FTSE cautious of tapering talk ahead of Bank of England forecasts

Liam Roche
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FTSE cautious of tapering talk ahead of Bank of England forecasts

Following Wednesday’s super-surge the European markets entered Thursday’s trading at a light jog. The FTSE 100 could only add 0.1% after the bell, though its reticence was understandable. For today brings May’s Bank of England meeting, one that comes complete with a fresh set of economic forecasts for the UK.

“From expectations of 5% growth in 2021 back in February, Andrew Bailey and the rest of the MPC are set to announce that the country will instead see GDP at 7% this year,” said Connor Campbell, financial analyst at Spreadex.

“However, those revised forecasts come with a potential catch. Much like in the US, the increasing strength of the UK economy’s rebound will cause the central bank to mull over tapering its current stimulus support.”

“Any hawkish signals could well send the FTSE 100 back below 7,000 – it’s currently at 7,060 – while leaving the pound primed to build beyond $1.39 against the dollar.”

FTSE 100 Top Movers

Next (2.9%), Pearson (2.55%) and Rolls-Royce (2.33%) are the biggest risers on the FTSE 100 at mid-morning trading.

At the bottom end, Admiral Group (-3.63%), Mondy (-2.75%) and Polymetal International (-2.10%) have seen the biggest falls.

Next

Next, the UK fashion outlet, increased its full-year profit guidance as it announced better than anticipated Q1 trading.

The FSTE 100 group, which has around 500 shops, in addition to an online presence, confirmed its central guidance for profit before tax in the 2021/2022 fiscal year is now at £720m, £20m more than what was forecast in April.

Biden backs waiving patents for Covid-19 vaccinations

Liam Roche
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Biden backs waiving patents for Covid-19 vaccinations

Shares in leading western drugmakers down as Biden administration speaks out

Joe Biden has given support to an effort to temporarily waive intellectual property rights for vaccinations as a means of supporting the supply of vaccines to developing countries.

The President and his administration got behind calls for a temporary suspension of current rules as pressure to do so mounted. The Times has reported that Biden’s chief trade negotiator made the case for extra action as the nature of the pandemic so required.

Shares in a number of manufacturers of coronavirus treatments fell as the news emerged.

Katherine Tai, the US trade representative, said it would be in favour pf proposals to allow nations to override patent rights of medical products while the pandemic is ongoing.

The measure has now been backed by dozens of countries, as well as campaign groups and former world leaders, after it was first proposed by South Africa and India at the World Trade Organisation (WTO) last autumn.

Yesterday’s remarks by Tai represent a significant move towards the campaign coming to fruition after western economies, many of which are home to leading drugmakers, have not put their support behind it.

“The extraordinary circumstances of the Covid-19 pandemic call for extraordinary measures,” Tai said. “The administration believes strongly in intellectual property protections but, in service of ending this pandemic, supports the waiver of those protections for Covid-19 vaccines.”

Biden, whose campaign for the presidency last year featured support for a waiver, said he endorsed the move. Asked whether he backed the suspension, he told reporters: “Yes, I’m going to talk about that later today, yes.”

Shortly afterwards, Tai issued her statement. “As our vaccine supply is secured, the administration will continue to ramp up its efforts — working with the private sector and all possible partners — to expand vaccine manufacturing and distribution,” she said.

Next raises its profit guidance for second time

Liam Roche
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0
Next raises its profit guidance for second time

Next expects pre-tax profit for current financial year to hit £720m

Next (LON:NXT), the UK fashion outlet, increased its full-year profit guidance as it announced better than anticipated Q1 trading.

The FSTE 100 group, which has around 500 shops, in addition to an online presence, confirmed its central guidance for profit before tax in the 2021/2022 fiscal year is now at £720m, £20m more than what was forecast in April.

The news comes despite full price sales in the quarter to May 1 dropped by 1.5% compared to a year prior, before the coronavirus pandemic impacted its trading levels.

Next’s previous guidance anticipated Q1 sales falling by 10% for the same period in the 2019/20 financial year, however, it beat the forecast by £75m.

The group did show strength during the pandemic, thanks to its online sales, while some of its rivals, including Primark, have fared less well.

