John Wood Group points to a mixed future
John Wood PLC (LON:WG) today announced in its trading update for the six months to June 2016 that it expects earnings to remain 20% lower in 2016 compared to 2015.
The company said:
“We expect financial performance in the first half of 2016 to demonstrate the benefits of: our asset light, predominantly reimbursable business model; our attention to management of utilisation; and significant overhead cost savings from reorganisation, delayering and back office rationalisation.
Overall the outlook for the full year has not changed and there is no change to earnings before interest, tax and amortisation guidance of around 20% down on 2015 as given in May,”
Wood said that the current environment remains challenging for both volume and pricing but remains firm on its leading positions in brownfield operations having renewed contracts with Chevron, Enquest, Nexen, Shell, Talisman, Taqaand co.
Furthermore the company said it continues to see areas of future growth in its engineering sector despite saying its ability to forecast future projects remained difficult due to the lack of large-capax projects coming into the market.
Wood stated that plans to increase its dividend per share by a double-digit percentage for 2016 remain in place.
Following its trading announcement, Shares in Wood Group dropped 19p (2.8%) to 651.5p at EMT
30/06/2016
Tullow Oil earnings fall in first half
Tullow Oil PLC (TLW:LN) today said that it expects a drop in earnings for the first half of the year 2016 due to a 24% fall in its daily average oil and gas output.
The FTSE 250 Company estimates that its West African oil production sector fell to 51,000 barrels per day with numbers standing at 66,500 this time last year. The company now estimates that oil production will be between 62,000 to 68,000 barrels of oil a day this year, a fall from an estimated 73,000 to 80,000 barrels in February 2016.
As a result, the company’s average selling price dropped $10 per barrel to $61.
Total revenue dropped from 37.5% to $500m as gross profit also declined by a third to $200m.
The firm announced that oil from the TEN project in Ghana which is 96% complete will be expected ‘imminently’ (next three-six weeks) The project has remained both on budget and on schedule from since it’s opening in 2013 and is forecast to produce 23,000 barrels of oil a day in 2016.
Production at its Jubilee field in Uganda however could cost the company between £100-150 million as production due to interruption in March due to technical difficulties and will now need a further 8-12 weeks during the first half of 2017 to fix. Production however from the Jubilee site stabilized a gross rate in June of 90,000 barrels per day.
30/06/2016
Greene King profits soar despite Brexit impact
British brewer Greene King announced an impressive 61 percent rise in pre-tax profit for the year to May 1st, despite seeing a slowdown in business in the run-up to the EU referendum.
The group saw revenues reach £2.1 billion for the first time ever, up 57.6 per cent from £1.5 billion last year. Earnings per share grew to 64.4p, up 57.5 per cent on the 40.9p reported last year, with the dividend was also rising by 7.7 per cent to 32.05p per share. These results are the first reported by Greene King since it acquired the rival Spirit pubs chain, with CEO Rooney Anand calling the merger process over the past year as “transformational”.
However, despite good results thus far, Anand took the opportunity to warn investors of a likely dip in sales post-referendum. Anand gave a nod to the “resilience” of Greene King, before adding that it was likely that “consumer confidence will be affected by Brexit in the near-term”.
Greene King have seen its share price dip 15 percent since the vote, with little recovery; the company is currently trading down 0.26 percent at 757.50 (1028GMT).
29/06/2016
Morning Round-Up: Vodafone considers HQ move, FTSE opens higher, Toyota recalls 4m cars
Vodafone HQ may move elsewhere after Brexit
Telecoms giant Vodafone has warned that it may move its headquarters out of the UK, if a post-Brexit agreement with the EU is unfavourable to business.
In an emailed statement the company highlighted the importance of the EU’s free movement of capital and goods, saying it would take “whatever decisions are appropriate” once an agreement has been reached.
