive scheme for operational staff worth up to £500 each for meeting local and national quality targets.

“We have a clear plan for longer-term improvement, including strengthening operations at a regional and local level, and recruiting faster than ever before, reducing reliance on temporary workers. A number of changes that we have included in the agreement with the Communications Workers Union (CWU), such as a new illness and absenteeism policy, will also help support quality.

“We are making good progress in implementing that agreement, but our change agenda is broader and will take time.”