Next said first quarter retail sales from its stores were down 76% on two years ago, reflecting COVID-19 lockdowns, while online sales increased 65%.

Total full price sales in the last three weeks were up 19%, reflecting the recent easing of pandemic restrictions.

“Evidence from last year suggests that this post lockdown surge will be short lived, and we expect sales to settle back down to our guidance levels within the next few weeks,” it said.

Trainline confirms £100m operating loss as sales dive

Liam Roche
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Trainline confirms £100m operating loss as sales dive

Trainline’s volume of UK passengers fell to 5% at outset of pandemic

Trainline (LON:TRN) announced on Thursday that it made a £100m loss as lockdown restrictions across the UK caused its passenger numbers to dive.

Having made a £2m profit the year before, Trainline posted an operating loss of £100m, as net ticket sales dropped by 79% to £783m.

The FTSE 250 company saw its revenue fall by 74%, down from £261m to £67m at the end of February.

At the outset of the pandemic, Trainline’s volume of UK passengers fell to 5%, in what was the beginning of a very challenging year for the company.

It is possible that consumer demand for train travel remains low as companies are often sticking with their hybrid working approaches.

Russell Pointon, Director, Consumer & Media at Edison Group commented: “Lockdowns, social distancing and a year of working from home impacted domestic train travel exponentially over the last year. It is, therefore, not surprising to see Trainline posting a poor set of full-year results today.”

However, Pointon suggests that the measures the train company took during the pandemic could allow it to bounce back strongly.

“As the pandemic hit, the company put in steps to reduce cash flow, halting marketing efforts and utilised the government furlough scheme for its teams. This resulted in its average cash burn being reduced to £5 million per month, outperforming its initial guidance of £8-9 million. With all furloughed teams back at work and marketing programmes beginning to be ramped up again, the Trainline is looking to bounce back strongly.”

While chief executive Jody Ford gave his thoughts on how Trainline is adapting itself to the future.

“Our continued investment in product and tech through COVID-19 means, despite the ongoing COVID-19 uncertainty, we are well positioned to support the wider industry recovery and continue driving the market shift to online and mobile tickets,” chief executive Jody Ford said. 

“Looking ahead I feel very confident about Trainline’s prospects for the future. We remain committed to championing rail as a greener mode of travel for millions of customers around Europe, and to driving the significant long-term growth opportunity for this business.”

BHP Share Price: iron ore price to continue rising

Liam Roche
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BHP Share Price: iron ore price to continue rising

The BHP share price (LON:BHP) performed relatively well during the pandemic, making a swift recovery and then getting far beyond its pre-pandemic level during 2021. Since the turn of the year the FTSE 100 mining giant is up by 18.6% to 2,302p.

Iron Ore

UK Investor Magazine outlined earlier this year that BHP’s performance would be dependent on the price of iron ore during 2021. While there was a possibility that the Chinese government could move to suppress the price of iron ore, so far, the commodity is close to an all-time-high. Iron ore has been getting near a record $200 per tonne, over double its price 12 months ago.

The price of iron ore is high because of soaring Chinese steal prices, as reported by S&P Global Platts, in addition to output reductions for environmental reasons boosting an already overheated sentiment.

The question now is whether or not iron ore has much further to go? China’s steel output grew by 16% year-on-year during Q1, which suggests demand for iron ore is likely to rise. Another potential cause of a fall in the price of iron ore is a global increase of supply. However, S&P Global Platts has suggested that both outcomes are unlikely and that “the market expects steel prices to continue rising, supported by falling steel inventories and robust orders”.

Analysts’ Views

Stockopedia has reported that out of 16 analysts covering BHP, three have given ‘buy’ recommendations, 12 have said to ‘hold’ and one gave the stock a ‘sell’.

Facebook oversight board to uphold Trump suspension

Liam Roche
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Facebook oversight board to uphold Trump suspension

Facebook shares gain ground during morning session

Donald Trump will remain banned from Facebook (NASDAQ:FB) after an independent oversight board ruling.

The decision means the former US president will be without a major communication tool for the time being, as the company will review its ruling in the next six months, the panel concluded.

Just over four months ago the social media company gave Trump an indefinite ban as it feared he could incite further violence and civil unrest in the aftermath of the US Capitol Building being stormed by protesters on January 6.

