McCarthy & Stone and Debenhams warn on profits, Ashtead posts solid results

London open

The FTSE 100 is expected to open 57 points lower on Tuesday, having closed down 0.03% at 7,631.33 on Monday.

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Retirement housebuilder McCarthy & Stone's chief executive has been pushed into early retirement of his own after the company issued a profit warning on Tuesday amid increased caution from potential customers. An anticipated strong spring selling season failed to materialise and the FTSE 250 company said it now forecast 2,100-2,300 sales for the financial year ending 31 August, meaning profits could fall between 17% to 32% to an expected operating profit range of £65-80m.

Debenhams has warned that annual profit will be at least 20% less than market expectations as the department store chain faces weak consumer spending and discounting by competitors. Pre-tax profit for the current financial year will be in the range of £35-£40m compared with analysts’ average forecast of £50.3m, Debenhams said.

Ashtead Group posted a solid improvement in revenue in its final results on Tuesday, with the figure rising 20% to £3.71bn, while rental revenue was ahead 21% to £3.42bn. The FTSE 100 company made a pre-tax profit of £927m for the year ended 30 April, compared to £793m a year earlier, with the board proposing a final dividend of 27.5p, making for a full-year distribution of 33p. “Our end markets remain strong and are supported by the continued structural changes in our market as customers rely increasingly on rental while we leverage the benefits of scale,” said chief executive Geoff Drabble.

Newspaper round-up

The wings may be falling off the bid by the British Airways owner IAG to acquire Norwegian Air Shuttle after it emerged that dithering by the chief executive, Willie Walsh, had allowed Lufthansa to begin its own takeover negotiations. Reports in the German press revealed that Carsten Spohr, chief executive of Lufthansa, Europe’s largest global airline group, had begun talks with Norwegian, two months after IAG began its own courtship. - The Times

The water industry regulator has threatened to take action against four of the country’s largest water suppliers after homes were left without water in the wake of the "Beast from the East" storm. Ofwat said there is “no excuse” for how Thames Water, Severn Trent, Southern Water and South East Water failed to protect their customers from major water shortages in the aftermath of the severe weather earlier this year. - Telegraph

Donald Trump directed the US Trade Representative to prepare new tariffs on $200 billion in Chinese imports Monday as the two nations moved closer to a potential trade war. The tariffs, which Trump wants set at a 10% rate, would be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries. - Guardian

US close

US stocks ended mostly down but off earlier lows on Monday as the energy sector lent a hand, with escalating tensions between the US and China undermining investor sentiment.

The Dow Jones Industrial Average fell 0.4% to 24,987.47and the S&P 500 closed down 0.2% at 2,773.87, while the Nasdaq ended broadly flat but in positive territory at 7,747.02.

On Friday, Trump announced 25% tariffs on up to $50bn worth of Chinese imports. China then retaliated by announcing 25% tariffs on $34bn-worth of imports from the US.

Oanda analyst Craig Erlam said: "We're seeing a slightly risk-averse tone in financial markets at the start of the week after the trade spat between the US and China ramped up over the weekend.

"Both countries have laid out plans to impose tariffs on one another on 6 July which is making investors a little uncomfortable, more so due to the potential for the situation to escalate further than the tariffs themselves. The question now is how much pain both sides will be willing to inflict on the other - and themselves in the process - before coming to an agreement that removes tariffs and eases investor concerns."

Elsewhere, oil prices rallied ahead of the OPEC meeting at the end of the week, with the cartel set to discuss reducing or even ending the coordinated output cut that was imposed to try to bring inventories back in line with the five-year average.