Thomas Cook feels the weight of terror attacks
Thomas Cook (LON:TCG) Group earnings have fallen sharply in its third quarter as a result of ongoing terrorist incidents across Europe have waded in on holiday booking numbers.
Recent terror attacks in Turkey and Brussels meant that Group revenue dropped 8% to £1.85bn from £1.95 as of June 2015. The biggest hit to the company was a 5% overall fall in summer bookings due to a weak demand for destinations such as Turkey despite it being the groups second largest area of sales in 2015. Sales instead are now increasing in Mediterranean areas such as Cuba and Bulgaria. In total, the airlines summer programme is 81% sold, a 3% reduction from the same period in 2015.
Underlying profit for the company was reported at £2m, a £22m fall from 2015.
The fall in profits for the airline means that Thomas Cook has had to change its annual profit outlook reducing it from £310m-£335m down to £300m.
Despite the damaging results from the report, shares in Thomas Cook were beyond stable rising 9% to 65.27p in early morning trading as an influx of early winter bookings took point rising 19% in the groups season calender.
Chief Executive of Thomas Cook, Peter Frankhauser said:
“Since the half year, we’ve taken action to further reduce our capacity to Turkey and increased sales of holidays to other areas, including the Western Mediterranean and long-haul destinations such as the USA. Growth to smaller destinations such as Bulgaria and Cuba is also strong.
“We are operating in a challenging geopolitical environment, with repeated disruption in some of our key source and destination markets. In addition, while Brexit has had no noticeable impact on our bookings so far, it has added to a general sense of uncertainty – for our business and our customers alike
It is evident from the report that Britain is beginning to take action over European incident as UK bookings were 1% lower from 2015. Overall UK selling prices were down 4%.
At 11:47am BST Thomas Cook Group traded at 63.80 + 3.80 (6.33%) Royal Dutch Shell report 71% drop in profits
Today Royal Dutch Shell (LON:RDSB) reported a 71% plunge in Q2 profits in their half year results. The shattering drop comes amid declining oil prices alongside slim refining profits and higher fees as a result of its $54bn purchase of BG Group.
Net profit for the oil giant fell $1.18bn (890m) from $3.99bn in 2015. Earnings associated to its shareholders also dropped 72% down from $3.76bn to $1.05bn. As a result, earnings per share dropped a huge 94% to $0.03 down from $0.53.
Royal Dutch Shell did however manage to maintain its dividend price which stayed at $0.47.
Chief Executive Ben Van Beurden said:
“Lower oil prices continue to be a significant challenge across the business, particularly in the upstream. We are managing the company through the down-cycle by reducing costs, by delivering on lower and more predictable investment levels, executing our asset sales plans and starting up profitable new projects.
“At the same time, integration of Shell and BG is making strong progress, and our operating performance continues to further improve. We are making significant and lasting changes to Shell’s working practices and cost structure. Shell is firmly on track to deliver a $40 billion underlying operating cost run rate at the end of 2016.”
The firm is currently in the process of cost reductions and confirmed that its target for its 2016 programme remain unchanged at $26bn. Shell also reported that it intends to sell up to £30bn of assets up until 2018 where 12,50 jobs will be lost over the 2015/16 season.
BP, who also reported Q2 results under estimates have also been in the process of cutting thousands of jobs to tackle the drop in global oil prices.
At 12:08pm BST Royal Dutch Shell (LON:RDSB) traded at 2,022.52 – 82.48 (-3.92%)
28/07/2016
Anglo American PLC reduces debt by $1.2bn
One of world’s largest mining company’s Anglo American PLC (LON:AAL) managed to reduce its’ net debt by $1bn in the first half of 2016. The company is now on track to deliver a promised reduction in debt to $10bn by the end of the year, despite facing persistent difficult conditions in the commodities market.
Net debt decreased to $11.7 billion in the first half of 2016, down from $12.9bn at the end of 2015.
