21st Nov 2019 08:02
(Alliance News) - Letter and parcel carrier Royal Mail said Thursday its profit in the first half was in line with expectations despite "considerable" economic and political uncertainty in the UK.
In the 26 weeks to September 29, Royal Mail recorded pretax profit of GBP173 million compared to GBP33 million in the 26 weeks to September 23 the year before.
Revenue was up 5.1% to GBP5.17 billion, with Royal Mail saying UK parcel growth more than offset any decline in UK letters. The company also noted it UK revenue performance was the best in five years.
Royal Mail lowered its dividend, however, to 7.5p from 8.0p the year before.
Looking ahead, the company said it expects to see adjusted operating profit between GBP300 million and GBP340 million for the full year. In the first half, the company recorded GBP165 million adjusted operating profit.
Royal Mail said its transformation is "behind schedule" but is committed to investing GBP1.8 billion into the firm. The company said its second half performance should benefit from the UK general election - due to political flyer postings - but its outlook, especially for letters, remains "challenging".
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.5% at 7,225.04
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Hang Seng: down 1.5% at 26,482.16
Nikkei 225: closed down 0.5% at 23,038.58
DJIA: closed down 112.93 points, 0.4%, at 27,821.09
S&P 500: closed down 0.4% at 3,108.46
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GBP: up at USD1.2929 (USD1.2909)
EUR: flat at USD1.1071 (USD1.1066)
Gold: up at USD1,471.00 per ounce (USD1,468.57)
Oil (Brent): flat at USD62.24 a barrel (USD62.30)
(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
0930 GMT UK public sector finances, government net borrowing
1600 CET EU FCCI flash consumer confidence indicator
0830 EST US initial jobless claims
0945 EST US Bloomberg consumer comfort index
1000 EST US existing home sales
1030 EST US EIA weekly natural gas storage report
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US lawmakers took the last step to approve legislation supporting protesters in Hong Kong in an almost unanimous vote on Wednesday, before sending it on to President Donald Trump for a signature. China has vowed to take "countermeasures" if the proposal becomes law. The Chinese Foreign Ministry summoned a top US diplomat in Beijing after the Senate approved the bills earlier this week. Trump declined to answer questions from reporters about whether he would sign the bill. Only one lawmaker in both houses of Congress voted against the bills, ensuring the legislation has a veto-proof majority. The Hong Kong Human Rights & Democracy Act requires sanctions against Chinese officials who are deemed to be violating freedoms and committing serious human rights abuses in the city. It also requires a review of Hong Kong's autonomy from China, to determine whether the city should benefit from a special trading status with the US.
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US central bankers last month dismissed the idea of taking interest rates into negative territory, something President Donald Trump has called for many times, according to meeting minutes released Wednesday. Evidence for the benefits of negative interest rates – lenders must pay borrowers rather than the other way around – has proven "mixed" in countries where it has been tried, according to members of the Fed's rate-setting Federal Open Market Committee. Federal Reserve policymakers also said at the October 29-30 meeting that the world's largest economy has "proven resilient" in the face of persistent global difficulties but risks remain "elevated," including from Trump's trade war. The Fed cut the benchmark lending rate last month for the third time this year, bringing it down to a range of 1.5% to 1.75%.
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Labour said its manifesto would bring about "real change" to overhaul Britain's "rigged" society as it pledged to boost wages, tackle climate change and re-nationalise key utilities. Leader Jeremy Corbyn will reveal the full details of his election manifesto in Birmingham on Thursday, which is set to include promises of free broadband for all homes and businesses by 2030, more money for the health service and a fresh Brexit referendum. Corbyn called the fresh plans a "manifesto of hope" that were "fully costed", involving no tax increases for 95% of taxpayers. He issued a warning to supporters that his vision for government would be met with opposition in the remaining three weeks leading up to the December 12 polling day. On Brexit, the party will keep to the position decided at its autumn conference of renegotiating an exit deal with the EU by March and then putting those terms to a public vote within another three months, with Remain as an option.
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The International Monetary Fund's chief warned that trade tensions and resulting uncertainties could shave off 0.8% of global gross domestic product by next year. The global economy is in a "synchronized slowdown", Kristalina Georgieva, managing director of the IMF, said at the end of a roundtable discussion with Chinese Premier Li Keqiang and the heads of five other international organizations in Beijing. Ninety per cent of the world's GDP is slowing compared with last year. In contrast, 75% of the world's GDP was increasing just two years ago, before the start of the US-China trade war, Georgieva said.
