Morning round-up: FTSE off to uncertain start, Asian stocks affected by Italy
The FTSE 100 kicked Wednesday trading off to an uncertain start, dropping sharply before climbing again to trade at 7634 points (0909GMT).
The markets suffered a bad start to the week on Tuesday after the long bank holiday weekend, as impending political crises in Italy and Spain weighed heavy on investors minds.
The possibility of an anti-European coalition government coming into power in Italy sent Italy’s markets – and the rest of Europe’s – down during the day.
However, Italy’s main share index rebounded on Wednesday as its stop-gap Prime Minister meets with the President in a new attempt to get a government approved. The FTSE MIB is up 197.69 points at 21,544.50.
Italy’s crisis also affects Asia on Wednesday, with the biggest stock indexes closing down for the day.
Japan’s benchmark Nikkei 225 finished down 1.52% to 22,018.52 points and South Korea’s Kospi lost 1.96% to end at 2,409.03 points.
Bodycote (LON:BOY), Premier Oil (LON:PMO) and Kainos Group (LON:KNOS) are the LSE’s biggest risers this morning, up 64.5 percent, 3.70 percent and 12 percent respectively. Photo-Me is the biggest faller so far, down 31.40 percent, followed by Gym Group and Sabre Insurance.
Loss of passport contract weighs on De La Rue
Passport printing firm De La Rue (LON:DLAR) saw an 11 percent fall in adjusted operating profit for the year to the end of March, with concerns over the loss of its contract to print the new blue passports weighing on results.
The group also suffered from loss of revenue from its exited paper business, with operating profit dropping to £62.8 million. Group revenue rose 7 percent to £493.9 million.
“Solid growth in all segments has been offset by strategically focused increases in investment in R&D and sales, which will drive long term sustainable growth,” the company said.
“The sale of the paper business and the associated long term paper supply agreement have reduced our exposure to the volatility of the oversupplied paper market, while securing the surety of supply for our print business,’ said Martin Sutherland, Chief Executive Officer.
“Through this, and good cash generation from the business, we have significantly strengthened our balance sheet with net debt now at its lowest in five years. The stronger balance sheet provides the Group with greater flexibility to allocate capital to deliver long term shareholder value.”
Shares in De La Rue are currently up on the news, at 518.00 (0902GMT).
Photo-Me shares plunge 20pc on profit warning
Photo-Me (LON:PHTM) downgraded its 2019 profit guidance on Wednesday, after a weak performance from its Japan photo division.
The group blaming a market over-supply in its Japanese photo identification business, with Japan having the highest density of photobooths worldwide – something that has only increased since the Japanese government brought in its photo ID scheme two years ago.
Operators installed photo machines to cater for the expected demand, which failed to appear. Oversupply now troubles the Japanese market, leading Photo-Me to warn on profits for the 2019 year.
The group is now expecting to make pre-tax profit of around £44 million for the year to April, below market expectations.
“Although no final decision has yet been made, the board currently expects that it will maintain the group’s existing dividend policy at the full year results,” Photo-Me said.
However, the group’s laundry business has continued to perform well, with revenue up 49 percent to £32.3 million.
Shares in Photo-Me are down 21.41 percent at 118.99 (0848GMT).
AirAsia under investigation for illegal international licenses
An investigation has been launched against budget Asian airline AirAsia (KLSE:AIRASIA), after it was accused of obtaining its international flying licenses illegally.
Authorities in India confirmed that they were launching the investigation on Wednesday, causing the airline’s share price to fall by 6 percent.
Both AirAsia India, its Malaysian parent company, and the airline’s boss Tony Fernandes are involved, with the offices of AirAsia India searched by police on Tuesday.
Mr Fernandes’s Malaysian firm teamed up with India’s Tata group five years ago to create AirAsia India. Both AirAsia India and its parent company have denied any wrongdoing.
Shuva Mandal, director of AirAsia India, said in a statement:
“Air Asia India Limited refutes any wrong-doing and is co-operating with all regulators and agencies to present the correct facts. In November, 2016 AAIL had initiated criminal charges against its ex-CEO and had also commenced civil proceedings in Bangalore for such irregularities. We hope to bring early resolution to all such issues.”
Shares are currently trading down 7.85 percent at 3.05MYR (0833GMT).
Telford Homes profits up on demand from overseas investors
Telford Homes (LON:TEF) shares rose in early trading on Wednesday, after reporting a 35 percent rise in profit for the year to March 2018.
The group’s figures beat market expectations, with pre-tax profit hitting £46 million. For the year ahead, Telford Homes said it was likely to push pre-tax profit up to over £50 million, representing a 100 percent increase over four years.
Telford Homes declared a final dividend of 9.0 pence per share, bringing the total dividend for the year to 17.0 pence, up 8 percent on-year.
“Telford Homes continues to perform well and I am delighted to report such a strong set of results, which again have produced record levels of revenue and profit,” chief executive Jon Di-Stefano said.
“As we increase the scale of the business, our growth is underpinned by the under supply of new homes in London and robust demand at more affordable price points, particularly for rental housing.
“Our substantial development pipeline and increasing expertise in the burgeoning build-to-rent sector provide us with confidence for the future.”
The developer has benefitted from demand from overseas investors, especially from Chinese investors looking for London property.
“We are seeing growing investment from China due to the continued international attraction of London, despite Brexit, and strong rental demand relative to supply,” Di-Stefano said.
Shares in Telford Homes (LON:TEF) are currently trading up 1.38 percent at 464.83 (0816GMT).
Canada to buy Kinder Morgan pipeline in C$4.5bn deal
The Canadian government will buy the Kinder Morgan (NYSE: KMI) Canada Ltd’s Trans Mountain oil pipeline in a C$4.5 billion (US$3.5 billion) deal.