Anglo American earnings decrease due to persistently low commodity prices
The company reported operational profits before interest and taxation of 1.382bn. This represents a decrease of 27% from the first half of 2015. The figure includes shares in associates and joint venture activities. Continued decreases in revenue can be attributed to persistent lower commodity prices. Price falls in commodities wiped out $1.2bn in EBIT this semester. Weaker currencies in producer countries partially reduced the impact, saving around $0.9bn. The company also undertook major cost reductions. The earnings report for the first half of the year still shows vast reductions in revenues. However, the company managed to beat analysts’ expectations through rigorous cost cutting measures. Earnings per share stood at 54 cents, compared to an expected 25.4 cents. The company did not pay an interim dividend of their strategic plan outlined last December. Anglo American sold $1.5bn worth in assets in the first half of 2016. The company expects to double this figure by the end of the year. The largest share of underlying revenues was contributed by De Beers which generated $379bn. Anglo American holds an 85% stake in the leading company in the diamond industry. The company therefore benefited greatly from the company’s latest deal with Namibia. In May this year De Beers signed a ten-year sales agreement with the Government of the Republic of Namibia for the sorting, valuing and sale of Namdeb Holdings’ diamonds.Reducing debt to $10bn
The company reported that it managed to strengthen its’ balance sheet “through capital and cost discipline and expects to deliver net debt of less than $10 billion at the end of 2016” Chief Executive of Anglo American, Mark Cutifani stated: “Sharply lower prices across our products were mitigated by our self-help actions on costs, volumes, working capital and capital expenditure, together contributing to the $1.1 billion of attributable free cash flow generated in the first half of 2016. Across the business, our copper equivalent unit costs have reduced by 19% in US dollar terms, representing a 36% total reduction since 2012.” The company also stated that it aims to deliver 12% more produce than in the same time period in 2012 – despite a 35% reduction in assets and 40% reduction in labour capacity. “We will continue to divest non-core assets using strict value thresholds as we continue to reduce our debt levels and position the core business on a foundation to deliver sustainably positive cash flows.” Cutifani added. Anglo American PLC (LON: AAL) share prices jumped 6.3% in early morning trading to reach a high of 849.2. At 11.52am shares were trading at 841.4p (+5.28%).BAE systems profits rise 6.1% in first half
BAE systems (LON:BA) today released its first-half year earnings insisting that the result of the EU Referendum will lead to a period of uncertainty but will not detrimentally impact operations in the immediate term.
The UK’s largest defence company reported that earnings rose 6.1% as sales increased by £2bn to £8.7bn as well as a rise in revenue for the defence giant growing 3% to £8.3bn.
As a result, underlying earnings increased to £849m equating to 17.4p per share from 17.1p per share at £800m in 2015.
BAE said the increase in earnings was marginally due to the weakening of the pound which meant that trades such as US dollar deals became increasingly more valuable and returned profitable growth.
The company’s interim dividend also increased by 2% to 8.6p per share
Chief Executive Ian King said:
“In the first half of 2016, BAE Systems performed well. Despite economic and political uncertainties, governments in our major markets continue to prioritise national security, with strong demand for our capabilities. In the US, we are seeing encouraging signs of a return to growth in defence budgets and improved prospects for our core franchises. In the UK, the result of the EU referendum will lead to a period of uncertainty, but we do not anticipate any material near-term trading impact on our business.
Our business benefits from a large order backlog, with established positions on long-term programmes in the US, UK, Saudi Arabia and Australia. We are well placed to maximise opportunities, deal with the challenges and continue to generate attractive shareholder returns.”
BAE systems has had to cope with numerous spending cuts in recent years, however ‘encouraging signs of growth’ can be found in a number of trade deals securing long term programmes with the US and with the recent renewal of Britain’s nuclear determent programme announcing that BAE systems will be the front runner in the £31bn campaign.
The company also announced that cyber security will become an increasingly important part of government security and as such, applied intelligence had a high demand in sales during the 6 months ending July 2016.
In reaction to the report, early morning trading in London saw shares in the company rise 1.1% in the first half hour of trading up 0.8% at 544p. BAE has so far valued at £17.3bn, a total growth of 8.9% so far this year.
