Reckitt Benckiser shares fall after weak sales
Reckitt Benckiser (LON:RB) sales grew by 2 percent in the last quarter, falling shy of the 2.8 percent growth estimated by analysts.
The health, hygiene, and home products producer put the miss down to “flagged issues in Korea, Russia and our Scholl innovation.”
Reckitt Benckiser suffered a large exceptional charge in first half earnings tied to deaths in South Korea from 2001 to 2011 related to their humidifier disinfectant.
After updating the market in July to expect like-for-like sales growth to be towards the lower end of the previously stated 4 percent to 5 percent it gave in February, today it has advised they are aiming for 4 percent.
Shares in the company are currently trading down 2.62 percent on the news, at 7,135 (1325GMT).
Is Clinton really the ‘safer bet’ for the financial markets?
In the financial markets, it has always been assumed that Democratic nominee Hillary Clinton would make a better president than her Republican counterpart Donald Trump. This is more practical than political, since Clinton is assumed by Wall Street to be a “safer” candidate than Trump, a so-called “wildcard” nominee with no track record in politics. But how true is this assumption? Below we explore reasons why a Clinton presidency may not be a safe bet after all.
For starters, political experts have noted a remarkable similarity between both parties on trade and corporation provisions, which means that a Clinton presidency isn’t necessarily better for stocks or the economy. After all, if we are assuming that Trump is a bad idea simply because he’s the unknown, we also can’t put much stock into Clinton given that her party’s policies on market-sensitive sectors are roughly the same.
For example, Clinton and Trump have both opposed the Trans-Pacific Partnership agreement, despite the latter being more vocal about it. If Clinton is elected president, her stance on TPP wouldn’t benefit US industrials, which rely heavily on international trade.
However, where both candidates differ dramatically is on the tax code. Trump wants to cut taxes, whereas Clinton wants to restructure them to extract more money from high-income earners. It’s too bad she hasn’t yet offered any specifics around some of her popular reforms, such as the middle-class tax cut. There’s little guarantee that raising taxes on high income households will improve the state of the economy. There’s even less evidence to suggest that taxing the rich will solve America’s growing inequality problem.
While Clinton has vowed to reform the financial markets, it’s difficult to take her word seriously when she insists on getting paid hundreds of thousands of dollars to give speeches to Goldman Sachs and other financial institutions. At a time when most Americans want real financial market reform, it’s unclear whether Clinton will initiate them. In this instance, perhaps a wildcard candidate wouldn’t be so bad after all?
One of Clinton’s most noble fights has been against the pharmaceutical industry, which she has accused of price gauging the American public. If you’ve invested in the healthcare industry, a Clinton White House definitely isn’t in your best interest. Healthcare and pharmaceutical stocks have sold off sharply in response to Clinton’s criticisms. In year-over-year terms, healthcare is the fourth-worst performing sector on the S&P 500. Investors can expect more hard times if the tough-talking former Secretary of State is sworn in this winter.
Then there’s the elephant in the room that many in the market community simply overlook: Hillary’s hawkish voting record. The former First Lady is often referred to as “Hillary the Hawk” for her support of military intervention across the Middle East and North Africa. She voted in favour of the Iraq War, the 2009 troop surge in Afghanistan and NATO intervention in Libya to overthrow Muammar Gaddafi. She was also in favour of arming rebels in Syria – many of which would later join ISIS, arguably the most destructive sub-state actor in the modern era.
So whereas Trump may talk tough, Clinton has actually voted on policies that have sunk the United States into a spiral of endless wars and economic peril. She has also supported the same policies that have made the Middle East more destructive than it was before. This has led to many nasty side effects, including the European refugee crisis and growth of terrorist cells around the world.
While nobody is saying Clinton will launch another war once she assumes office, her woeful track record should be enough to give pause to investors assuming she is the safer choice as president; combined with her other policies, there’s little evidence to support this. That’s not to say Donald Trump is the better choice – but we should at least have an honest conversation about where the risks truly lie.
