18th Feb 2016 08:20
LONDON (Alliance News) - Centrica and BAE Systems were the stand-out blue-chip stocks in a mixed early market Thursday, after reporting 2015 earnings.
Gas distributor and producer Centrica's results beat market expectations, as the drag on earnings from its upstream unit was not as bad as expected, while aerospace firm BAE said recovering global defence budgets should result in higher earnings in 2016. Centrica was up 2.7%, with BAE up 2.0%.
The FTSE 100 index was being held back by three heavyweights going ex-dividend: GlaxoSmithKline, AstraZeneca and Royal Dutch Shell.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.3% at 6,011.20
FTSE 250: up 0.3% at 16,205.24
AIM ALL-SHARE: up 0.3% at 680.23
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Hang Seng: closed up 2.3% at 19,363.08
Nikkei 225: closed up 2.3% at 16,196.80
DJIA: closed up 1.6% at 16,453.83
S&P 500: closed up 1.7% at 1,926.82
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GBP: down at USD1.4280 (USD1.4328)
EUR: flat at USD1.1138 (USD1.1133)
GOLD: down at USD1,206.80 per ounce (USD1,212.00)
OIL (Brent): up at USD34.72 a barrel (USD34.33)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
(all times in GMT)
EU European Council meeting
09:00 Italy Retail Sales
09:00 EU Current Account
11:00 Ireland Consumer Price Index
12:30 EU ECB Monetary Policy Meeting Accounts
13:30 US Initial and Continuing Jobless Claims
13:30 US Philadelphia Fed Manufacturing Survey
13:30 Canada Wholesale Sales
15:00 US Conference Board Leading Indicator
15:30 US EIA Natural Gas Storage
16:00 US EIA Crude Oil Stocks change
20:30 US FOMC Member Williams speech
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EU President Donald Tusk said Wednesday he cannot guarantee that a summit starting on Thursday will deliver a deal on reforms that Britain has demanded to remain a member of the bloc. "After my consultations in the last hours, I have to state frankly: there is still no guarantee that we will reach an agreement," Tusk wrote in a letter to EU leaders. "We differ on some political issues and I am fully aware that it will be difficult to overcome them. Therefore I urge you to remain constructive," he added.
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China's inflation accelerated to a five-month high in January, and producer prices declined at a slower pace. Consumer prices advanced 1.8% year-on-year in January, faster than December's 1.6% increase, the National Bureau of Statistics said Thursday. This was the highest rate since August 2015, when inflation was 2%. Nonetheless, it was slightly slower than the 1.9% rise forecast by economists. Looking ahead, Julian Evans-Pritchard at Capital Economics said January's pick-up in consumer price inflation may partially reverse this month as the seasonal boost to food inflation turns into a drag. Year-on-year, producer prices dropped 5.3%, but slower than the 5.9% decline seen in December. Prices were expected to fall 5.4%.
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Japan posted a merchandise trade deficit of JPY645.943 billion in January, the Ministry of Finance said. That beat forecasts for a shortfall of JPY648.3 billion following the JPY140.3 billion surplus in December. Exports were down 12.9% on year, missing expectations for a decline of 11.0% following the 8.0% decline in the previous month. Imports tumbled an annual 18.0% versus expectations for a fall of 15.9% after shedding 18.0% a month earlier.
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Officials at the Federal Reserve were concerned that January's stock market meltdown added to "downside risks" for the US economy, the minutes of their most recent meeting showed. Policy makers took a wait-and-see approach at the January meeting, electing not to follow December's interest rate hike with further tightening. Fed members in favor maintaining rock-bottom interest rates want to see "clear evidence" of rising inflation before another rate hike, the minutes showed. Until then, the Fed will continue "closely monitoring global economic and financial developments," alluding to weakness in China and Europe.
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Minneapolis Fed President Neel Kashkari said the nation's biggest banks remain too big to fail and pose significant risk to the economy. "While significant progress has been made to strengthen our financial system, I believe the [Dodd-Frank] Act did not go far enough," Kashkari said in a speech at the Brookings Institution. "I believe the biggest banks are still too big to fail and continue to pose a significant, ongoing risk to our economy." Kashkari said Congress must consider breaking up large banks into smaller, less connected, less important entities.
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Dozens of trucks laden with humanitarian aid entered five besieged areas near the capital Damascus and north-western Syria, UN sources and state media reported. "The operation is still on going," said Linda Tom, a spokeswoman for the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) in Amman, Jordan without elaborating. Trucks carrying food supplies entered Madaya, a rebel-held town about 25 kilometres north-west of Damascus, which has been under siege since July by forces loyal to Syrian President Bashar al-Assad, aided by fighters from the allied Lebanese Shiite Hezbollah movement.
