04/05/2016
Morning Round-Up: Sainsbury’s and Next down, Imperial Brands meets expectations
Sainsbury’s shares fall on results
Supermarket chain Sainsbury’s have seen shares fall this morning, after its CEO warned that trading conditions in the “fiercely competitive supermarket sector” would remain tough.
Underlying profits fell to £587 million for the year to 12 March, down from £681 million in the previous year.
Pre-tax profits for the year were £548 million, better than expected after last year’s £72 million loss.
“The market is competitive, and it will remain so for the foreseeable future,” said Chief Executive Mike Coupe on Wednesday. “We believe we have the right strategy in place.”
The supermarket was hit by its own price cuts as well as a decline in food prices in general.
Shares (LON:SBRY) are currently trading down 3.99 percent at 374.30 (0907GMT).
Next issues profit warning
Clothing retailer Next has issued its third downgrade in five months, warning that sales could fall as much as 3.5 percent by the end of the year.
The poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a potentially wider slow-down in consumer spending,” Next said in its statement on Wednesday.
The company cited tough weather conditions in comparison to last year as the main reason for the fall.
However, investors have reacted well to the news, with shares in Next (LON:NXT) trading up 2.45 percent at 5,100 (0915GMT).
Imperial Brands meet outlook expectations
British tobacco company Imperial Brands (LON:IMB) saw a fall in first-half sales, but managed to maintain full-year outlook expectations.
Imperial, who make Davidoff and Gauloises cigarettes, saw sales of 133.9 billion cigarettes in the six months to 31 March, below expectations of 136 billion. Tobacco net revenue was £3.4 billion. However, operating profit came in above analysts expectations at £1.64 billion.
The Group’s results come just as major cigarette companies lose a battle in the EU high court against plain-packaging cigarettes, which may well be introduced next month.
Pfizer shares up on strong quarter
US pharmaceutical giant Pfizer saw shares soar in pre-market trade this morning after a favourable earnings release.
Revenue for the quarter stood at $13.01 billion, well above last year’s figure of $10.86 billion. The company cited a sales boost of its new treatments for cancer and its Hospira acquisition as reasons for the increase.
Pfizer adjusted their 2016 revenue expectation upwards and is now set to be between $51 billion to $53 billion, up from $49 billion to $51 billion.
Shares of the company were up 3.2 percent at $33.86 in premarket trade.
Morning Round-Up: Liberty House place bid, Just Eat shares soar, Lufthansa slows growth
Liberty House to bid for Tata Steel plants
Metals group Liberty House will submit a letter of intent to buy the British steel plants put up for sale by Tata Steel, possibly saving 11,000 jobs.
This will be the first bid since Tata announced their intention to sell.
A spokeswoman confirmed that the Group has put in “place a strong internal transaction steering committee and panel of leading external advisers to take the bid forward.”
Just Eat shares up over 8 percent
Shares in takeaway site Just Eat have risen over 8 percent this morning as the group upgraded their full year guidance.
Highlights from the announcement showed order numbers for Q1 rising 57 percent year-on-year to 31.5 million, with its full year revenue expectation increased to £358 million. Underlying EBITDA for the full year is now expected to be between £102-104 million, up from the previous guidance of £98-100 million.
CEO David Buttress added:
“We have had an excellent start to 2016 and I am delighted with the Company’s performance and the momentum in the business”.
The company’s shares (LON:JE) are currently up 9.21 percent at 418.82 (0933GMT).
Lufthansa slows growth after reporting loss, shares fall
Lufthansa has announced plans to slow the pace of growth plans year, after being hit by stiff competition from low-cost airlines.
The German airline reported a net loss of €8m in the three months to the end of March – a sharp fall from the €425 million profit reported a year earlier. Seat growth will now be at 6 percent this year, instead of the 6.6 percent initially planned. The announcement comes just days after British Airways owner IAG also decided to slow the roll-out of growth plans, after being hit by a lack of demand after European terror attacks. Shares have fallen 6.7 percent on the news this morning, at 12.80 (0937GMT).03/05/2016
HSBC reports better-than-expected drop in profits
HSBC has reported a 14 percent drop in profits for the first quarter, hit by “extreme levels of volatility” in financial markets throughout January and February.
