7th Nov 2019 08:13
(Alliance News) - Rolls-Royce Holdings said Thursday it has seen improved trading in recent months, though it now expects annual profit towards the lower end of guidance, amid a big one-off hit from problems with its Trent 1000 TEN jet engine.
A full financial analysis of Trent 1000 issues has resulted in a likely exceptional charge of GBP1.4 billion, Rolls-Royce said.
This represents the additional near-term costs of customer disruption and remediation shop, as well as provisions against future losses on a small number of contracts due to a new estimate of high pressure turbine durability.
"In Civil Aerospace, while the Trent 1000 costs remain a headwind, the vast majority of our installed fleet of widebody engines is performing well, with the Trent XWB surpassing our expectations. We have seen growth in ITP and steady sales in Defence. In Power Systems, while trading remains healthy, a small number of larger projects have been deferred and as a result we now expect sales growth for the full year in the low- to mid-single-digit range," said Chief Executive Warren East.
The stock was up 0.6% early Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 7,420.45
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Hang Seng: up 0.4% at 27,792.12
Nikkei 225: closed up 0.1% at 23,330.32
DJIA: closed flat at 27,492.56
S&P 500: closed up 0.1% at 3,076.78
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GBP: soft at USD1.2856 (USD1.2866)
EUR: firm at USD1.1080 (USD1.1072)
Gold: soft at USD1,486.90 per ounce (USD1,488.80)
Oil (Brent): flat at USD62.10 a barrel (USD62.17)
(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
0830 GMT UK Halifax house price index
1100 GMT Ireland consumer price index
1200 GMT UK Bank of England interest rate decision
1230 GMT UK press conference with BoE Governor Mark Carney
0830 EST US initial jobless claims
0945 EST US Bloomberg consumer comfort index
1030 EST US EIA weekly natural gas storage report
1200 EST US retail chain store sales index
1500 EST US consumer credit
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UK shadow chancellor John McDonnell will pledge an "irreversible shift" in wealth in favour of working people, as Tories warn Labour's "fantasy economics" would wreck the recovery. In his first speech of the UK general election campaign, McDonnell will say that if Labour gain power on December 12, they will deliver a programme of investment "on a scale never seen before in this country". The clash over the economy – one of the key election battlegrounds – takes place as Corbyn appeared to strengthen his grip on the party with the shock resignation of deputy leader Tom Watson. Watson, who is not standing again for election, said he was stepping down for "personal not political" reasons, and would be campaigning in future on health issues. However his departure will be seen as a blow to Labour "moderates" whose cause he championed in frequent clashes with Corbyn.
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The EU's executive is due to release its latest economic forecasts for the 28-country bloc on Thursday, amid signs of a slowdown in the eurozone currency area. The European Commission is expected to revise down its growth estimates for the 19-country eurozone, which it had put at 1.2% for 2019 and 1.4% for 2020 when it issued its last quarterly projection, in July. The data comes amid a change of leadership in EU institutions, with Germany's Ursula von der Leyen poised to take over from commission President Jean-Claude Juncker and Christine Lagarde freshly installed at the helm of the European Central Bank.
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Democrats will hold the first open hearings in Congress next week as part of the impeachment inquiry against US President Donald Trump, in what appears to be a targeted pivot from fact-finding to a public information campaign. Adam Schiff, the head of the House Intelligence Committee, announced on Wednesday that three key officials will testify in an open forum. Schiff also released the closed-door testimony of one of those officials, with potentially damaging quotes against the president, alleging Trump was demanding an investigation targeting the family of Joe Biden, the president's political rival. The testimony of the interim ambassador to Ukraine, William Taylor, who is due to be questioned in an open session on November 13, makes clear that he believed the Ukrainians were being pressed to open the probe if they wanted a White House meeting and military aid.
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BROKER RATING CHANGES
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GOLDMAN CUTS ANGLO AMERICAN TO 'NEUTRAL' ('CONVICTION BUY LIST'); TARGET 2200 (2300) PENCE
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GOLDMAN RAISES AB FOODS TO 'BUY' ('NEUTRAL') - TARGET 2750 (2500) PENCE
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JPMORGAN CUTS HISCOX TO 'NEUTRAL' ('OVERWEIGHT') - TARGET 1290 (1750) PENCE
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COMPANIES - FTSE 100
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J Sainsbury saw sales trends improve over the first half of its financial year. Revenue was broadly flat at GBP15.1 billion in the half-year to September 21, while the grocer's pretax profit dropped to GBP9 million from GBP107 million a year ago. Sainsbury's booked GBP229 million in one-off costs in the half, up from GBP172 million a year ago. Like-for-like sales excluding fuel were down 1.0% year-on-year, falling 1.6% in the first quarter but just 0.2% in the second. Total retail sales were down 0.6% on a year before, again seeing trends improve over the period with a 1.2% fall in the first quarter and a 0.1% rise in the second. Sainsbury's noted that UK retail markets remain "highly competitive" and the consumer outlook uncertain, but, as previously guided, the supermarket expects profit in the second half to benefit from a normalisation of marketing costs and weather comparatives.
