BUSINESS LIVE: Burberry turnaround plan; United Utilities closed due to bill increases; Young’s sees budget hit of £11 million

The new Trump administration could be “good news” for the British defense industry as the new US president pushes allied countries to spend more on armaments, Babcock’s boss has said.

CEO David Lockwood told the Mail that if Trump continued to put pressure on other members of NATO to meet their spending commitments, it could lead to demand “surging” as happened in several countries during his first term.

Richard Hunter, head of markets at Interactive Investor:

‘Burberry can only hope that these results mark a line in the sand, and that its revised energy will return the country to its former glory. It is impossible to estimate how much of its cachet has already been lost, let alone the broader headwinds such as the economic situation in China, which remain uncertain.

‘The fall in the share price was severe and relatively concentrated, with a decline of 72% from a peak of over £26 recently reached in April 2023. Over the past year, the shares have fallen 56%, including relegation to the FTSE250, which itself added 9.8% in the period.

‘A brief rebound in recent weeks following unconfirmed reports of a bid from Italy’s Moncler has been followed by a positive share price reaction to these figures and the group’s intentions, although both are far from sufficient to reverse the decline.

“In the meantime, and despite the group’s renewed resolve, the market consensus on the sale of the shares is unlikely to waver until some measurable progress has been made on the new strategy.”

WH Smith has posted a 16 per cent increase in annual profits as its travel division continues to grow sales while high street sales continue to fall.

The group reported underlying pre-tax profits of £166 million for the year to August 31, compared with £143 million the year before.

Trading profits at stores in train stations, airports and hospitals around the world rose 15 percent to £189 million, with profits from these outlets in Britain increasing by a fifth.

Profits were flat on the traditional high street unit at £32m, despite a 2 per cent drop in like-for-like sales.

Carl Cowling, group director of WH Smith, said: ‘The group has delivered an excellent performance throughout the year, particularly during the key summer trading period.’

Boohoo faces a showdown with Mike Ashley just days before Christmas, it was announced last night.

Ashley, whose Frasers retail empire owns 27 percent of the troubled fashion site, will try to install himself as CEO at an emergency meeting of investors on December 20.

Boohoo announced details of the meeting after markets closed yesterday, with the unplanned publication of half-year results.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘The plan is to return the focus to the origins of the brand: outerwear. Newly established CEO Joshua Schulman plans to leverage the brand’s legacy to regain its position in the category before expanding into other areas.

‘But it is a careful balance, and Mr Schulman will not want to make the same mistake as his predecessors by shifting Burberry’s offering towards a narrow base of luxury customers at the expense of a loyal fan base.

‘Back to the recent performance and it has been painful to read for investors. Sales fell by double digits as the group saw declines in all regions, meaning Burberry fell into loss-making territory in the first half of the year.

‘Cost-cutting is underway to stem some of the financial bleeding, with £25m of excess material set to be deducted from expenditure this year. But because no expectations are given for the entire year, it is unclear whether the company can return to profit in time.’

Young’s has become the latest hospitality company to outline the impact of increases in employer contributions and a minimum wage increase set out in the autumn budget.

It came as the pub group revealed that revenues in the six months to September 28 were up more than 27 per cent to £250m, while adjusted pre-nasties profits were up 23.2 per cent to £59m.

“I am very pleased with our performance and the progress we have made over the period, despite some challenges.

‘The new government’s budget will result in significantly higher costs for our sector in the short term, through increases in the national minimum wage and employers’ net benefits.

‘We expect the cost impact to be around £11 million annually from April next year. We will look at how we can mitigate these headwinds without passing all the costs on to our loyal customers.

‘We would like to see certainty and implement real business rates reform, which will benefit all hospitality businesses.’

North-west England water supplier United Utilities expects turnover to rise 10 percent this year, after a more than two-fold increase in profits in the first half of the year, supported by higher consumer bills.

It means revenues for the year to the end of March 2025 are on target for analyst estimates of £2.13 billion.

The sector is under extreme scrutiny from regulators and the public, especially as the largest of the UK’s water suppliers, Thames Water, risks running out of money if financing talks with creditors fail.

United Utilities posted underlying pre-tax profits of £182.9 million for the six months to September 30, compared with £90.3 million a year earlier.

Burberry’s new CEO Joshua Schulman has launched a turnaround strategy aimed at returning the struggling fashion brand to growth as sales continue to fall.

Sales fell 20 per cent to just under £1.1 billion in the 26 weeks to September 28, with the group slumping to an adjusted operating loss of £41 million for the period, compared to a profit of £223 million for the same period last year.

Schulman told shareholders this morning:

‘My first few months have confirmed my belief that Burberry is an extraordinary luxury brand, quintessentially British, with equal parts heritage and innovation. Burberry’s original goal to design clothing that protects people from the weather is more relevant than ever.

“Our recent underperformance is the result of several factors, including inconsistent brand execution and a lack of focus on our core outerwear category and our key customer segments.

“Today we are acting with urgency to correct course, stabilize the business and position Burberry for a return to sustainable, profitable growth. We have a powerful brand with broad appeal among luxury customers, authority in the outerwear and scarves categories that have remained resilient during this period, and a strong presence in all major luxury markets.

“Now we have a clear framework to reinvigorate brand desire, improve our performance and drive long-term value creation. Building on our strong foundations, I am confident that Burberry’s best days lie ahead.”