At 10:05am BST BAE Systems plc traded at 545.00 +5.50 (1.02%)
28/07/2016
UK’s Q2 GDP surges, but stagnation is predicted for the future
National Statistics published data on the UK’s GDP in the second quarter of 2016. Figures have beaten estimations, indicating higher-than expected economic growth in the past three months. Analysts do however warn that the increase will not last in a post-Brexit economy.
Gross Domestic Product grew by 2.2% this quarter compared to the same period last year. The rate is 0.2% higher than last month’s figure and beats analysts estimates who believed the rate would remain flat.
National statistics also reported 0.6% growth in GDP compared to last month, exceeding estimates by 0.2 percentage points and improving from June’s figure of 0.4% growth.
While growth has been unexpectedly strong in the second quarter, analysts at Lloyds Bank predict stagnation for the rest of the year due to last month’s Brexit vote revealing its’ growing impact on the UK economy.
Lloyds Bank analysts report:
“Following revisions in the Q1 Quarterly National Accounts release at the end of June, the estimated pace of growth for Q2 stands out as unusually firm, not least in the context of pre-referendum uncertainty widely assumed to gnaw on growth. The official estimates are notably in some contrast to the slowing economic momentum indicated by, for example, surveys of purchasing managers.”
“Once more data are available on actual activity in June, a downward revision is possible, notably to industrial output. Moreover, the comparatively strong outturn for Q2 points to some compensating weakness in Q3 GDP overall. On the basis of the very early evidence for July so far, we would expect GDP growth to stagnate over Q3 and likely over the second half of the year.”
New iPhone SE helps Apple revenues beat expectations
Apple reported its’ 3Q earnings on Monday which suggested that slump iPhone sales has finally began to ease.
Revenues fall
Apple’s revenue fell 15% in the 3Q to $42.4 billion which exceeds analysts’ expectations by $300 million. The prediction of low revenues was fuelled by last quarters low earnings, indicating a slump in the demand for the companies most popular product the, iPhone. While a continuing draw-back in revenues from the Q3 in 2015 still represents lower demand in iPhone compared to a year ago, the sales slowdown in iPhone has started to ease. Apple CEO Tim Cook states “[The 3Q revenues] …reflect stronger customer demand and business performance than we anticipated at the start of the quarter.” iPhone’s continue to provide the largest share of revenues for Apple. Earnings stood at $24.05 billion this quarter, down from $31.37 billion last year’s 3Q. Sales had dropped from 47.53 million in the 3Q of 2015 to 40.40million this year. However, this sales figure still beats estimates by 500,000 sales. New demand for iPhones has mainly been generated by the release of the iPhone SE model. The new model is a 4-in screen low-priced device and mainly aimed at customers in China and emerging regions. Revenue from iPads was up $340 million to $4.88 billion. Shipments exceeded estimates of 9.1 million units by 850,000. Mac’s generated an income of $5.24 billion, compared to $6.03 billion in the 3Q of 2015, selling 150,000 units less than previously estimated. Apple’s “other product” which include Apple TV’s, Apple Watch Beats products and the iPod pulled in $2.22 billion, $440 million less than a year ago. Service revenue from services such as AppleCare, Apple Pay and licensing increased 19% to $5.98 billion. Average earning per share stood at $1.42, beating analyst’s prediction of $1.39.iPhone sales bottom?
Fourth quarter revenues are predicted to stand between $45.5 billion and $47.5 billion. The iPhone 6S and 6S Plus are still not performing as well as hoped and therefore an increase in iPhone sales is not expected until their successor’s release later this year. Cook stated in an interview to Bloomberg: “The March quarter seems to have been the low point for the cycle.”Investors cheer results
Apple shares jumped 7.9% in after hour trading following the earnings announcement late Monday afternoon. Apple Inc. shares (NASDAQ: AAP) are trading at 103.95 (+7.28%) at 14.58pm, 28 minutes after US market open.ITV reports 11% growth in Q1 earnings, shares rally 9%
The British television network ITV (LON:ITV) reported higher than expected earnings this morning. But the company says it is preparing for harsher economic climate in the coming months due to the UK’s Brexit vote.