However, it said it was too early to “draw any firm conclusions regarding the long-term location for the headquarters”. The loss of Vodafone from the UK would have a significant impact on business sentiment, as well as British jobs; the company currently employs 13,000 people, with an operating division at Newbury, Berkshire, and a headquarters in London. FTSE opens higher for second day straight Britain’s top share index opened higher again this morning, as worry over an immediate exit from the EU recedes. The FTSE 100 index is currently up 1.68 percent (0932GMT), in positive territory for the second day in a row after crashing on Friday post-Brexit. Investor sentiment has been calmed by Prime Minister David Cameron’s comments yesterday that he was unlikely to trigger Article 50 until a new Prime Minister in place, possibly in several months time. Banks have started to recover losses, with the UK banking index and the life insurance index rising 2.3 percent and 2.8 percent respectively. Toyota recalls 4 million cars Japanese carmaker Toyota has announced the recall of over 4 million of its vehicles, due to possible faults with both the fuel emissions control units and airbags. 2.87 million vehicles worldwide may be affected by a fault with their evaporative fuel emissions control unit, covering vehicles made between 2006 and 2015. The Prius model, the Auris compact hatchback and Corolla compact models may all have issues. Earlier the same day, Toyota also announced the need to recall 1.43 million Prius and Lexus models worldwide due to a possible defect with the airbag inflator.29/06/2016
Rolls-Royce reassures UK commitment
Rolls- Royce Holdings PLC (LON:RR) today released a statement confirming it’s continued commitment to the UK following Thursday’s vote to leave the EU.
The engineering giant said:
“Although this is not the outcome the company would have chosen, Rolls-Royce remains committed to the United Kingdom where we are headquartered, directly employ over 23,000 talented and committed workers and where we carry out a significant majority of our research and development”
The FTSE 100 firm also made clear that the UK’s decision to leave the EU will have ‘no immediate impact on day-to-day business’ but has warned that the medium to long term effect of the vote will be dictated by the negotiations and trade deals established between the UK and the EU in the next stages.
In its statement the company also said that overall trading in the first five months of the year has been ‘broadly’ in line with expectations set out in its annual results earlier this year.
The British company’s cost-cutting scheme is ‘on track’ as the company seeks profitable growth as its share price halved leading to changes in senior management. The scheme is expected to produce a stronger performance to the second half of the year.
The Company said:
“As outlined in May, underlying profit before financing charges and tax for the first six months of the year is expected to be close to breakeven, with our performance significantly weighted towards the second half”
28/06/16
UK Loses Triple- A credit rating
Yesterday the UK lost its top AAA credit rating from Standard & Poors and Fitch as a result of the vote to leave the European Union.
The decision arrived shortly after Chancellor George Osborne said that the UK is “about as strong as it could be” to confront future economic challenges.
The ratings agency Standard & Poor said:
“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,”
“The negative outlook reflects the risk to economic prospects, fiscal and external performance, and the role of sterling as a reserve currency, as well as risks to the constitutional and economic integrity of the UK if there is another referendum on Scottish independence,”
Rival agency’s Fitch and Moody’s also downgraded the UK’s rating from AA to AA+ having already removed Britain’s status as an AAA rating before the referendum campaign started.
In a statement released yesterday Fitch said:
“Fitch believes that uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment.”
“Medium-term growth will also likely be weaker due to less favorable terms for exports to the EU, lower immigration and a reduction in foreign direct investment. An adjustment in the value of sterling and changes in the business environment could also affect growth.”
The loss of a Triple – A rating is the latest in a number of blows to the economy as sterling recently plunged to its lowest point in 31 years following the Brexit vote while the equity markets try to overcome the crisis.
The decision means that Britain’s position on the international market is at a greater risk as the move will inevitably effect how much the government can borrow on the international stage.
28/06/16
Redrow remains confident, shares up over 8 percent
Housebuilder Redrow remains confident in the wake of the European referendum, saying it expects this year’s profit before tax to come in above analysts’ expectations.
The company’s order book for private housing at the end of June stood at £870 million, over 50 percent higher than this time last year, with the average selling price of private homes up 10 percent to £328,500. On these figures, Redrow expects 2016 profit before tax to come in above the £240 million currently expected.
Redrow also confirmed that it expects the UK housing market to be largely unaffected by a Brexit vote, with housing sites remaining “busy”:
“The fact remains that there is a long-term underlying demand for new homes following decades of under-supply. This chronic shortage of housing leaves market fundamentals unchanged.”
Shares in Redrow jumped 8 percent this morning after the statement, and are currently up 2.82 percent at 302.80 (0949GMT).
28/06/2016
Morning Round-Up: FTSE stabilises, Osborne to raise taxes, German carmakers against Brexit
FTSE stabilises after Brexit volatility
The FTSE 100 has rebounded a little this morning after two days of negative trading in the wake of Britain’s vote to leave the European Union, with every stock up in early trading.
The key index slumped 5.6 percent over the last two sessions but is currently up 2.04 percent (0900GMT). Bank stocks, which tanked over 16 percent on the outcome of the vote, are trading up over 3 percent.
