BP profits drop by a third
BP’s (LON:BP) reported a dramatic drop in profits this morning, attributing poor results to lower crude prices and a huge fine related to the 2010 Gulf of Mexico oil spill.
Underlying replacement cost profit was $1.31bn (£841m) compared with $3.63bn a year ago. The British oil and gas company also cut its planned full-year capital spending again to “below $20 billion”, after cutting it 13 percent to $20 billion earlier this year.
At the beginning of this month BP reached a settlement of $10.8 billion with the US Department of Justice over the Deepwater Horizon oil spill, which was one of the worst environmental disasters in history. After setting aside $7.5bn for further costs relating to the case, BP recorded a loss of $6.26bn.
BP were further impacted by the price of oil, which is more than 50% lower than last year. Brent crude oil stood at $52.93 a barrel on Tuesday, compared with roughly $115 a year ago.
BP chief executive Bob Dudley said: “The external environment remains challenging, but BP moved quickly in response and we continue to do so.
Our work to increase efficiency and reduce costs is embedding sustainable benefits throughout the group and we continue with capital discipline and divestments.
In the past few weeks, oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future.”
Latest GDP data shows economic recovery
Gross domestic product grew 0.7 percent on the quarter in the April-June period, in line with economists’ forecasts, after a first-quarter expansion of 0.4 percent, according to the Office for National Statistics in a preliminary estimate.
Growth was largely led by the gas and oil industry, whose output jumped to 7%. The ONS say that may be due to tax cuts for the oil industry announced in March’s budget.
These statistics are clear signs that economic recovery is well under-way; the economy is now about level with the peak reached in the first quarter of 2008, before the financial crisis.
Due to the rate of recovery, some economists expect a minority of policymakers to vote to raise interest rates as soon as next week’s BoE meeting; however, it is more likely to be early 2016.
Manufacturing output figures were weaker, falling 0.3% as a combination of the strong pound and weak export markets hurt activity.
Based on thse statistics, the UK may be on track to become the fastest growing G7 economy. Howard Archer of IHS Global Insight explains:
“Growth of 2.6% in 2015 would likely make the UK, the fastest growing G7 economy as it was in 2014.
IHS currently forecasts GDP growth in 2015 of 2.2% in the US, 1.7% in Germany, 1.2% in France and 1.0% in Japan. We see overall Eurozone growth at 1.5% in 2015″
Data for other countries are set to be released later this week: the US on Thursday, Canada on Friday, eurozone data on August 14, and Japan on the 17th. GlaxoSmithKline results: what to expect
By Miranda Wadham – 28/7/15
As GlaxoSmithKline (LON:GSK) prepare to announce their second quarter results on Wednesday, here’s what we can expect to hear according to Dow Jones Newswires analysts.
Analysts are expecting Glaxo’s core net profit attributable to shareholders of 803 million pounds ($1.25 billion), 13% lower than the GBP921 million reported a year earlier.
There are expectations that sales will be £5.85 billion, a 5.3% increase on the £5.56 billion in the second quarter of 2015.
Back in March, Glaxo completed a $20 billion asset swap with Novartis (NYSE:NVS), with Glaxo swapping its high-margin oncology business for the Swiss company’s lower-margin vaccines franchise. This is the first full quarter for “new” Glaxo and analysts expect core earnings per share to drop by 14% to 16.5 pence.
Analysts surveyed by FactSet expect revenue from ViiV Healthcare, the HIV business majority-owned by Glaxo, to be 47% higher at £518 million, compared with the £352 million reported in the same quarter last year.
After the previous quarter’s results, Chief Executive Andrew Witty said he would pursue a “contrarian” strategy of chasing growth in emerging markets rather than high-margin sales in the traditionally dominant U.S. and Western European markets. Investors will be interested to hear how this plan is affecting the company’s performance.
miranda@ukinvestormagazine.co.uk
New figures show slow growth for supermarkets
New figures release by Kantar Worldpanel show slow but steady growth for British supermarkets. After a bad festive season, overall sales have now increased by 0.8% compared with a year ago, with stronger growth being enjoyed by the smaller retailers.
The Co-operative supermarket has returned to growth for the first time since July 2014, increasing its sales by 1.0% and retaining its 6.3% market share.
The Co-operative has returned to growth for the first time since July 2014, increasing its sales by 1.0%. While their growth is slightly ahead of the market, its overall share of 6.3% has remained the same as last year.
Sainsbury’s sales fell 0.3% but has edged its market share of 16.5% ahead of Asda, and has returned to its position as the nation’s second largest supermarket for the first time since January.
Customers at Waitrose have taken advantage of the recently introduced ‘Pick Your Own Offers’ initiative, which has pushed their market share up to 5.0% and sales up 3.0%.
Fraser McKevitt, head of consumer and retail insight at Kantar Worldpanel, explains: “Grocery inflation now stands at -1.6% for the 12 week period ending 19 July 2015 and comparable groceries are now 1.6% cheaper than a year ago. Prices have been falling since September 2014, although they are projected to start rising again by early 2016.”