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Flutter Entertainments, formerly known as Paddy Power Betfair, raised its US guidance, spurred on by "excellent" sports betting and casino momentum. For the third quarter, group revenue was up 10% year-on-year to GBP533 million, with both sports and gaming seeing good growth. Australia continues to perform well, with Sportsbet net revenue growth of 19%, while US revenue surged 67%. The betting firm said it now expects its US Ebitda loss to be around GBP40 million to GBP45 million, versus a previous expectation of GBP55 million.
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Housebuilder Persimmon said it has made "good progress" thus far in the second half. Trading over the summer weeks was in line with expectations, with the group seeing "the usual pick-up in customer activity" in the autumn season. Trading has continued to be "resilient" through the second half of the year, with the group's average weekly private sales reservation rate per site of 0.67 being in line with last year.
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COMPANIES - FTSE 250
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Aston Martin Lagonda Global Holdings flagged that challenging trade conditions have persisted, putting sales under pressure. The luxury car maker reported revenue of GBP250.1 million for the third quarter of 2019, down 11% on a year ago. The firm swung to a pretax loss of GBP13.5 million from a GBP3.1 million profit a year ago, and adjusted earnings before interest, tax, depreciation and amortisation fell 12% to GBP47.7 million. Total wholesale volumes were down 16% in the quarter to 1,497. In the year-to-date, they dipped 3% to 3,939. Aston Martin said it expects to meet market expectations for 2019, though continues to see pressure on volumes continuing into the end of the year, with wholesales to be lower than previously guided but "within the range of market expectations".
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COMPANIES - INTERNATIONAL
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Japanese carmaker Toyota Motor said its profit and revenue strengthened during the first half of the year amid rising sales, but it still expects to report weaker full year results. For the six months ended September, pretax profit widened 2.2% to JPY1.583 trillion from JPY1.549 trillion the year prior. This was after revenue rose to JPY15.286 trillion from JPY14.674 trillion the year before. Toyota proposed an unchanged JPY100 interim dividend. For the financial year ending March, Toyota forecasts JPY2.630 trillion in pretax profit on revenue of JPY29.500 trillion. This represents a 2.7% fall in profit and 2.4% decline in revenue on the year before.
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Australian lender National Australia Bank cut its annual dividend after profit suffered amid its ongoing customer compensation programme, despite net interest income rising. For the year ended September, pretax profit narrowed 7.4% to AUD7.78 billion - about USD5.36 billion - from AUD8.40 billion the year prior. This was despite net interest income rising 2.3% to AUD29.20 billion from AUD28.54 billion the year before. "This year has been very challenging, requiring significant actions for us to deal with past issues and make real changes aimed at earning trust with customers and the community," Chief Executive Officer Philip Chronican said. During the year, NAB booked a further AUD1.10 billion in charges relating to remediation costs for customers.
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German engineering firm Siemens said its annual profit fell amid a steep fall in financial income, despite strong revenue and orders growth following a "brilliant" final three months. For the year ended September, pretax profit narrowed 6.6% to EUR7.52 billion from EUR8.05 billion the year prior. This was despite revenue rising 4.6% to EUR86.85 billion from EUR83.04 billion the year before. Profit performance was hurt by a EUR74 million financial loss reported in financial 2019, compared to a EUR1.48 billion gain recorded the year prior.
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Deutsche Lufthansa confirmed its annual guidance, despite a strike that began late Wednesday, as it reported a 4% rise in in third quarter net profit. For the three months to September 30, the German airline recorded net profit of EUR1.15 billion, up from EUR1.11 billion in the year ago period, on total revenue of EUR10.18 billion, up 2% from EUR9.96 billion. The company on Wednesday said a cabin crew strike has led to the cancellation of around 1,300 flights hitting 180,000 passengers over the next two days. On Thursday, 700 of 3,000 planned flights are to be cancelled, with 600 axed on Friday.
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Steelmaker ArcelorMittal said markets remained weak during the third quarter, as expected, hurting sales and profit. Sales for the three months to September fell 26% year-on-year to USD13.63 billion, and dipped 29% on the quarter before. Steel shipments for the third quarter were 20.2 million tonnes, 7.3% lower than the year before, which ArcelorMittal blamed on seasonality, for the most part. Luxembourg-based ArcelorMittal posted earnings before interest, tax, depreciation and amortisation of USD2.06 billion, down 25% year-on-year. However, it did return to an operating profit of USD297 million, after a loss of USD158 million in the second quarter.
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Thursday's Shareholder Meetings
BHP Group
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By Tom Waite; [email protected]
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