Whilst many hope this marks a start on the road to post-Brexit stability, economic figures are still fragile; the pound remains low, trading at around $1.33, and Britain has had its economic rating slashed by two ratings agencies since the vote. Both Fitch and S&P have downgraded the country by one level.
Osborne to raise taxes and slash spending in the wake of Brexit
UK Chancellor George Osborne confirmed on Tuesday that taxes would be raised and public spending cut after the vote to leave the European Union, saying that he had to focus on providing “fiscal security”.
In his first interview since the result was announced, Osborne told the BBC that “we are going to have to show the country and the world that the government can live within its means.”
“I will do everything I can to make it work for Britain in the difficult weeks and months ahead.”
German carmakers say free movement is essential for single market
German carmakers have taken a hard line against Brexit, arguing that free movement of people is a necessity to maintain access to the single market.
Matthias Wissmann, from the German Automotive Industry Association, called free movement of people a “bitter pill” that would need to be swallowed in order to maintain its place in the single market. This goes against the theory peddled by Leave campaigners that Germany would push for a generous trade deal with the UK in order to help their car export industry.
Wissmann continued, “We don’t like to build new barriers… but any bid to secure full access to the single market would necessarily come with conditions. Everyone who negotiates on the British side will understand that.”
28/06/2016
Poll shows post Brexit hiring freeze and redundancies
The majority of business leaders called for a remain vote and the shock outcome of Thursday’s Referendum result has left many feeling anxious about the future of their businesses and investment plans.
HSBC has recently announced that it will move a portion of its 48,000 UK based employees into Paris if the UK leaves the single market in post Brexit negotiations. Furthermore, financial giants such as Morgan Stanley, JPMorgan and BNP Paribas are reported to have already begun plans to reduce the size of their companies in the UK following the vote as fears over London’s status as the main financial capital in the world grow.
Amidst the uncertainty and a market, Chancellor George Osbourne made a public speech before markets opened this morning in an attempt to calm investors in the capital.
“Britain is ready to confront what the future holds for us from a position of strength. Growth has been robust and employment is at a record high. Our economy is now about as strong as it could be to confront the challenge the country now faces,” he said
His speech follows the release of a poll this morning conducted by the Institute of Directors (IoD) which began on Friday immediately after the result that has since polled over 1000 business leaders.
The results from the poll show that 64% of business leaders around the country feel that a Brexit vote will harm their business as results show that post Brexit plans are already on the table with 24% of members planning on freezing recruitment and 5% of companies saying they will make redundancies.
Simon Walker, director general of the Institute of Directors, said:
“Businesses will be busy working out how they are going to adapt and succeed after the referendum result. But we can’t sugar-coat this, many of our members are feeling anxious.
A majority of business leaders think the vote for Brexit is bad for them, and as a result plans for investment and hiring are being put on hold or scaled back.”
The concluding outcome of the poll showed that three quarters of Iod members said their top priority is to protect the British economy following the reaction of the financial markets that has seen the pound drop to it’s lowest since 1985.
27/06/2016
The Corbyn Crisis: who’s in and who’s out
Labour leader Jeremy Corbyn now heads a party in crisis, with nearly half of his shadow cabinet walking out in protest against his handling of the EU referendum.
The Labour leader stood defiant in his position on Monday, despite criticism of his weak leadership during the referendum campaign. Shadow health secretary Heidi Alexander resigned yesterday, with prominent frontbencher Stephen Kinnock following her lead this morning. In a statement, Kinnock expressed his respect for Corbyn as a leader, before saying that his “half-hearted and lacklustre role” in the referendum led him to the “conclusion that [Corbyn is] no longer able to lead our party.”
These resignations were then followed by latest shadow foreign minister Diana Johnson, shadow civil society minister Anna Turley, shadow defence minister Toby Perkins and Wayne David, the shadow Cabinet Office, Scotland and justice minister.
Despite his cabinet’s lack of confidence Corbyn will continue as Labour leader for the foreseeable future, stating on Sunday that he would not “betray the trust” of the people who voted for him and vowed to stand against anyone challenging him for the leadership.
Jeremy Corbyn has reappointed ministers as fast as they can resign, filling at least ten positions so far; these include the promotion of Diane Abbot to shadow health secretary, Emily Thornberry to shadow foreign secretary and Clive Lewis to shadow defence.
27/06/2016