21st Feb 2023 07:59
(Alliance News) - The FTSE 100 looked set to slip below the 8,000 mark at the open on Tuesday, as investors digested a mixed set of corporate earnings.
Meanwhile, the UK public sector budget saw a higher-than-expected surplus in January, thanks to record self-assessed tax receipts, according to the Office for National Statistics on Tuesday.
UK public sector borrowing - excluding public sector banks - was in a surplus of GBP5.4 billion.
This was behind the GBP12.5 billion surplus of January 2022, but GBP5.0 billion larger than the Office for Budget Responsibility had forecast.
"Each January, accrued receipts tend to be higher than in other months owing to receipts from self-assessed taxes, often leading to a public sector net surplus," ONS explained.
Self-assessed income tax receipts were GBP21.9 billion in January, which was the highest figure for the month since monthly records began back in 1999. It was up from GBP16.4 billion a year before.
ONS said the self-assessed tax receipts were partially offset by the "substantial" spending on energy support schemes, as well as a large one-off payment related to historic customs duties owed to the EU.
This was related to the UK's "the failure to prevent the undervaluation of customs duties on Chinese footwear and textile products while the UK was an EU Member State".
The GBP2.3 billion owed has been settled in three payments in June 2022, and January and February 2023, ONS said.
In the fourth round of Energy Bills Support Scheme payments, the government paid out GBP1.9 billion to households. The scheme will come to an end in March.
In January, the interest payable on central government debt reached a record for the month at GBP6.7 billion. However, this was down substantially from GBP17.3 billion in December.
"The recent high levels of debt interest payable are largely a result of higher inflation, with the interest payable on index-linked gilts rising in line with the Retail Prices Index," ONS said.
Around GBP3.3 billion of the interest payable is due to the effect of inflation of index-linked gilt stock.
In early corporate news, Smith & Nephew reported a drop in annual trading profit, while InterContinental Hotels launched a USD750 million share buyback.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 14.5 points, 0.2%, at 7,999.81
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Hang Seng: down 1.7% at 20,538.80
Nikkei 225: down 0.2% at 27,473.10
S&P/ASX 200: closed down 0.2% at 7,336.30
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New York markets were closed for a public holiday.
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EUR: down at USD1.0671 (USD1.0687)
GBP: down at USD1.2027 (USD1.2034)
USD: up at JPY134.47 (JPY134.07)
GOLD: down at USD1,838.60 per ounce (USD1,843.50)
OIL (Brent): down at USD83.19 a barrel (USD83.29)
(changes since previous London equities close)
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ECONOMICS
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Tuesday's key economic events still to come:
10:00 CET EU flash PMI
09:30 CET Germany flash PMI
11:00 CET Germany ZEW indicator of economic sentiment
09:30 GMT UK flash PMI
11:00 GMT UK CBI industrial trends survey
09:45 EST US flash manufacturing PMI
09:45 EST US flash services PMI
10:00 EST US existing home sales
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UK public sector borrowing - excluding public sector banks - was in surplus by GBP5.4 billion last month, the ONS said. This was well behind the GBP12.5 billion surplus of January 2022, but GBP5.0 billion larger than the Office for Budget Responsibility had forecast. "Each January, accrued receipts tend to be higher than in other months owing to receipts from self-assessed taxes, often leading to a public sector net surplus," ONS explained. The deadline for self-assessed tax payments in the UK is January 31. Self-assessed income tax receipts were GBP21.9 billion in January, which was the highest figure for the month since monthly records began back in 1999. It was up from GBP16.4 billion a year before. ONS said the self-assessed tax receipts were partially offset by the "substantial" spending on energy support schemes, as well as a large one-off payment related to historic customs duties owed to the EU.
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The UK government has charged a new taskforce, chaired by the boss of NatWest, with working out how to significantly cut UK energy consumption over the next seven years. The Treasury said that NatWest Chief Executive Alison Rose will be the co-chair of a new body designed to lead efforts to cut energy consumption from buildings and industry by 15% by 2030. Rose, who will chair the Energy Efficiency Taskforce alongside Energy Minister James Callanan, was hailed as an "excellent" choice by the government. The top banking official announced earlier this month plans for NatWest to reduce lending to oil and gas firms as part of a new climate change initiative.
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UK Prime Minister Rishi Sunak will hold a Cabinet meeting on Tuesday amid growing anticipation that the UK and the EU could be on the verge of agreeing a deal on Northern Ireland protocol. But Sunak is facing up to a potential battle with members of his own party as he seeks to satisfy the demands of both Conservative MPs and Northern Ireland's Democratic Unionist Party over any agreement. The European Research Group, a band of Eurosceptic Conservative MPs, are expected to meet for talks later on Tuesday even as Downing Street insisted that a final deal had not yet been struck. As pressure builds on Sunak, who is also facing calls to allow MPs a vote on any final deal, the Times newspaper reported that some ministers could be prepared to resign if Sunak's solution to the protocol risks the place of Northern Ireland within the UK.