Earnings
The network reported total external revenues growth of £1,503m, up 11% from Q1 earnings last year. It stated double digit growth in Non-NAR revenue, which was up 26% to £874m from Q1 in 2015. ITV Studios total revenue grew by a total of 31%. Online, Pay and Interactive revenue was up 26%. The Companies Chief Executive Adam Crozier pointed towards a strong performance in growing viewer figures. Viewer numbers on ITV’s main channel were up 7% while long form video consumption increased by as much as 50%. Net Advertising Revenue was recorded flat at £838m. ITV Family NAR was flat in May but up 19% in June.Future outlook
The outlook on total 2016 earnings was equally positive. ITV stated that it is on track to deliver double-digit total revenue as well as adjusted earnings before interest, taxes, and amortization growth. The company pointed towards its’ recent acquisitions as main driver of improved revenues. The network acquired 100% controlling interest in UTV Limited in February this year. This strengthened its’ air business and enabled it to run its business more efficiently. Earlier this month it reached an agreement to sell UTV Ireland generating an income of 10 million [subject to regulatory approval]. There are however some concerns that the UK’s recent decision to leave the European Union will have a negative influence on growth. ITV Family NAR is expected to record at a 1% loss over the first nine months of 2016 reflecting the expectation that companies may rein in advertising spending due to post-Brexit economic uncertainty and lower consumer spending. Therefore, ITV stated it will target £25m in overhead cost savings for 2017 to guarantee that the firm can “meet the opportunities and challenges ahead”. Adam Crozier, ITV plc Chief Executive, stated: “Our strategy of strengthening and rebalancing the business is clearly working and remains the right one for ITV. We have a strong balance sheet and the capacity to continue to invest behind our strategy, while at the same time delivering returns to our shareholders.”Shares
ITV shares were under the hardest hit UK companies by the UK’s Brexit vote. Share prices dropped as much as 19.6% on the first day after the vote. However, the better than expected earnings in Q1 and the positive forecast for the coming months have send share prices up 9.63% in morning trading today. At 11.52am ITV.plc shares (LON:ITV) were trading at 202.53.Taylor Wimpey revenue up 9.1% despite Brexit woes
Taylor Wimpey (LSE:TW.) today released its half year results for the period ending 3 July reporting that the company has delivered a strong operational and financial performance despite Brexit fears.
The UK house builder reported a 9.1% in revenue growth climbing up to £1.46bn from £1.24bn. As a result of the boost in revenue, operating profits also grew 9.1% from £256m to £279m with an operating profit margin growth of 19.2%.
The firm announced that its order book grew by 16% to £2.2bn on top of a rise in completion rates that rose 3% from 2015 as its home prices also rose 5.8% averaging out to £238,000 per home. Pre-tax profit for the year ending 3 July increased by 13% to £268.8m from £237.2m.
Pete Redfern, Chief Executive, commented:
“We have delivered a strong operational and financial performance with continued growth in profitability, building over 6,000 new homes across the country during the first half of 2016”
In regards to the EU Referendum, the company said that current trading remains in line with normal seasonal patterns however could not comment on long term impacts the Brexit vote will have.
Pete Redfern further added:
“One month on from the EU Referendum, current trading remains in line with normal seasonal patterns. Customer interest continues to be high, with a good level of visitors both to our developments and to our website. We are monitoring customer confidence closely across a number of metrics, including appointment bookings, and these continue to be solid.
…..Whilst it is still too early to assess what the longer term impact from the Referendum result on the housing market may be, we are encouraged by the first month’s trading and by continued competitive lending from the mortgage providers as well as the positive commentary from Government and policymakers”
Taylor Wimpey revealed that it remains ‘fully committed’ to its dividend policy and confirmed it will pay 11p per share in 2016 rising to 13.8p in 2017. Both of these include a ‘special dividend’ of £300m which equates to 9.2p per share to be paid July 2017.
