BUSINESS LIVE: Wage growth slows; Vodafone agrees Microsoft AI deal; Ocado baskets shrink

Card Factory shares fell sharply on Tuesday, despite the group lifting profit expectations to the top-end of forecasts after enjoying strong festive trade.

The greetings card and gifts company told investors it expects to deliver profit at the top end of market expectations for the full financial year on the back of strong sales growth during the 11 months to 31 December.

Sales for the period increased by more than 10 per cent to £476.9 million, from £432.6 million a year ago, with the growth driven by ‘continued positive momentum across the business and the effective execution of our strategy’.

Brexit Britain is resilient and remains one of the world’s most important investment destinations, a global poll of business leaders has found.

The PwC survey showed the UK is the most strategically important country for US chief executives and is also becoming an increasingly key location for Chinese firms.

The audit giant’s findings, published at the World Economic Forum in Davos, undermine repeated claims that Britain’s departure from the European Union has diminished its place in the world.

Frasers Group – which is controlled by tracksuit tycoon Mike Ashley – has tightened its grip on Asos.

The retail giant, whose brands include Sports Direct, House of Fraser and Flannels, increased its control of the fast fashion business from 17.9pc to 24.1pc.

It has been building holdings in Asos as well as rival Boohoo since the summer.

Cairn Homes defied a downbeat mood among housebuilders after delivering record sales in 2023, with the Irish firm predicting another bumper year ahead.

Cairn reported 1,741 new home sales in 2023, up from 1,526 the previous year, generating revenue of €665.0 million (£573million), up from €617.4million in 2022.

The London-listed group’s forward order book for 2024 was valued at €900million and 2,350 homes, nearly triple the forward order book value of €374million at the same time the previous year.

Morrisons’ private equity owner has hired former Unilever and Tesco boss Sir Dave Lewis as it beefs up its top team.

New York-based buyout group Clayton, Dubilier & Rice said Lewis will become an operating adviser and ‘support the firm in identifying and evaluating new investment opportunities’.

Experian revenues surged in the third quarter on the back of resilient demand, particularly in Latin America.

The credit data firm, which is one of the UK’s top credit rating agencies, reported a 9 per cent rise in revenues in the three months to 31 December.

Charles Hepworth, investment director at GAM Investments:

‘Average weekly earnings over the three months to end of November grew at 6.6% compared to the comparable year before. The previous reading was 7.2% and a shift lower to 6.7% was expected, so not too far off the mark and obviously subject to some revision.

‘What is important is how the Bank of England views this as the Bank was expecting pay growth to still remain higher at this point. The unemployment rate held steady at 4.2%.

‘A softening in wage growth will hopefully help extinguish any fears of persistent vicious wage-inflation spirals, if anything as wage growth cools, inflation should cool too in a virtuous spiral but we are only still at the first part of that journey with wage growth still at the high-end for the Bank of England at least.

‘Every journey starts with small steps and as we see inflation approach the Bank of England’s target, calls for rate cuts will grow ever louder.’

Ocado Retail is on track to return to positive earnings for the 2023 financial year after higher selling prices and growing customer numbers offset shrinking average order sizes.

The 50:50 joint venture between Ocado Group and Marks & Spencer saw revenues jump 10.9 per cent in the 13 weeks to 26 November, reflecting a fourth consecutive period of quarter-on-quarter growth and up from 7.2 per cent in the third quarter.

Average selling prices rose 5.4 per cent year-on-year, while Ocado also benefited from a 5.9 per cent rise in active customers to 998,000, a 4.8 per cent increase in volumes, or number of items sold, and a 3.8 per cent rise in average basket value.

Ocado Retail is on track to return to positive earnings for the 2023 financial year after higher selling prices offset shrinking average order sizes and its active customer base grew to neatly one million.

The 50:50 joint venture between Ocado Group and Marks & Spencer saw revenues jump 10.9 per cent in the 13 weeks to 26 November, reflecting a fourth consecutive period of quarter-on-quarter growth and an increase on the 7.2 per cent reported for the third quarter.

Ocado Retail benefited from a 5.9 per cent rise in active customers to 998,000, a 4.8 per cent increase in volumes, or number of items sold, and a 3.8 per cent rise in average basket value.

Its average basket size by number of items fell 1.6 per cent to 43.8.

‘Our trading performance, and our focus on costs, has translated through to our bottom line, returning to positive EBITDA for the full year,” the joint venture said.

It made a loss of 4 million pounds in the 2021-22 year.

Ocado Retail also said it hit its highest ever level of sales over the peak Christmas trading period. Overall sales increased 7 per cent between 20 to 24 December.

For the new 2023/24 year, the joint venture forecast revenue growth in the ‘mid-high single digits’.

Vodafone has agreed a ten-year partnership with Microsoft to bring generative AI, digital, enterprise and cloud services to more than 300 million businesses and consumers across its European and African markets.

The British company will invest $1.5billion in customer-focused AI developed with Microsoft’s Azure OpenAI and Copilot technologies, it said, and will replace physical data centres with cheaper and scalable Azure cloud services.

Microsoft will in turn become an equity investor in Vodafone’s managed IoT (Internet of Things) platform when it is spun out as a standalone business by April 2024, and help scale Vodafone’s mobile financial platform in Africa.

Vodafone boss Margherita Della Valle said:

‘Today, Vodafone has made a bold commitment to the digital future of Europe and Africa. This unique strategic partnership with Microsoft will accelerate the digital transformation of our business customers, particularly small and medium-sized companies, and step up the quality of customer experience for consumers.’

Alice Haine, personal finance analyst at Bestinvest:

‘The UK jobs market continued to show signs of softening at the end of last year with the estimated number of payrolled employees dropping by 24,000 in December and vacancies falling by 49,000 on the quarter to December to 934,000 – the 18th consecutive period of decline – as employers remained cautious about hiring amid uncertain economic conditions.

‘The cooling jobs market is feeding through into wage growth with the increase in regular pay, excluding bonuses, easing to 6.6% on the year in the three months to November.

‘Annual growth in average total pay, which includes bonuses, also dipped over the same period to 6.5%. In real terms, real salaries grew 1.4% and total pay 1.3% once inflation is factored in – meaning that incomes are growing faster than price rises and stretching further than they did a year ago.

‘The hope is that real pay growth will remain positive in 2024 because inflation is expected to ease further over the course of the year.

‘While some forecasters expect inflation to drop rapidly in the first quarter amid lower energy prices, such optimism may be tempered by the growing tensions in the Red Sea and wider Middle East – a reminder that global price pressures are still very much with us and the risk of change is always a factor.’

Richard Carter, head of fixed interest research at Quilter Cheviot:

‘The external market is looking for signs that the labour market is loosening as it will show that monetary policy is working and inflation will continue to fall and stabilise.

‘However, keep rates too high for too long and the Bank might overshoot its aim and cause more pain than necessary in the labour market.

‘So far though, in October to December 2023, the estimated number of vacancies in the UK fell by 49,000 on the quarter to 934,000.

The estimate of payrolled employees in the UK for December 2023 decreased by 24,000 on the revised November 2023 figure to 30.2 million.

‘This may be as a result of a change in the method of data collection but while there is now certainly more optimism in the air in respect to the UK’s economic future, businesses are still being battered by the cost of living storm.

‘This rate may well jump up if the Bank does indeed keep rates higher for longer.’

Wage growth excluding bonuses slowed to 6.6 per cent in November, down from 7.2 per cent in October, fresh data from the Office for National Statistics shows.

Easing wage growth will encourage market confidence of looming Bank of England interest rate cuts.