Top story

UK inflation has fallen to its lowest level since 2015 as the Eat Out to Help Out Scheme helped drive down prices.

The Office of National Statistics said today the UK 12-month inflation rate was down to 0.5% in August 2020 from 1.1% in July 2020.

This represented the lowest rate of annual inflation in the UK since December 2015.

Inflation fell by 0.3% between July and August 2020, compared with a rise of 0.3% between the same two months of 2019.

Falling prices in restaurants and cafes, arising from the Eat Out to Help Out Scheme, resulted in the largest downward contribution (0.44 percentage points) to the change in the 12-month inflation rate between July and August 2020.

The restaurants and hotels group made a downward contribution of 0.27 percentage points in the latest month reflecting a negative 12-month inflation rate of 2.8%.

The reduction in Value Added Tax (VAT) from 20% to 5% on the hospitality sector also contributed to the fall in prices.

Other smaller downward contributions came from falling air fares and clothing prices rising by less between July and August 2020 than between the same two months a year ago.

Food and non-alcoholic beverages also produced a downward contribution of 0.03 percentage points as prices rose by 0.1% between July and August this year, compared with a larger rise of 0.5% a year ago.

The largest effect came from bread and cereals, where prices fell this year but rose a year ago, particularly for items such as chocolate biscuits, packs of individual cakes and dried potted snacks.

Morning update

Online retailer and beauty and sports nutrition brand owner The Hut Group has begun trading on the London Stock Exchange this morning after a pulling off a £1.9bn share float valuing the company at £5.4m.

The shares were sold at 500p each and opened at 8am this morning at 600p and have already risen by the further 6.1% to 647.4p.

Chief executive Matthew Moulding said: “I am delighted that THG has received such strong support from some of the world’s largest investors, which means we have been able to achieve a highly successful offer of shares in the company.

The float represented the UK’s largest IPO since 2015.

Elsewhere, Sports nutrition group Science in Sport posted a drop in first half sales and an underlying operating loss given the “severe disruption” to its business caused by the COVID 19 pandemic.

Group revenue for the six months to 30 June was £23.6m, down 5% on last year reflecting the disruption in its second quarter.

The SiS brand delivered revenue of £11.9m, down 5% while the PhD brand delivered £11.7m, down 6% on H1 2019.

However, online channels performed “very strongly”, with its own digital platform delivering revenues of £6.0m across all markets, 27% ahead of the same period last year. Marketplace was 22% ahead, with revenues of £4.0m.

Online accounted for 42% of total business at the end of H1 2020, up from 32% in H1 2019.

Internationally, much of the growth seen in the first quarter was negated by the COVID-19 pandemic, which sharply impacted Q2 revenues and carried into Q3, resulting in growth in export retail markets of just 2%.

SIS said it is now starting to see some recovery with PhD trading picking up in China, and its Shimano partnership extending into Spain for SiS.

Overall it said it has seen a continued improvement in trading in July and August, with group revenue of £8.6m for those months, up 1% on the same period last year

However, UK retail remains 16 lower year on year July and August, albeit that indicates a recovery from the first half’s 31% lockdown-related decline. Export retail remains 13% lower, recovering from a Q2 34% decline.

Group gross profit nudged up to £11.2m from £11.1m as supply chain improvements, together with margin improvement from digital and marketplace, resulted in strongly improved gross margin of 47.7%.

The group posted an underlying operating loss of £0.2m in the period, down from a loss of £0.6m in the same period last year, as its focus on removing non-strategic cost and prioritising profitable growth have driven improvements in underlying profitability

CEO Stephen Moon commented: “We acted quickly and decisively in March to restructure given the COVID-19 pandemic, and as a result, we stabilised business operations. We have used the last six months to take advantage of changing consumer preferences and accelerated our digital and marketplace strategy. Improved channel mix and pricing, together with significant supply chain efficiencies underpinned a strong gross margin. Subject to any further severe COVID-19 related impact, we feel we can build on this strong platform.”