Supermarket growth also coincides with figures released today by the Office of National Statistics, showing UK economic growth has accelerated in the second quarter of the year, helped by a big jump in oil and gas production.
The UK’s economy grew by an estimated 0.7% in the April to June period, compared with growth of 0.4% in the first quarter of the year.
Jury retires in Libor rigging case
The jury in the trial of Tom Hayes, the former UBS and Citigroup trader charged with manipulating global Libor interest rates, has retired to digest nine weeks of evidence.
Mr Hayes has pleaded not guilty to eight counts of conspiracy to defraud, saying he did not alter the London Interbank Offered Rate – the agreed rate at which large banks charge each other for borrowing.
The Serious Fraud Office alleges that Mr Hayes, from Fleet, Hampshire, corralled and bribed traders across 10 lenders into manipulating the rate for a profit.
It was revealed earlier this month that Hayes frequently wrote a Libor wishlist on Facebook, in statements like “Tom needs a low one-month Libor” or “Tom needs a high three-month”. He told investigators he even dreamt about rates because they “underlined everything that I traded”.
Hayes had admitted that he was extremely open about trying to influence rates and said that the practice was widespread. He had left a trail of emails and computer chats requesting higher or lower Libor rates, the court heard.
“I could’ve done a million things to reduce the trail,” he said in one of the interview transcripts, read out to the court.
Education technology software Earwig begin crowdfunding campaign
In the past decade schools have moved from one computer room, to ‘smart boards’ in every classroom and the standard issue of an iPad to every pupil – but what does the future of technology hold for education?
Apps have sprung up for education purposes left, right and centre. For pupils these days, revision no longer means copying out facts onto paper; it means flashcards made on an iPad with the ability to test yourself against others, or an app that teaches you French grammar.
So what about for the schools themselves? One entreprenueur has noticed a gap in the market when it comes to technology in education; a product that speeds up and organises paperwork, leaving more free time for teachers to actually teach.
Joe Ryan is founder of Earwig Academic Timelines, a software business that brings school technology into the 21st century, enabling teachers to create vivid, image-based timelines showing the progress of each pupil and allowing parents to track the progress of their children. Earwig is currently crowdfunding on Crowdcube, with a target of £152,000 in return for 8% equity.
Essentially, the company has developed an app and software package which allows teachers to capture and tag images, documents and video, so that they are automatically available as a dynamic timeline that shows the progress being made by each pupil. This cuts the time spent recording teaching evidence by 50%. As well as this, photos put onto a child’s stream will be available to be bought by the parents, generating an income – on top of fee for the service – of between £5 and £20 per pupil.
Schools are under constant pressure from Ofsted to provide documentary evidence of the progress of each child in every area of learning and at every level from Nursery to A Levels. According to Ryan, a product was needed to organise this process:
“We’ve found that the arrival of technology, particularly smartphones and tablets in schools means that teachers increasingly use photos, document scans and video to record everything from test scores to field trips. However, they currently have no convenient way to organise or present these. Printing images and making notes can take up huge amounts of expensive teacher time which would be better spent preparing and teaching. This provides the opportunity.”
There is, as far as the founders are aware, no competition for this product. Developed by an ex-teacher, who understood the problems teachers face and Ryan, who is software sales specialist, the perfect team was created; raising £285,000 from founders, friends and private investors. In what will be there second crowdfunding campaign on Crowdcube, the additional £152,000 will be needed to fill out the Earwig product suite, build the marketing and sales momentum and speed up the rollout to those 46,000 schools and other educational institutions which make up the UK education landscape.
For more information on this opportunity, visit Crowdcube.com
US-Italian car giant Fiat Chrysler given record fine
US regulators have imposed a record fine of $105m (£67.6m) on Fiat Chrysler over recall failures, in a crack-down on manufacturer defects.
The automaker will also offer to buy back as many as 1.5 million vehicles in an agreement with National Highway Traffic Safety Administration, as well as agreeing to allow an independent monitor to audit the company’s recall performance for three years.
The huge fine eclipses the previous record of $70 million imposed against Honda Motor Co in January for failing to report death, injury and other claims.
Mark Rosekind, administrator of the NHTSA, said in a statement: “Fiat Chrysler’s pattern of poor performance put millions of its customers and the driving public at risk.This action will provide relief to owners of defective vehicles, will help improve recall performance throughout the auto industry, and gives Fiat Chrysler the opportunity to embrace a proactive safety culture.”
The breakdown of the fine includes a $70 million cash payment, an agreement that Fiat Chrysler will spend $20 million improving its recall process and an additional $15 million payable if the automaker is found to have committed any further violations.
What will new Innovative ISAs mean for investors?
While George Osborne’s recent Summer budget provoked a variety of emotions in the public – disbelief and anger, mainly – there is likely to be one welcome addition, especially for the alternative finance sector: the Innovative Finance ISA.