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BROKER RATING CHANGES
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Berenberg cuts XP Power to 'hold' (buy) - price target 2,430 pence
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Berenberg raises Howden Joinery to 'buy' (hold) - price target 870 (620) pence
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Barclays starts easyJet with 'equal weight' - price target 510 pence
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COMPANIES - FTSE 100
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In 2022, Asia-focused lender HSBC Holdings said net interest income rose to USD32.61 billion from USD26.49 billion a year before. Net fee income fell to USD11.45 billion from USD13.10 billion. Net insurance premium income rose to USD12.83 billion from USD10.87 billion. Net operating income - before credit losses and impairment charges - improved to USD51.73 billion from USD49.55 billion. This was slightly ahead of company-compiled consensus of USD51.41 billion. Pretax profit fell 7.3% to USD17.53 billion from USD18.91 billion. This was also slightly better than company-compiled market consensus of USD17.49 billion. In relation to the USD10 billion sale of its Canadian banking business, the bank said that as a "priority use" of the sale proceeds, the board will consider a special dividend of USD0.21 per share. HSBC's board approved a second interim dividend of USD0.23 per share for 2022, bringing the annual total to USD0.32. This is up from the total of USD0.25 in 2021.
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Medical technology firm Smith & Nephew said annual revenue edged up 0.1% to USD5.22 billion in 2022 from GBP5.21 billion, as trading profit fell to USD901 million from USD936 million, at a trading margin of 17.3%. Pretax profit fell to USD235 million from USD586 million. "We continued to outperform in Sports Medicine & ENT and Advanced Wound Management and, even though we are early in our work to fix Orthopaedics, performance improved here too," said Chief Executive Deepak Nath. In the fourth quarter, revenue grew 1.4% to USD1.37 billion from USD1.35 billion a year before. In 2023, S&N expects underlying revenue growth of 5.0% to 6.0% and a trading profit margin of at least 17.5%. In the longer term, it plans to expand trading profit margin to "at least 20%" by 2025. It left its annual dividend unchanged at 37.5 cents.
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InterContinental Hotels reported improved annual profit and revenue, and announced a new USD750 million share buyback. In 2022, the hotel and resort chain reported a pretax profit of USD540 million, up 50% from USD361 million the previous year. Revenue totalled USD3.89 billion in 2022, up 34% from USD2.91 billion in 2021. By region, Europe, the Middle East & Africa saw the largest revenue growth, growing 82% against the previous year. Meanwhile, Greater China saw the greatest decline, with revenue down 25% year-on-year. "In 2022 we saw demand return strongly in most of our markets, pushing group revenue per available room back close to 2019 levels and fee margin ahead. It's particularly pleasing that in the second half of the year we exceeded 2019 levels for both [revenue per available room] and profitability," said Chief Executive Keith Barr.
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COMPANIES - FTSE 250
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Safestore Holdings reported a strong start to its financial year in the quarter that ended January 31. Revenue rose 9.4% to GBP55.7 million, as the average storage rate increased to GBP30.42 from GBP29.55 the year before. It now expects to deliver adjusted diluted EPRA earnings per share for financial 2023 in line with analysts' forecasts, with consensus cited as 49.5p. "The first quarter's trading performance has provided us with a solid base for the rest of the financial year," said CEO Frederic Vecchioli.
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Intermediate Capital said its chief finance and operation officer, Vijay Bharadia, will step down in July. David Bicarregui will replace him, joining in April. He was mostly recently CFO at Goldman Sachs International Bank.
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OTHER COMPANIES
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BHP Group reported a sharp drop in interim profit, mostly due to falling prices for iron ore and copper, as it put two Queensland coal mines up for sale. In its half year to December 31, the Australian mining company said revenue fell 16% to USD25.71 billion from USD30.53 billion a year before. The decline was mostly the result of lower realised prices for iron ore and copper, BHP said. Attributable profit dropped 32% to USD6.46 billion from USD9.44 billion, while basic earnings per share came in at 127.5 cents, down sharply from 186.6 cents. Pretax profit fell 30% to USD10.18 billion from USD14.49 billion. As well as the lower iron ore and copper prices, BHP said profit was also hit from the higher royalties due to increased Queensland government royalty rates. BMA, which is BHP's joint venture with Mitsubishi Development Pty Ltd, has started to pursue the divestment of the Daunia and Blackwater mines in Queensland. The firm proposed a dividend of 90 cents for the period, a 40% decrease from 150 cents a year before. CEO Mike Henry commented: "We expect domestic demand in China and India to provide stabilising counterweights to the ongoing slowdown in global trade and in the economies of the US, Japan and Europe."
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By Elizabeth Winter, Alliance News senior markets reporter
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