The US presidential election takes place November 8.
Nikolas Xenofontos, Director of Risk at easymarkets.com on 18/10/2016
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Pearson shares fall by 10 percent
Pearson shares fell by over 10 percent on Monday morning, after reporting a worse-than-expected fall in sales amidst a challenging market.
The educational publisher reported disappointing sales numbers, with underlying sales falling by 7 percent in the first nine months of the financial year and 9 percent in North America. This contrasts initial projections by analysts who had only expected a fall in sales of around 5 percent. Today’s fall in shares for the company marked the biggest fall in the FTSE 100.
However, Pearson are expected to meet its profit targets for 2016 due to various cost-saving precautionary measures. Sales had improved in September and October which, coupled with cost reduction efforts, have enabled the company to achieve its expected profit forecast of between £580 million to £620 million this year.
Pearson reported that the required cutting of 9000 jobs, announced in January, is 90 percent complete. The move is expected to have saved the company around £350 million annually.
“While market conditions continue to be challenging, particularly in higher education, thanks to tight cost management we are on track to deliver our guidance this year and to achieve our long-term growth goal,” commented John Fallon, chief executive of Pearson.
Moreover, the company noted that the weakening of the pound in recent months had proven a boost for profits. The company also indicated that if sterling continued to remain weak for the remainder of the year, this would increase the earnings-per-share guidance range by around 4.5p to 59.5p.
Pearson is the largest publisher in the world, and its main headquarters are located in London. The FTSE 100 company publishes educational textbooks and owns the various exam boards behind GCSE and A-level examinations in the U.K. The company also operates in North America, notably its largest market, where it supplies higher education textbooks for college students across the states.
Super-prime property sales fall 86 percent post-Brexit
Uncertainty over the future of Britain’s relationship with the EU and increasing residential property taxes have led to an 86 percent fall in super-prime property sales, according to the latest statistics from the Land Registry.
Over the three months to August 2016, seven times fewer super-prime properties – those above £10 million – were sold than in the same period last year. The average price paid for the top five most expensive sales fell 25 percent from £22 million to £16.3 million.
Sales in the UK’s capital remained stronger than the rest of the country, with all sales within the three months to August being on property in London. This is in comparison to the same period last year where 30 percent took place elsewhere in the country, according to data analysis by London Central Portfolio (LCP).
The reduction in super-prime activity in the last three months could have a negative effect for the British government, who may receive £45 million less in Stamp Duty receipts. According to LCP, these findings could significantly impact next year’s Stamp Duty receipts as top end sales, which were expected to counter lower levels of Stamp Duty under £1m, fall away and prices drop.
Naomi Heaton, CEO of LCP, commented: “Despite roughly stable Stamp Duty takings in the financial year to April reported by HMRC, next year may see a different picture, particularly as the it took account of a major rush in March. Transactions increased 72 percent over February as buyers sought to beat the 3 percent Additional Rate Stamp Duty (ARSD) deadline, buoying overall receipts.”
17/10/2016
New business bank Redwood submits license application
A new business bank is to be founded by Jonathan Rowland and Gary Wilkinson, offering commercial mortgages and business deposit accounts to SMEs across Hertfordshire, Bedfordshire and Buckinghamshire.
Rowland and Wilkinson submitted a banking license application to Financial Conduct Authority and the Prudential Regulation Authority today, and hopes to receive its license in early 2017. The bank will be named Redwood Bank and is expected to attract £50 million worth of investment from a number of high profile investors, including Wildcat Capital Management, Falcon Edge founder Rick Gerson and David ‘Tiger’ Williams of Williams Trading.
