What to Watch: Lego profits slide, construction plunge, Tesco mortgage sale

Edmund Heaphy
Finance and news reporter
A Lego shop in Denmark. Photo: Michal Fludra/NurPhoto via Getty Images

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

Profits slide at Lego

Net profits at Denmark’s Lego – the largest toymaker in the world – fell by 12%, to 2.7 billion Danish kroner ($396m, £325m), in the six months to the end of June, the company said on Tuesday.

The company has been funnelling money into a series of strategic investments, including the opening of new stores, fresh products, and digital offerings.

It said on Tuesday that it was planning to open 160 more stores this year, an increase of nearly 40%.

Operating profits fell by 16% in the first half of its financial year, but revenue climbed by 4% to 14.8 billion kroner.

“We want to ensure that we stay really relevant even though there will be changes in the retail landscape. We still need kids to discover Lego. It’s about making sure we have the right access to kids,” said Niels Christiansen, Lego’s CEO.

Tesco sells 23,000 mortgages to Lloyds Bank

Lloyds Banking Group (LLOY.L) has agreed to buy the £3.7bn mortgage portfolio of Tesco (TSCO.L), Britain’s largest supermarket chain said on Tuesday.

Halifax, a subsidiary of the Lloyds group, will pay £3.8bn, or a 2.5% premium, for the 23,000 mortgage loans, Lloyds said.

The move will bolster the position of the banking group, which is already the largest mortgage lender in the UK.

Tesco Bank, the supermarket’s wholly owned retail bank, said in May that it was retreating from the mortgage market, citing tough conditions, and that it would sell its portfolio of mortgage loans.

Lloyds said it would fund the purchase using existing internal resources.

“The sale is in line with Tesco Bank’s strategy of focusing on a reduced number of products and services that serve the broad range of Tesco customers, and will reduce operating and funding costs,” Tesco said in a statement on Tuesday.

UK construction suffers sharpest slide in a decade

New orders in the UK construction industry dropped at the fastest rate in more than 10 years in August, a widely watched survey shows.

Building firms are now “braced for a protracted slowdown” as new work dries up, sparking a similarly sharp decline in business optimism to its lowest level since the financial crisis in 2008.

The latest figures reveal shrinking output for the fourth month in a row, raising fresh alarm bells over the health of the UK economy in the run-up to Brexit.

The headline figure in the latest purchasing managers’ index (PMI) in construction was 45 for overall output, down from 45.3 in July.

Figures below 50 on the index, by IHS Markit and the Chartered Institute of Procurement & Supply (CIPS), indicate a decline in trading conditions. Readings above 50 indicate growth.

European stocks and pound fall

European stocks fell sharply on Tuesday, with the FTSE 100 (^FTSE) down 0.13%, Germany’s DAX (^GDAXI) down 0.19%, and France’s CAC 40 (^FCHI) down by 0.37%.

The pound tumbled to a 34-year-low against the US dollar on Tuesday after newly installed UK prime minister Boris Johnson threatened to call another snap general election on 14 October.

It was down almost 0.65% against the dollar (GBPUSD=X) on Friday, to around $1.198, and down 0.48% against the euro (GBPEUR=X), to around €1.094.

What to expect in the US

Futures are pointing to a lower open for US stocks.

S&P 500 futures (ES=F) are down by 0.62% and Dow Jones Industrial Average futures (YM=F) are down by 0.66%. Nasdaq futures (NQ=F) are down by 0.77%.

Companies reporting later on Tuesday in the US include:

  • Conn’s (CONN)

  • Napco Security Technologies (NSSC)