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BROKER RATING CHANGES
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HSBC RAISES ANGLO AMERICAN TO 'HOLD' ('REDUCE') - TARGET 520 (180) PENCE
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JPMORGAN RAISES ROLLS-ROYCE TO 'NEUTRAL' ('UNDERWEIGHT'), PRICE TARGET TO 690 (395) PENCE
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JPMORGAN RAISES AUTO TRADER GROUP TO 'OVERWEIGHT' ('NEUTRAL')
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COMPANIES - FTSE 100
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Centrica reported full year results that significantly beat expectations, as the drag on earnings from its upstream unit was not as bad as expected. The FTSE 100 gas distributor and producer reported a 4% fall in net earnings to GBP863.0 million in 2015 from GBP903.0 million in 2014, but the figure was significantly higher than analyst expectations of GBP733.0 million. Adjusted operating cashflow, which Centrica said would be a "major focus" back in December, came in ahead of Centrica's guidance at GBP2.25 billion, which was also up 2% from GBP2.20 billion last year. Revenue for 2015 fell 5% to GBP28.00 billion. The dividend for the year will be 12.0 pence per share, down from 13.5 pence in 2014.
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Defence contractor BAE Systems said recovering global defence budgets should result in higher earnings in 2016, even though pretax profit was given a one-off boost in 2015 by aircraft deliveries to Saudi Arabia. Pretax profit rose to GBP1.09 billion in 2015 from GBP882.0 million in 2014, helped by a rise in revenue to GBP17.90 billion from GBP16.64 billion and lower impairment and amortisation charges. BAE said it will pay a final dividend of 12.5 pence per share, taking its total dividend to 20.9p, up 2.0% year-on-year from the 20.5p it paid in 2014.
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Telecommunications giant Vodafone Group said it is planning to raise GBP2.9 billion through the issue of convertible bonds. The company said the bonds will be issued in two tranches, one with an 18-month maturity and the other with a three-year maturity. The bonds will be convertible into ordinary shares representing around 5.0% of the company's current share capital, and it will hedge its exposure to share price movements via an option strategy. The initial conversion price for the bonds will be 217.30 pence per share, Vodafone's closing price on Wednesday.
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Rexam said its pretax profit fell in 2015 amid a tough trading environment and writedowns it booked on the value of its assets and said it expects a similarly difficult set of conditions to prevail in 2016. The beverage can maker, which is in the process of being acquired in a GBP4.3 billion deal by US rival Ball Corp, re-entered the FTSE 100 on Monday. It said Thursday its pretax profit for the year to the end of December was GBP250.0 million, down from GBP343.0 million, hit by higher exceptional items and a loss on the fair value changes in certain operating derivatives. Rexam said it will pay a final dividend of 11.9 pence per share, leaving its total dividend flat at 17.7p.
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South32 could be among the first companies to buy assets which have been put on the block by Anglo American as part of the embattled miner's restructuring plans, Reuters reported. The two companies share a manganese mining and smelting business with sites in Australia and South Africa, and South32 is understood to be interested in buying out Anglo's 40% stake. A spokeswoman for South32 said, in an emailed statement: "As a JV partner with a deep understanding of their value, we would be a buyer if the price is right."
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Most managers at HSBC UK will have to do without a salary increase this year, The Financial Times reported. According to the report, most managers in the UK retail and wealth management division have been told they won't receive a pay increase, despite a deal between the bank and its employees last year. Pay increases will be given to a small number of managers who are among the top performing and paid a lower salary than the market rate, the report said. The move comes just days after the bank dropped plans to freeze pay for a year for employees around the world, following staff feedback.
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COMPANIES - FTSE 250
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Go-Ahead Group said its first-half results met its expectations and affirmed its outlook for the full year as it saw solid performances in its bus and rail divisions. The public transport operator said pretax profit for the half-year to December 26 was GBP52.1 million, up from GBP44.7 million a year earlier, helped by a big rise in profit from its rail division. Go-Ahead will pay an interim dividend of 28.33 pence per share, up from 26.60p a year earlier.
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Drugmaker Indivior said pretax profit about halved in 2015 as it was hit by a lower average market share and higher rebates in the US, leaving it expecting a fall in revenue in 2016. Indivior said its pretax profit for the year to the end of December was USD285.0 million, down from USD561.0 million a year earlier. Net revenue fell to USD1.01 billion in 2015 from USD1.12 billion in 2014, down 9.0%, and the profit line was hit further by higher operating costs for Indivior as a standalone company, having been spun-out of consumer goods giant Reckitt Benckiser in 2014. Indivior will pay a final dividend of 9.5 cents per share, taking its total dividend to 12.7 cents.
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Lancashire Holdings said it expects current market trends to continue during 2016, with more pricing pressure, albeit at a slower rate, although the non-life insurer has been able to cut its exposures through reinsurance. According to Chief Financial Officer Elaine Whelan, that leaves Lancashire "well positioned" for the current phase of the cycle. The outlook came as Lancashire announced plans to pay a standard final ordinary dividend of 10 US cents per share. Lancashire said pretax profit fell to USD171.7 million in 2015, from USD226.5 million the prior year. Lancashire said Martin Thomas will stand down as chairman in May. Peter Clarke, a former chief executive of Man Group, and currently an independent non-executive director of Lancashire, will succeed Thomas.