However, analysts had expected the fallout to be far worse for the bank, with chief executive Steve Gulliver commenting that it had been “resilient in tough market conditions”. “Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses. However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank,” he added. Profit before tax stood at $6.1 billion for the three months to March, down from $7.1 billion a year ago. Its adjusted revenue for the first quarter amounted to $13.9 billion, a 4 percent drop from the same time last year. Shares in HSBC have moved up on the news, currently trading up 2.50 percent at 463.75 (0811GMT).03/05/2016
Exxon Mobil beats expectations in tough market
Exxon Mobil, the world’s largest publicly traded oil producer, reported a sharp profit drop after being hit by low oil prices and tough market conditions.
The company reported a $1.8 billion profit, a sharp decline from $4.94 billion in the same period last year and its lowest quarterly profit since 1999.
However, the results remained better than expected by analysts, with CEO Rex Tillerson attributing this to the company’s large size and cash flow. He said:
“The organization continues to respond effectively to challenging industry conditions.”
Exxon Mobil’s share price is reflecting the positive earnings, up 1.12 percent at 89.02 (1519GMT)
Earnings reports: IAG, AstraZeneca, Amazon, Restaurant Group
IAG, the owner of British Airways and Iberia, has announced plans to slow expansion plans in the wake of weaker demand after the Brussels attacks.
The group reported pre-tax profits of €124 million for the first quarter, compared with a loss of €37 million in 2015. However, shares have dropped 3.45 percent this morning on the news that they will be scaling back their planned expansion of routes.
Shares are currently down 3.81 percent at 530.00 (1142GMT).
AstraZeneca saw a 12 percent fall in underlying earnings in the first quarter, broadly in line with expectations.
The pharmaceutical company have been hit by drug patent expiries, with analysts expecting weak earnings throughout 2016 and 2017.
However, share price is broadly unaffected by the news, currently up 0.13 percent at 3964.50 (1146GMT).
Online retail giant Amazon has seen another strong quarter, reporting a $513 million profit and a 28 percent jump in sales.
The company’s investment into technology appears to have paid off, with their Kindle and Fire tablets pushing sales to $29.1 billion.
Restaurant Group, the owner of Chiquito and Frankie & Benny’s, saw shares take a dive this morning after cutting their profit forecast.
The group are now predicting full-year like-for-like sales will fall by between 2.5 percent and 5 percent, with profits between £74 million and £80 million.
Restaurant Group is currently trading down 23.91 percent at 284.91 (1156GMT).
29/04/2016
RBS reports £968 million loss after government fee
The Royal Bank of Scotland saw losses more than double to £968 million for the first quarter of the year, after paying a £1.2 billion fee to the British government.
Operating profits rose to £421 million for the quarter, up from just £37 million in 2015. The £1.2 billion payment to the government was made to remove the Dividend Access Share, meaning it can now pay a dividend to investors.
It was also hit by £238 million restructuring costs, including the spinning off of subsidiary Williams & Glynn.
RBS shares are currently trading down 1.16 percent at 241.96 (1037GMT).
US economy slows in Q1 2016
The US economy slowed in the first quarter of the year, according to figures released today, just hours after the Federal Reserve voted with caution and kept rates steady.
US economic growth slowed to an annual pace of 0.5 percent during the first three months of the year, a sharp drop from the 1.4 percent seen in the last quarter of 2015.
Gross domestic product rose at an annual pace of 0.5 per cent in the first quarter, slower than the 0.7 percent estimated by analysts. Household spending, a key driver of US growth, slowed to 1.9 per cent growth in the first quarter from 2.4 per cent previously.28/04/2016
Would banks really desert London in event of a Brexit?
With the threat of a Brexit growing ever closer, stark warnings of the potential impact on the City of London grow louder. Bank of England governor Mark Carney has warned of major banks leaving the city in their droves, fleeing towards the safety of EU countries. But how likely is that to happen?