As E-Car Club becomes the first crowdfunded company to pay back investors, now seemed the right time for Osborne to give an official nod to alternative finance methods. The new type of ISA will extend the usual list of tax-free ISA investments to include peer-to-peer lending to businesses from 6th April 2016. A consultation will also take place as to whether the ISA should extend to debt and equity crowdfunding investments. Essentially, it allows investors to put money into new companies and reap the rewards – tax-free.
ISA investors will have the ability to set up an Innovative Finance ISA through peer-to-peer lending platforms like LendingCrowd. Clearly, it is a move by Osborne to encourage people to invest in SMEs. By boosting and growing small businesses, there is the hope that thousands of new jobs will be created, which will subsequently help to haul down a budget deficit that he has already reduced from 10.2% of GDP to 5%. It is also another sign of the government recognising the benefits of an industry that continues to grow by 400% each year.
Whilst on the surface this looks like a good idea, there are however some concerns over underlying issues.
For the most part, peer-to-peer lending opportunities are tailored to sophisticated investors with wealth to deploy – which is very different to the primary audience at which ISAs are aimed. They are traditionally used to encourage ordinary people to save for the future.
Furthermore, most equity-based crowdfunding investments already qualify for tax relief that is far more generous than what is on offer via ISAs. The majority of fundraisings are eligible for the enterprise investment scheme (EIS) or its junior partner, the seed enterprise investment scheme (SEIS); meaning that, by offering and advertising ISAs as a way to save, people without specialist knowledge may end up making less money by putting the money into an Innovative ISA rather than one of the other schemes.
The name “Innovative ISA” is a broad umbrella term that, pending the aforementioned report into including equity crowdfunding opportunities too, can be extended to other types of alternative finance in the future. The rules surrounding this new type of ISA will be clarified through technical consultation on the draft legislation, with the final arrangements set in time for the new tax year.
Greek creditors arrive in Athens for negotiations
Greece’s creditors have begun arriving in Athens to start technical discussions on a third euro bailout deal.
The negotiators were originally expected to arrive last week, although a spokesperson has said that there is no reason for the delay. Talks have just begun but high level talks are not due to start until early next week.
Ex-finance minister Yanis Varoufakis recently told a group of investors in London that he had commissioned a small team to work on a contingency plan, should the the European Central Bank (ECB) decide to cut off emergency funding to the Greek financial system. According to Greek newspaper Kathimerini the plan would involve copying online tax codes in order to introduce a parallel payment system if the banking system was closed down, which would have seen the return of the drachma.
“The context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history.” Varoufakis told the Daily Telegraph.
Earnings season shows power of US tech companies
The US earnings season has been relatively strong, most notably for a number Tech companies, with most having beaten analyst’s expectations.
The likes of Amazon, Google and Apple have all posted solid revenue increases demonstrating the dominance of the US Technology sector.
Amazon (NASDAQ:AMZN) released results last week, disclosing an unexpected profit of $23.18 billion; the company’s first profit. Analysts had expected Amazon to lose $0.14 per share on revenue of $22.39 billion. Following its earnings beat, Amazon shot up more than 14 percent in after-hours trade.
Google’s stock jumped more than 7 percent in the after-market hours on Thursdayas the company also reported strong earnings results for the second quarter. Total income for the period ended June 30 was $3.93 billion, up 17 percent from $3.35 billion in the second quarter of 2014.
Apple posted a profit rise of 38% to $10.7bn; however, investors seemed disappointed with the results, and the stock dropped 5%. This sell-off is representative of the high standards investors are demanding from the sector.
The social media giants are set to release results this week; Twitter (NYSE:TWTR) is scheduled for Tuesday, and Facebook (NASDAQ:FB) rolls out on Wednesday. Their stocks have often become volatile after earnings results with investors being quick to sell or buy; Twitter has beaten consensus five out of six times since it went public in 2013, yet investors typically sell the first chance they get, pushing shares down 4.6 percent on average.
Twitter has suffered significantly over the past quarter, with CEO Dick Costolo stepping down and uncertainty surrounding his replacement affecting share price. The company went into this quarter at a similar price to rivals Facebook and Google and is now trading at around 50% lower than both.
Facebook, however, has followed a similar trend to Google over the past 3 months, with Google spiking before and falling slightly after releasing their results earlier in July. Facebook are set to release on Wednesday and have remained fairly steadier, but may be set to do the same following a sell-off of shares if they report increased earnings as expected.
Whilst the Dow Jones and S&P 500 are largely flat year to date, the tech dominated NASDAQ is up 7% having made a record high two weeks ago.
The strength in US tech stocks will give hope to investors who fear a negative impact of higher interest rates and some see further good news in 2015 for the sector.
“The question now is if the markets are fully valued and can they move higher without earnings growth,” said Jerry Braakman, chief investment officer of First American Trust
“Ultimately, it’s earnings that drive the market not revenue and a lot of the growth in earnings is expected to come in the second half of the year.”
Apple, Google and Amazon have accounted for around 37% of the NASDAQ’s gains but small caps within the sector have the potential to supersede US tech giant in terms of share price gains as investors seek the higher returns innovative early stage companies can yield.