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Industrial property investor SEGRO said it has struck a partnership agreement with Roxhill Development Group which will give the group access to a portfolio of big box logistics assets in the south east of England and the Midlands. Should all of the sites involved in the deal be fully developed, SEGRO said the total potential capital expenditure for all the developments would be around GBP800.0 million over a 10-year period, delivering over 10.0 million square feet of big box logistics space.
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Tullow Oil said it has implemented extra "operational procedures" on the floating production, storage and offloading vessel serving the Jubilee field offshore Ghana after identifying an potential issue in the turret area. Tullow said an inspection of the turret area of the FPSO was carried out by SOFEC, the original manufacturer of the turret, which identified "a potential issue" with the turret bearing.
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COMPANIES - LONDON MAIN MARKET AND AIM
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Trinity Mirror is to launch a new national newspaper by the end of the month, only weeks after The Independent said it will close its print edition, The Guardian reported. The publisher of the Daily Mirror said 'New Day', which may still undergo a name change prior to launching nationally on February 29, is expected to target a mid-market audience currently reading the Daily Mail and Daily Express. It will initially be priced at 20 pence, the same as the i when it launched. i, a tabloid-style paper launched by The Independent in 2010, is now being sold to Johnston Press.
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Victoria Oil & Gas said it has expanded its operations in Cameroon after it purchased a 75% stake in the Matanda licence from a subsidiary of commodity giant Glencore. Glencore Exploration Cameroon Ltd has agreed to sell its 75% stake in the production sharing contract covering the 1,235 square kilometre Matanda block to Victoria Oil for an undisclosed amount.
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Aspen Technology said it will not raise its offer for KBC Advanced Technologies after the target company accepted a higher offer from a rival bidder. On Wednesday, KBC agreed a deal to be acquired by Yokogawa Electric for GBP180.3 million, significantly higher than the GBP158.0 million US software firm Aspen had agreed to pay in January.
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Stevia ingredients producer PureCircle said it has appointed Rakesh Sinha as chief financial officer following the retirement of William Mitchell. Sinha joins the company from Anglo-Dutch consumer goods firm Unilever, where he has held a number of senior finance and strategic roles over the past 17 years, including as finance director of the Australian and New Zealand ice-cream business and CFO of Unilever Taiwan and Hong Kong. He is currently CFO for Latin America, South and Eastern Europe at Unilever Food Solutions. Sinha will join PureCircle on April 25 and will take over from Mitchell as CFO upon his retirement later in the year.
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COMPANIES - INTERNATIONAL
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Swiss foods giant Nestle's 2015 profit was EUR9.07 billion, down from EUR14.46 billion the prior year. The company noted that the decline in profit was mostly due to the one-off impact from the disposal in 2014 of part of the L'Oréal stake combined with the revaluation of the Galderma stake. There was also some effect from foreign exchange. Pre-tax profit rose to EUR11.78 billion from EUR10.27 billion. Nestle's sales for the year were EUR88.79 billion, down from EUR91.61 billion in 2014. Sales for the year had a negative foreign exchange impact of 7.4%.
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Franco-Dutch airline Air France-KLM reported its 2015 net income group share was EUR118 million, compared to the previous year's loss of EUR225 million. The prior year results were restated. Earnings per share were EUR0.34, compared to a loss of EUR0.76. The results reflected sharply lower income tax expenses. On a pre-tax basis, income was EUR200 million, significantly higher than last year's income of EUR22 million. Sales increased to EUR26.06 billion from EUR24.91 billion.
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Google Chief Executive officer Sundar Pichai gave his support to Apple's pushback against a court order to help the US Justice Department unlock an iPhone used by one of the suspects in the San Bernardino, California, terror attack. Pichai wrote on Twitter on Wednesday that "forcing companies to enable hacking could compromise users' privacy." The US government said in a filing in federal court in Riverside, California that Federal investigators haven't been able to unlock the iPhone used by Syed Rizwan Farook, who carried out a December 2 shooting in San Bernardino that killed 14 people at a holiday party.
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Toyota Motor Sales USA announced that it is conducting a safety recall of about 1.124 million Model Year 2006-2012 RAV4 and Model Year 2012-2014 RAV4 EV vehicles. The company said the involved vehicles are equipped with lap-shoulder seatbelts in both second-row outboard seats. The company said that it is possible the lap belt webbing could contact a portion of the metal seat cushion frame in a severe frontal crash. If this occurs, the seat belt could become cut.
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Thursday's Scheduled AGMs/EGMs
Sunrise Resources
Tertiary Minerals
Blackrock North American Income Trust
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By Tom Waite; [email protected]; @thomaslwaite
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