It appears to be a generally universal opinion that a Brexit would have a negative effect on the City, at least in the short term. London’s financial centre is the world’s largest, contributing 9.6 percent to the UK’s GDP in 2011. It is home to 250 foreign banks, most of which are based here because of the access London gives to the EU market. Without that, banks could be forced to relocate abroad.
“A significant amount of financial trade currently booked in London would leave if the UK left the EU,” says Alex Wilmot-Sitwell, head of the European arm of Bank of America Merrill Lynch. “It wouldn’t happen overnight but, steadily, it would fragment throughout the EU.”
Of course, it largely depends on the agreement the UK reaches with the EU as to whether the City would retain unfettered access to the single market. However, without it, Carney has warned of the consequences:
“Fundamentally in its broadest terms, the question is what degree of mutual recognition would be accorded to the UK… and whether or not a mutual recognition framework could be negotiated that would as much as possible replicate the current passporting regime,” Carney said.
HSBC warned in February of the possibility of moving a large part of their investment banking arm to Paris should a Brexit happen:
“If the UK leaves the EU it could have a significant impact on our non-ring-fenced bank – our trading room, corporate banking and investment banking – although it would not have an impact on our holding company domicile,” he said.
“In that situation a number of jobs would leave the UK.”
However, some are sceptical as to whether the impact would really be so great. After all, London was a global financial centre long before Britain joined the EU in 1973, and has remained so despite not joining the single currency. It boasts an impressive skill set, the world’s most universal language, and a time zone that allows for same-day working with both Japan and the US – even without access to the EU, London is a beneficial city to base business.
In reality, it is not easy to simply move your operations abroad – it would be timely and costly. According to lobby group TheCityUK the 250 foreign banks based in the UK employ almost 160,000 people; moving this number abroad, or recruiting again, would be no easy task.
Arguably, the City is the greatest financial centre in Europe with one of the most welcoming tax and regulatory environments. Any post-Brexit negotiations are likely to saw in favour of the UK; as we import £68 billion more goods from Europe each year than we sell there, we are in a strong bargaining position.
In the event that the public vote ‘yes’ to leaving the European Union on the 23rd June, in the short term the effects are likely to be negative. The Sterling may well drop against many other currencies, largely on the panic created by the uncertainty of the future. But after that, it could go either way – in reality, no one can be sure. With a lack of any precedent to follow, we can only hope for smooth post-vote negotiations.
Miranda Wadham on 28/04/2016
Earnings round-up: Airbus, Sony, Boeing, Samsung
Airbus shares have dropped this morning after CEO Tom Enders warned of a “challenging year” for 2016.
The company reported a 23 percent drop in core operating profits to 501 million euros, causing shares to fall nearly 6 percent.
Recent problems with the gearbox on the A400M’s giant turboprop engines could also prove “significant” in the near future, according to finance director Harald Wilhelm.
Shares are currently trading down 5.68 percent at 55.12 (1340GMT).
The world’s largest plane-maker Boeing also reported today, with earnings falling $0.12 billion from last year to $1.22 billion.
The company saw first-quarter profit drop 9 percent after being hit by a $156 million charge for its KC-46 aerial refueling tanker, as well as a $70 million pretax charge for its 747 program.
Its share price remains largely unaffected, currently trading down 0.01 percent at 137.06 (1349GMT).
Samsung reported a strong second quarter, with operating profit coming in ahead of expectations after a “robust” sales of their Galaxy S7 smartphones.
The company reported a 12 percent earnings gain between January and March, with operating profit coming in at 6.7 trillion won.
Sales were really driven by their mobile range, with profit for the smartphone division jumping 42 percent from a year earlier to 3.9 trillion won, an almost two-year high.
“We expect our solid performance to continue,” Samsung investor relations chief Robert Yi said during a post-earnings conference call.
Sony shares fell this morning after reporting a loss in its image-sensor business, a sector designed to push growth in the technology company.
Annual operating profit more than quadrupled to 294.2 billion yen for the year ended March, after a cost-cutting a restructuring programme put in place by chief financial officer Kenichiro Yoshida. However, its image sensor arm swung to a loss of 29 billion yen, down from a profit of 89 billion yen the previous year.
Sony is currently trading down 2.08 percent at 2,778.00 (1403GMT).
28/04/2016