AFP’s majority shareholder will the company owned by David and John Rowland, Acorn Global Investments Ltd, who have extensive experience and a successful track record in the banking and finance sectors. Subject to regulatory approval Jonathan Rowland will be the Redwood Bank’s chairman – Jonathan was the Chief Executive of Kaupthing Bank between 2009 ad 2013 and played a leading role in the restructuring and subsequent recapitalisation of the bank into Banque Havilland S.A. and Banque Havilland (Monaco) SAM.
“This is an ideal time to apply for a full banking licence; the major banks have not returned to anywhere near their pre-crisis business lending levels and the uncertainty caused by Brexit is likely to worsen the situation. At the same time, SMEs have shown a strong appetite for new market entrants offering competitive rates and superior customer service. Against this backdrop, we have a compelling opportunity to build a secure, robust and profitable bank”, Jonathan said.
The senior management team of Redwood will be led by Gary Wilkinson as Chief Executive, again subject to regulatory approval. Gary has over 30 years’ experience within financial services, and is the former Chief Executive of Cambridge & Counties Bank, which provides lending and deposit products for SMEs.
Miranda Wadham on 17/10/2016
UK economy ‘faces prolonged weakness’, report says
The UK economy faces a “prolonged period” of weakness, according to the latest report from EY Item Club.
According to a recently released Autumn report, think tank EY Item Club’s research has indicated the UK economy will experience weaker growth as consumer spending slows and businesses begin to reduce investments.
Despite predictions that the economy will grow by 1.9 percent this year, it warned that with inflation levels continuing to rise performance will be negatively affected. The report also warned that the UK economy’s relative stability since June’s Brexit vote was “deceptive”, and markets are yet to feel the full ramifications of the referendum result.
Whilst initial measures undertaken by the Bank of England to calm markets have been somewhat effective, the pound has continually begun to weaken sharply against the euro and the dollar, a worrying sign that the worst is perhaps yet to come. This sentiment was echoed in the comments made by a Bank of England (BOE) official to BBC’s Radio 5, who said inflation may potentially surpass original BOE targets of 2 percent.
The EY report reiterated these concerns, having projected inflation to rise to 2.6 percent in the next year, before settling down to 1.8 percent in 2018. Consumer spending growth is expected to slow from a projected 2.5 percent this year to around 0.5 percent in the following year, and 0.9 percent in 2018.
Business investment has also been forecast to fall due to uncertainty over Britain’s future trading relationship with the EU, dropping 1.5 percent this year and more than 2 percent in 2017.
EY has predicted that the impact of weaker consumer spending combined with lower investment will result in the UK’s GDP growth dropping considerably to 0.8 percent next year, before eventually increasing to 1.4 percent in 2018.
EY Item Club is a forecasting think tank group that provides insight and analysis into businesses and economic development.
Snapchat moves closer to stock market flotation
Social media giant Snapchat moved closer to flotation on Friday, after confirming that Morgan Stanley and Goldman Sachs would underwrite the initial public offering.
The IPO is expected to value the company at $25 billion, making it the largest social media company to float on the stock market since Twitter. The IPO is rumoured to take place before March 2017.
The Snapchat app allows users to send and receive messages and photos – called ‘snaps’ – which then disappear after a maximum of 10 seconds. It has seen a strong growth in popularity, attracting high-profile users such as Michelle Obama and Gigi Hadid. It has 150 million users watching 10 billion videos a day, and has seen a 350 percent increase in use over the last year.
Data from eMarketer shows that Snapchat may have the potential to bring in nearly $1 billion in advertising revenue by the end of 2017, a strong increase on the $367 million it is predicted to make from adverts this year.
14/10/2016
Sky report revenue rise as advertising dips
Sky reported a rise in revenue on Thursday, accompanied by news of a slowdown in advertising income.
Like-for-like revenues – which mitigate the impact of currency movements – rose 5 percent in the last quarter to September. Subscriber numbers increased by 106,000 over the same period, a decrease on last year’s increased figure of 134,000.
However, advertising revenue in both the UK and Ireland fell around 3 percent. In a statement, Sky reiterated that these were still competitive figures in a tough market.