The country does not plan to be the long-term owner of the pipeline but will offer federal loan guarantees to ensure the construction throughout 2018.
Bill Morneau, the finance minister, said: “The federal government has reached an agreement with Kinder Morgan to purchase the existing Trans Mountain pipeline, and infrastructure related to the Trans Mountain expansion project.”
“So our message today is simple: when we are faced with an exceptional situation that puts jobs at risk, that puts our international reputation on the line, our government is prepared to take action,” he added.
The project has faced environmental opposition, with over 14,000 people signing the organisation’s pledge to halt the project due to the widespread concerns over environmental risks and the fight against climate change.
“Prime minister Trudeau has picked a fight with British Columbians by approving Kinder Morgan – and it starts now. The Kinder Morgan pipeline will not be built. Not on our watch,” said Caitlyn Vernon from the Sierra Club of British Columbia.
Justin Trudeau has defended the controversial project and said: “This is a decision based on rigorous debate, on science and evidence. We have not been and will not be swayed by political argument, be they local, or regional or national,” he said. “We have made this decision because we are convinced it is safe for BC, and it is the right one for Canada.”
The Canadian government has not made long-term plans clear but may sell the pipeline after completion, according to Canadian press.
Bloomberg has reported that the deal could be announced on Tuesday.
Smiths Group shares edge up on potential merger deal
Engineering firm Smiths Group (LON:SMIN) saw shares rise 2 percent on Tuesday morning, after it confirmed it was in merger talks with US company ICU Medical.
Smiths Group have said it was in “very early discussions” over the sale of its medical arm, adding there was “no certainty” a deal would be concluded.
ICU make devices used in infusion therapy and oncology, and have a proven track record of takeovers. Last year the firm purchased Pfizer’s Hospira Infusion Systems arm for $900 million.
There is very little known about the merger at present, but it is likely to be more of a joint venture than a takeover by ICU.
Responding to takeover speculation over the last couple of days, Smiths said that it “routinely reviewed all options for its businesses to maximise value for shareholders.”
“Any actual deal is probably still months away,” they added.
Revenue for the half-year to January was down 5 percent to £451 million, but Smiths said they were making “significant progress” on this. The group is likely to be valued at over £2 billion.
Shares in Smiths Group are currently trading up 2.66 percent at 1,765.83 (1125GMT).
George Soros spooks markets with Europe financial crisis warning
Billionaire investor George Soros warned that the EU may be heading towards another major financial crisis, spooking the markets on Tuesday morning.
Giving the keynote address at a meeting organised by think-tank the European Council on Foreign Relations in Paris, Soros criticised Brexit, warned on the European Union’s future and highlighted the key problems facing the EU.
Soros, whose pro-European Open Society Foundation donated £400 million to the Remain campaign, said the EU was in the midst of an “existential crisis” and said Brexit was likely to be “immensely damaging”.
Soros said the EU’s three key problems were the refugee crisis, territorial disintegration exemplified by Brexit and an austerity policy that has “hindered Europe’s economic development”.
He added that “everything that could go wrong in Europe, has gone wrong”.
He also warned that the strength in the dollar is taking focus away from emerging market currencies, which alongside the collapse of the Iran deal, is set to create trouble for Europe.
“We may be heading for another major financial crisis,” he said.
The FTSE 100, which was already trading down this morning due to worries over Italy and Spain, fell further on Soros’s speech, currently down 1.32 percent at 7,627.90 (1024GMT).
Idox shares down 16pc after earnings fall
Software solutions supplier Idox (LON:IDOX) saw shares sink over 15 percent at market open, after a trading update slashed full year earnings expectations.
The groups expected EBITDA for the full year is now likely to be in the range of between £13 – £15 million, down from previous market expectations of around £22.8 million. Underlying performance excluding the discontinued Digital division is expected to be in the range of £18- £20 million. Group net debt at the half year stands at £25.5 million.
However, an improved performance in the second half of the year is expected by the board, boosted by stronger May and June trading.
Laurence Vaughan, Chairman of Idox, commented:
“The major review and actions taken reflect our commitment to deal decisively with the issues faced by the Group during the last year. Despite the impact on our financial performance this year, this necessary programme of change has positioned the group to deliver an improved performance in future financial years.
“I believe that the Group has good growth opportunities through its continued focus on digital transformation and high quality governance solutions for the public sector. With new leadership in place we can look forward to the future with renewed confidence.”
The group also confirmed the appointment of David Meaden as Chief Executive, who will join Idox on 1st June.
Shares in Idox (LON:IDOX) are currently down 16.22 percent at 32.80 (1000GMT).
Rolls-Royce unveils new range of business jet engines
Rolls-Royce (LON:RR) surprised markets with the announcement of a new engine family for its business aviation unit, designed to push the troubled company back to the forefront of the market.
The Pearl engine has been purpose-built and will be the sole engine for Bombardier’s latest business jets, the Global 5500 aircraft and the Global 6500 aircraft.
Rolls-Royce have issued several profit warnings over the last five years, after its leadership in the industry began to be overtaken by rival companies including Pratt & Whitney and Snecma. However, it maintains a 42 percent share of the market, a percentage designed to be expanded upon by the surprise new range of engines.
Chris Cholerton, Civil Aerospace President at Rolls-Royce, said:
“Our teams have worked hard behind the scenes to develop this new engine and we are proud, once again, to lead the way in business aviation. The Pearl engine is a pioneering product, bringing together the most eco-friendly and efficient technologies available today.”
Shares in Rolls-Royce are trading down on the news however, down 2.44 percent at 822.,80 (0935GMT).