The results boast a huge increase in market confidence for the company as the immediate aftermath of the EU Referendum saw its stock plummet up to a third of its value.
At 10:44am BST Taylor Wimpey traded at 151.30 + 6.40 (4.42%)
27/07/2016
Wednesday’s Fed decision – What to expect
The Federal Reserve is currently holding its July Monetary Policy meeting from which analysts expect no changes in the federal funds rate.
The Fed’s latest meeting to discuss future monetary policy measures is being held over Tuesday and Wednesday with a decision to be made on Wednesday evening.
Since the Fed decided to increase interest rates in December 2015 – from prior near-zero levels – it has since kept rates steady following a period of extreme market turbulence.
Reluctance to increase the rate further has stemmed from financial turmoil at the start of 2016 and lower than expected economic growth throughout the first quarter.
The Federal Reserve has previously stated that although it has so far refrained from further interest rate increases, two more hikes are likely to come over the next year.
However these hikes may be postponed due to new worries over economic uncertainty since the UK’s vote to leave the European Union.
Federal Reserve Chairwoman Janet Yellen will not be holding a press conference after the meeting. Therefore, all eyes will be on the Fed interest rate decision and the monetary policy statement published at 7pm on Wednesday.
Expectations from the new decision
Analysts expect that the Federal Reserve will refrain from increasing rates this month. The reasons for the expected move include the new increases in market volatility since the Brexit vote as well as political turmoil and terror threats in Europe.
It is also expected that the policy statement which will be published on Wednesday will refrain from giving clear indications about a possible rate increase after the next meeting in September. This has been attributed to ongoing uncertainty about economic performance in the second quarter of the year.
Michael Feroli, chief U.S. economist for J.P. Morgan Chase stated: “I’m not sure they’re quite ready to signal the coast is clear.”
Further analysts expect that this month’s statement will sightly improve conditions in the US labour market in comparison to last month as well as progression towards the goal of steady inflation.
The Research Team at RBS additionally noted that the statement may mention the “acceleration of economic activity (and particularly consumer spending) in Q2 noted previously in the June FOMC statement is likely to be reiterated (especially given expectations that Q2 real GDP growth may approach 3%).”
Market outcomes
It can be expected that the Pound may gain some strength against the Dollar if interest rates remain unchanged. We saw similar movement in the Dollar after the June meeting saw rates unchanged with the GBP/USD climbing 5.6% until falling sharply due to the UK’s Brexit vote. Unchanged rates are also likely to invigorate price hikes in gold, as the non-interest yielding asset performs better in a low interest rate environment. Gold formerly increased in value since the UK’s Brexit vote induced uncertainty in the markets, but prices started to drop after a spike at 1,367.3 USD/ounce on the 6th of July. They hit a new three-week low at 1313.84 USD/ounce yesterday in the late afternoon on anticipation that the Fed may increase rates soon. But prices have since recovered 0.1% to stand at 1320.61 at 2pm under the assumption that the Fed will refrain from implementing changes this month.Future outlook on Fed decisions
There will be three more Fed policy meetings this year which are scheduled for Sept. 20-21, Nov. 1-2 and Dec. 13-14 and analysts do expect that rates may be increased in at least one future meeting.According to the CME Groups FedWatch tool there is currently an 18.8% probability for an increase in rates to 0.5 to 0.75% post the September meeting. The probability the Fed will decide to hike rates in December this year stand at 42.8%.
In addition, the minutes to this month’s meeting will be published on the 17 August and may give some indication as to the future intentions of the Fed to change rates. Michael Hanson, chief economist at the Bank of America believes there is a “greater chance” that the minutes will point in a direction of a September rate hike. He however also mentioned that that April’s minutes made the same indications for June which was ultimately not followed through in action.
Jacob Oubina, senior U.S. economist at RBC Capital Markets, holds the view that the Fed is likely to hold off on further action until June 2017. He pointed towards financial volatility due to a possible Brexit spill-overs, the coming U.S. presidential election as well as elections in France as reasons for the Fed to postpone further contractionary measures.Katharina Fleiner 26/07/2016