Sky, which generates about a third of its business in Europe in countries such as Italy, Germany and Austria, has said that its group revenues had also seen gains. This was seen to be as a result of the stronger euro against the pound sterling, as European sales in euros are recalculated into sterling. As a result of continuing pound weakness against the Euro, Sky saw group revenues rise by 13 percent to £3.1 billion.
The company continue to generate strong viewership and revenue numbers for sporting channels, particularly football. Whilst Sky have paid a supplementary £600 million for its Premier League broadcasting rights, it has reassured that they were already seeing strong returns on the investment, ultimately the move was improving efficiency, with operating costs for the quarter notably lower than the previous year.
These figures follow a 19 percent plunge in the company’s shares the last 12 months, as investors worry about the broadcaster’s ability to compete with digital streaming services such Netflix and the cost of investing in expensive sporting rights.
Sky Chief executive, Jeremy Darroch commented: “We finished the quarter strongly after a slower start against the backdrop of the Rio Olympics and Uefa Euro 2016.
“We are on track financially in a year of investment on screen.”
The company emphasised that the released figures showed that growth had been promising “across all territories and categories”.
Hargreaves Lansdown issue warning over investor confidence
Hargreaves Lansdown issued a profit warning on Thursday, after a slowdown in new business growth.
According to figures, net new business intake in the September quarter stood at 1.1 billion, down 22 percent from the 1.4 billion recorded in the first quarter of the year. The total number of active client numbers increased by 20,000, down 17 percent from 24,000 in the first quarter of 2016.
However, assets under administration rose 9.5 percent from August to the end of September to a record £67.6 billion, stimulated by stock market rallies. The firm had also benefited from increased client trade demand following the June Brexit vote.
In a statement, the firm said:
“Despite the higher stock market levels, investor confidence has fallen and there remains much uncertainty about the future economic environment weighing on investors’ minds,” it said in a statement.
“Future stock market levels and investor confidence will have a significant part to play during the remainder of our financial year.”
Following the warning, Hargreaves Lansdown’s shares fell 2.8 percent. This marks a decrease of around 20 percent since the start of the year.
The FTSE All Share index was up 6.8 percent during September, according to figures by Reuters. This was attributed to boosts in profits for companies with overseas income, as a result of a the continued devaluation of sterling in the wake of the U.K’s decision to leave the European Union.
Tesco and Unilever row sparks #Marmitegate
British supermarket Tesco are running short of products after a row with food and grocery manufacturer Unilever.
Unilever have moved to increase the prices of their products by 10 percent after sterling’s recent devaluation. Tesco have so far resisted moves from the company to up the prices of their products, causing a shelf shortage of several items.
However, the bosses of both Unilever and Tesco have said they are sure the situation will be resolved “quickly”.
Marmite, PG Tips tea and Pot Noodles are among the brands taken off the Tesco online store on Thursday. Tesco have thus far refused to up prices, with many analysts agreeing with their position; producers tend to operate with a 20 percent – 30 percent margin, whereas supermarkets struggle with a margin of between 2 and 3 percent.
Both Tesco and Unilever warned on the possibility of increased food prices ahead of the referendum. However, according to a poll by YouGov, it appears that the current goods deficit will hit both Remainers and Leavers alike. According to the survey, Leavers favour Unilever brands such as PG Tips, with Remainers favouring Ben & Jerry’s.
The row has hit the share prices of both Unilever (LON:ULVR) and Tesco (LON:TSCO), dragging the FTSE down from last week’s highs. Unilever is currently down 3.96 percent at 3,576, with Tesco faring slightly better down 2.40 percent (1346GMT).
The row has hit the share prices of both Unilever (LON:ULVR) and Tesco (LON:TSCO), dragging the FTSE down from last week’s highs. Unilever is currently down 3.96 percent at 3,576, with Tesco faring slightly better down 2.40 percent (1346GMT).
13/10/2016