“We believe the risks of allowing the president to continue to use our service during this period are simply too great,” Facebook CEO Mark Zuckerberg commented at the time.

Later in January, the month that the storming of the capital building occurred, Facebook requested an appointed oversight board to review the ban, in addition to making further recommendations about how the platform should treat rule-breaking continent from prominent politicians.

The board confirmed on Wednesday that it had upheld its decision to restrict Trump’s account it added that Zuckerberg’s decision to ban the former president “indefinitely” was an “indeterminate and standardless penalty”.

It added: “The Board insists that Facebook review this matter to determine and justify a proportionate response that is consistent with the rules that are applied to other users of its platform. Facebook must complete its review of this matter within six months of the date of this decision.”

The Facebook share price is up by 0.26% during the morning session to $319.17 as investors appear to have welcomed thee news. It followed days of consecutive falls in the company’s value as tech stocks were sold-off on mass.

Former deputy prime minister and current Facebook vice-president of global affairs and communications, Nick Clegg, reiterated that the company’s decision was the correct one: “We’re pleased the board has recognised that the unprecedented circumstances justified the exceptional measure we took.”

Boohoo Share Price: well positioned financially but ESG concerns remain

Liam Roche
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Boohoo Share Price: well positioned financially but ESG concerns remain

Boohoo Share Price

The Boohoo share price (LON:BOO) has seen impressive growth over the past five years, rising from 47.5p per share in May 2016, to 320p, its value at the time of writing. However, more recently, the online fashion retailer has come into some difficulty. Year-to-date Boohoo shares are down by 6.24%, as the FTSE All-Share Index has added 7.24%. While the company saw its sales and profits jump up last year during the pandemic, questions will now arise over Boohoo’s investment credentials as the dust settles post-lockdown.

Financials

The FTSE 250 company revealed on Wednesday morning that its revenue rose by 41% during the year ending on 28 February, as sales rose by just over £0.5bn to £1.75bn. Pre-tax profit soared too, up 35% to £124.7m over the same time period, while earnings per share increased 36% from 5.35p to 7.25p.

The company made an EBITDA of more than £173.6m, which was better than the expected £171.3m. It also boosted its forward guidance, saying that it expects its revenue to jump by 25% in the new year.

“Boohoo has strutted ahead of flailing high street rivals showing that its bang on trend when it comes to the way fashion followers want to shop and the styles they want to buy,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

Superstar sales have meant Boohoo has piled up the cash, with its operating cash flow hitting more than £200 million, compared to £127 million in 2020. With plenty of cash in the bank, Boohoo is in a position to continue acquiring rival businesses, as it did with Dorothy Perkins, Wallis and Burton.

“This plan is on track with revenue growth for international up 44% over the year, now accounting for a bigger slice of the overall sales pie,” said Streeter.

“Boohoo is now a fashion powerhouse, and investment in scaling the platform is expected to keep paying off, with even higher margins expected in the second half of the year. But the catwalk isn’t completely clear, with hurdles of uncertainty ahead.”

ESG Concerns

It is well documented that Boohoo has received backlash over its practices during the pandemic. In particular as ESG principles are firmly etched into the minds of would-be investors now. The company will now have to make firm steps to distance itself from past practices, including accusations of modern slavery.

In response, the company has announced an initiative with the purpose of linking the pay of its senior executives to the improvements they make in ESG principles. On Monday, Boohoo Group chairman Mahmud Kamani told the Environmental Audit Committee (EAC) about the firm’s plan to link bonuses to sustainability practices.

“Boohoo’s response to our committee’s letter sends promising signals that we are reaching a turning point in fast fashion’s awareness of its environmental and social responsibilities,” EAC chairman Philip Dunne said.

Activist investor Gatemore adds to Superdry stake

Andrew Hore
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Activist investor Gatemore adds to Superdry stake

Activist investor Gatemore Capital Management is building up its stake in fashion brand and retailer Superdry (LON: SDRY) and it has a record of changing the management and strategy of underperforming companies.
The fully listed company has gone through many directors in recent years and founder Julian Dunkerton has returned as chief executive. Shaun Willis was appointed finance director on 26 April.
Superdry is a former stockmarket star, whose recent performance has been poor. There is the appearance of a lack of leadership in recent years. The share price high was at the beginning of 2018 an...