“We are also looking through COVID-19 and intend to get back onto our proven growth trajectory, underpinned by science-led innovation and strong brand equity. Major projects in supply chain and technology are underway, to help support the next phase of digital and international growth. We remain positive about our long-term profitable growth strategy.”

Retail technology group Eagle Eye Solutions increased revenues to £20.4m from £16.9m in the year to 30 June despite the impact of the COVID-19 pandemic.

Recurring revenues increased to 73% of group revenues (from 71%) as continued growth of the Tier 1 customer base both in the UK and in new geographies resulting in an uplift in “win” related revenue.

Two flagship international clients were won and went live in the year, The Warehouse Group in New Zealand and Southeastern Grocers in the USA

The group has also begun a growing number of powerful collaborations to target the US market, notably dunnhumby, Ecrebo and News America Marketing.

It also agreed contract extensions with Sainsbury’s, ASDA and JD Sports in the UK during the year.

Overall, it generated adjusted EBITDA of £3.3m, an increase of 359% on the prior year, which was ahead of revised market expectations, reflecting the growth in revenues combined with a continued focus on managing the cost base, releasing investment into the business in line with revenue growth. T

The company said it benefited from approximately £2.2m of COVID-19 related cash management measures and prudent working capital management, resulting in a cash inflow of £2.8m for the year, which will partly unwind in 2021.

The group said it has made a “positive” start to its new financial year despite COVID-19 with current trading in line with expectations

It said it remains confident it has sufficient headroom within its £5m banking facility, which was extended to September 2021, to support its existing growth plans.

CEO Tim Mason commented: “In spite of the challenging global outlook, we have continued to make excellent progress against our strategic objectives this year, winning new clients internationally and delivering leading loyalty and promotions programmes for some of the largest retailers in the world. Our people have been outstanding during these challenging times, and I am assured of our ability to respond to whatever may lie ahead.

“The global pandemic has prompted the acceleration of digital transformation in the retail sector and never has digital engagement with consumers been of more relevance. We will continue to invest in our people, product development, sales and marketing, and in new geographies during the year ahead, whilst carefully managing the business and cost-base. This will enable us to capitalise on the accelerated digital transformation in the retail sector, as well as sustain the momentum we have gained in the US and Australasia.

“With our growing number of Tier 1 clients, proven technological ability, powerful international partners and a strengthening financial position, I am confident for the future.”

Finally, C&C Group has appointed Barclays Bank and Numis Securities as joint corporate brokers with immediate effect. Barclays and Numis will work alongside the Group’s existing corporate broker, Davy.

On the markets this morning, the FTSE 100 has edged back 0.3% to 6,085.9pts.

Other than The Hut Group, major risers include McBride, up 3.6% to 64.2p, FeverTree, up 2.6% to 2,240.5p and Nichols, up 1.6% to 1,275p.

Fallers so far today include SSP Group, down a further 3.3% to 210.6p, Marston’s, down 2.4% to 45.7p and WH Smith, down 1.8% to 1,133p.

Yesterday in the City

The FTSE 100 ended the day up 1.3% to 6,105.5pts

Ocado shares surged 10.7% to 2,608p yesterday on stronger than expected third quarter sales and positive early signs from its newly stocked Marks & Spencer products. The share price jump took Ocado to a new all-time share price high and values the business at an extraordinary £19.5bn, which is larger than Sainsbury’s, Morrisons and M&S combined.

Other winners yesterday included Fevertree Drinks, up 4.6% to 2,183p, Pets at Home, up 4.5% to 300p, Marks & Spencer, up 4.4% to 109.3p, Hilton Food Group, up 3.4% to 1,220p, DS Smith, up 3% to 286.2p and Associated British Foods, up 2.6% to 1,990p.

The day’s fallers included agriculture and engineering group Carr’s, which dropped 14.1% back to 102.5p, Glanbia, down 5.6% to €8.81, SSP Group, down 4.9% to 217.8p, Greencore, down 3.1% to 111.5p and McColl’s Retail Group, down 2.4% to 22.4p.

Topics