What to Watch: On The Beach profit warning, UK economy shrinks, and WPP pops

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
On The Beach provides package holidays to beach locations. Photo: Mustafa Ciftci/Anadolu Agency via Getty Images

Here are the top business, market, and economic stories you should be watching today in the UK, Europe, and abroad:

On The Beach profit warning

Travel operator On The Beach (OTB.L) has issued a profit warning, blaming the plummeting value of the pound amid the threat of a no-deal Brexit.

The company said the diving value of sterling against the euro since May has forced it to push up its holiday prices compared with competitors.

On The Beach said it does not hedge its exposure to currency changes, unlike larger travel industry rivals, but instead alters prices dependent on the value of the pound.

"In what is a difficult general economic climate, we remain confident in the resilience and flexibility of our business model, focusing on profitable growth and an ability to capitalise on any structural changes in the market,” CEO Simon Cooper said.

Shares in On The Beach (OTB.L) crashed 17% on the warning.

UK economy unexpectedly shrinks

The UK economy unexpectedly shrunk in the second quarter of the year, with GDP dropping by 0.2% between April and June.

Office for National Statistics (ONS) figures showed the first quarterly decline in GDP in seven years, as Brexit uncertainty and weak global growth took their toll.

Many analysts had only expected the UK economy to flatline at 0% in the second quarter, but several industry surveys in recent months had pointed to contraction and painted a bleak picture of the health of the UK economy.

The surprise to the downside sent the pound falling against both the dollar and euro in the wake of the numbers.

WPP stock pops

Advertising company WPP (WPP.L) topped the FTSE 100 on Friday, with the stock rising 7.5% after it reported first half results.

Revenue rose by 1.6% in the first half of the year to £7.6bn, while pre-tax profit fell by 43.5% to £478m. Sales growth was a “strong beat” compared to forecasts, UBS said.

"We continue to simplify WPP, with a more integrated offer for our clients, better, more collaborative working environments for our people, and less complicated management structures,” CEO Mark Read said.

"When the Kantar transaction completes, our disposal programme will have generated proceeds of c.£3.6bn, allowing us to return significant amounts to shareholders and reduce our leverage to the low end of the target range.”

William Hill profit dives

Profits have almost halved at William Hill (WMH.L) after the bookmaker was hit hard by a UK government clampdown on betting machines dubbed the “crack cocaine” of gambling.

The company had already announced last month it will close around 700 branches, blaming the reforms as it put 4,500 jobs at risk.

The betting firm saw its profits slide 47% before tax to £50.8m in the six months to July, with significant investment in US expansion also denting earnings.

G4S spinning off cash business

Security contractor G4S (GFS.L) plans to separate its cash handling business and focus on its main security operations.

The outsourcing firm said its board has approved plans to split off the cash handling arm by the first half of 2020, following a review into the business.

Ashley Almanza, G4S chief executive, said the spin-off will “create two strong, focused businesses each with the clear potential to capitalise on market leading positions and to unlock substantial value for customers, shareholders, and employees.”

The announcement came as the group reported a 3.8% jump in revenues to £3.8 billion for the half-year to 30 June.

Goldman bankers face criminal charges

Seventeen current and former Goldman Sachs (GS) bankers — including its most senior London-based executive — have been hit with criminal charges related to a multi-billion-dollar Malaysian fraud case.

The Malaysian Attorney General’s office filed charges on Friday related to claims the country’s government were defrauded out of billions of dollars in bond deals, some of which allegedly ended up going to a producer of the film “Wolf of Wall Street.”

The fresh charges relate to the long-running scandal centring around Malaysian development agency 1MDB.

Goldman helped 1MDB issue bonds worth $6.5bn but authorities around the world have been investigating claims that billions were stolen from 1MDB over several years. Malaysian authorities alleged at least $2.7bn was stolen.

Ripple CEO eyes ‘multiple’ deals

The CEO of cryptocurrency company Ripple is working on “multiple” potential investments and acquisitions in the wake of a $30m investment in money transfer business Moneygram (MGI).

“We’re in a very strong position, our business is growing strongly, we have a strong balance sheet, and I intend to press our advantage,” Brad Garlinghouse, the CEO of Ripple, told Yahoo Finance UK.

Garlinghouse said active discussions on “multiple” potential investments and acquisitions were currently underway but declined to give further details.

“Deal are always very, very hard to predict,” he said.

Government spending review delayed by Brexit

The chancellor has shelved plans for a three-year review of Whitehall spending to give departments more time to prepare for a possible no-deal Brexit.

The Treasury will carry out a fast-tracked spending “round” rather than a full review to give ministers a quick and clear picture of their budgets for 2020/21, the ministry said late on Thursday.

The spending round will take just a few weeks, with departmental budgets likely to be in place by early September. By contrast, a full spending review, which sets budgets for the next three years or more, would have taken months.

“The prime minister and I have asked for a fast-tracked Spending Round for September to set departmental budgets for next year,” chancellor Sajid Javid said in a statement.

“This will clear the ground ahead of Brexit while delivering on people’s priorities.”

Uber dives after missing forecasts

Uber (UBER) shares crashed by 12% on Thursday after reporting disappointing second quarter numbers.

Revenue at the ride-hailing app came in at $2.87bn, versus analyst expectations of $3.05bn. The company made a net loss of $5.24bn in the quarter, though much of that was due to stock compensation following its IPO.

“Our platform strategy continues to deliver strong results, with Trips up 35% and Gross Bookings up 37% in constant currency, compared to the second quarter of last year,” CEO Dara Khosrowshahi said in a statement.

European markets drift lower

European markets were falling on Friday despite a strong session for US markets overnight.

Britain’s FTSE 100 (^FTSE) was down by 0.2%, France’s CAC 40 (^FCHI) was down by 0.7%, Germany’s DAX (^GDAXI) was up by 0.5%, and the Euronext 100 (^N100) was down by 0.6.

Asian markets mostly fell overnight. Japan’s Nikkei (^N225) closed up by 0.4%, but the Hong Kong Hang Send Index (^HSI) was down by 0.6%, and China’s Shanghai Composite (000001.SS) was down by 0.7%.

What to expect in the US

US stocks look set for a lower open later today. S&P500 futures (ES=F) were down by 0.5%, Dow Jones futures (YM=F) were down by 0.4%, and Nasdaq futures (NQ=F) were down by 0.7%.