IAG share price rallies as passengers await ‘green list’ announcement

Liam Roche
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0
IAG share price rallies as passengers await ‘green list’ announcement

IAG Share Price

Going back as far as November 2020, the IAG share price (LON:IAG) was valued at 92p. Now, as a roadmap out of lockdowns have been set forward, and the vaccine roll-out is running smoothly, the FTSE 100 company is valued at 203p per share. IAG, owner of British Airways, added further value to its share price yesterday too, as the UK looks set to announce which countries have made it on the ‘green list’. While there is still uncertainty around the speed of the economy reopening, investors may consider an investment at the current price a risk more worth taking.

Up Again From Here?

There was good news for airlines yesterday, who may dare to dream of a somewhat normal summer, as the EU suggested it could open up to fully vaccinated tourists. “Time to revive EU tourism industry and for cross-border friendships to rekindle – safely,” EU Commission President Ursula von der Leyen tweeted. One drawback is that all passengers will be required to have had a vaccine.

In addition, reports are suggesting that the UK government will set forward ‘green list’ of between ten or 12 countries, including Malta, Gibraltar, Portugal and Israel, that passengers will be able to travel to.

Major tourists destinations including Spain, Greece and France are also rumoured to be on the list. The government’s travel plans involve a traffic light system of red, amber and green classifications for countries depending on the perceived COVID-19 risk.

IAG was also bolstered by the EU’s decision to allow entry for vaccinated people from low-risk countries.

“Foreign holidays are looking like they could actually happen this year, lifting demand for travel and tourism stocks, which were severely battered across the crisis,” said Sophie Griffiths, analyst at OANDA.

JP Morgan’s View

Sharecast has reported that JP Morgan upgraded IAG shares to ‘overweight’ from ‘neutral’ as the prospects for 2022 onwards “look promising as global air travel starts to normalise”, despite there being challenges ahead.

“We anticipate turbulence on this journey but consider IAG an attractive long-term investment,” JP Morgan said.

“It is still unclear when widespread intra-European travel will be allowed, but by late summer we would expect a meaningful pick-up across the region,” the investment bank added.

ITV sees a strong rebound in revenue as broadcaster looks ahead to summer

Liam Roche
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0
ITV sees a strong rebound in revenue as broadcaster looks ahead to summer

ITV’s total external revenue rose by 2% to £709m during the quarter ending on 31 March

ITV (LON:ITV) is retaining a level of cautious optimism over its recovery during 2021 as its advertising sales have seen a resurgence in recent months.

The UK broadcaster told shareholders that it has been “encouraged” by trading levels over the past quarter as revenues rise on robust growth of its ITV Studios production and distribution arm.

ITV’s total external revenue rose by 2% to £709m during the quarter ending on 31 March in the face of pandemic-related restrictions.

The FTSE 250 company said that ITV Studios made £372m, up by 9%, as production, for the most part, continued in the face of the pandemic.

“The weather may be unseasonably chilly, but the advertising market is heating up according to free-to-air broadcaster ITV.

Despite people now being allowed outdoors, there is reason for ITV bosses to be optimistic over the coming months, according to Russ Mould, investment director at AJ Bell.

“Even the biggest devotee of reality show Love Island won’t be as excited about its return as ITV given its importance to driving online viewing.”

“The lack of a ‘winter’ Love Island in the first three months of 2021 meant online viewing was down 11% for ITV but when it was stripped out, eyeballs on the ITV Hub were actually up by nearly a quarter.”

“The Euros football tournament will provide another reason for people to switch to ITV and combined with the reopening impact, and assuming the UK keeps the virus under control, advertising growth is likely to be very significant for some time to come,” Mould said.

The broadcaster is fighting to stay relevant having seen both the television market and advertising space heavily disrupted by giant US companies in recent years – Disney, Netflix and Amazon Prime on the streaming side and Google and Facebook competing for advertising spend.

“However, TV as a medium still has reach, particularly with certain sections of the population, and ITV has a chance to prove it still has a place as it benefits from the reopening boom,” Mould said.

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