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BROKER RATING CHANGES
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DEUTSCHE BANK CUTS AVIVA TO 'HOLD' ('BUY') - TARGET 450 (485) PENCE
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GOLDMAN INITIATES JD SPORTS FASHION WITH 'BUY' - TARGET 870 PENCE
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CITIGROUP INITIATES SMITH & NEPHEW WITH 'BUY'
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COMPANIES - FTSE 100
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Johnson Matthey said its first half was in line with expectations, with revenue sharply higher but profit slipping due to one-off costs associated with manufacturing inefficiencies in its Clean Air business. In the half year to September 30, Johnson Matthey's pretax profit fell 8% to GBP225 million from GBP244 million the year before. Revenue jumped 37% to GBP6.82 billion from GBP4.97 billion. The company said this was driven by "good" sales growth and higher precious metals prices. Sales, excluding precious metals, were up 3% year on year to GBP2.12 billion. Looking to the second half, Johnson Matthey said it expects a "stronger" set of results compared to the first half, primarily driven by the absence of the one-off costs and seasonality in its Efficient Natural Resources unit. For the full year, the company expects to deliver group operating performance in line with market expectations.
Centrica said its performance in the second half has been "solid" and has kept its full year targets unchanged. The company has seen growth in total customer accounts, higher margins and returns in business energy supply in North America, strong trading and optimisation performance in Europe, and acceleration of cost efficiency delivery, Centrica said. Looking ahead, Centrica expects its adjusted earnings to be weighted towards the second half, with adjusted operating cash flow guided to be in the lower half of the GBP1.8 billion to GBP2.0 billion range. Year end net debt is guided between GBP3.0 billion and GBP3.5 billion. Centrica now expects capital investment of about GBP800 million, down GBP100 million compared to guidance offered in its interim results. The company also expects in-year efficiency savings of about GBP300 million, GBP50 million higher than previous guidance.
Severn Trent saw its turnover rise 3.2% in the six months to September 30, in a "strong" first half, which the company believes has laid the foundations for the next regulatory period for utilities, AMP7. Turnover grew to GBP910.0 million from GBP881.5 million, with pretax profit slipping GBP4.6% to GBP285.3 million. The dip in profit was attributed to a one-off gain the year before on the sale of its Teal Close property. Severn Trent upped its interim dividend by 7.2% to 40.03p from 37.35p the year before. Chief Executive Liv Garfield said: "This has been another six month period where we have delivered for all of our stakeholders through strong performance, continued investment and environmental improvement, helping us to fulfil our goal of being the most trusted water company in England."
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COMPANIES - FTSE 250
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UK competition regulators invited comments as they consider an investigation into the GBP3.3 billion acquisition of Canadian firm Entertainment One by US toymaker Hasbro. In August, Action Man and Nerf owner Hasbro announced its 560 pence per share cash offer to buy the Peppa Pig owner Entertainment One. The deal valued the London-listed firm at GBP3.3 billion. On Thursday, the UK Competition & Markets Authority invited comments on the proposed buy as part of an assessment on whether the deal would represent a "substantial lessening of competition" in the UK. The monopoly regulator has given until December 5 for comments on the deal to be submitted.
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COMPANIES - INTERNATIONAL
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Costa Coffee has appointed the former head of Marks & Spencer Group's clothing and home operations as chief executive, it said on Tuesday. On December 2, Jill McDonald will succeed Dominic Paul as CEO at the coffee shop chain, which is owned by Coca-Cola, having bought Costa for GBP3.9 billion off Whitbread at the start of 2019. McDonald left her role at M&S in the summer after nearly two years, when M&S CEO Steve Rowe decided to take over Clothing & Home to "address long-standing issues".
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An Australian court found that Johnson & Johnson was "negligent" in supplying thousands of women pelvic meshes without adequate testing or health warnings, a ruling that exposes the firm to millions of dollars in damages. Federal Court Justice Anna Katzmann upheld a class action from more than 1,000 Australian women who say the mesh – designed to support weakened muscles holding up the pelvic organs – had disastrous side-effects. The amount of damages will be set in next year, but the ruling said three companies in the Johnson & Johnson group rushed to get the sub-standard products to market without adequate testing, while vastly underplaying potential dangers.
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German industrial giant ThyssenKrupp axed its dividend after its annual results were hit by tough market conditions and ineffective restructuring efforts. For the year ended September, the Essen-based firm sank to a pretax loss of EUR83 million from a profit of EUR561 million the year prior. Adjusted earnings before interest & taxes - also known as operating profit - narrowed to EUR802 million from EUR1.44 billion the year before, this was in line with previous company forecasts. ThyssenKrupp skipped its annual dividend amid the weaker profit performance at the firm. The year prior, the firm paid a 15 euro cents dividend.
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Thursday's Shareholder Meetings
Hotel Chocolat
Ferguson
Avation
FW Thorpe
Close Brothers Group
JD Wetherspoon
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By Tom Waite; [email protected]
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