3rd Feb 2022 07:53
(Alliance News) - Stock prices in London are called lower on Thursday, as European equities, after decent progress so far this week, are seen surrendering gains ahead of interest rate decisions by the Bank of England and European Central Bank.
IG futures indicate the FTSE 100 index is to open 18.4 points, 0.2%, lower at 7,564.10. The blue-chip index closed up 47.22 points, or 0.6%, at 7,583.00 on Wednesday.
In early UK corporate news, Shell hailed a "momentous year" as earnings ballooned after the Covid-19 hit that the oil major took in 2020. The recently renamed company also said it will lift shareholder returns.
BT posted an earnings fall but announced talks for a joint-venture involving its sports broadcasting arm. Contract caterer Compass said revenue almost hit pre-virus levels.
Shell, fresh from simplifying its share structure and dropping 'Royal Dutch' from its name, posted substantially stronger annual earnings and an increased payout.
For the fourth quarter of 2021, total revenue, so including joint-ventures and interest income, more than doubled annually to USD90.22 billion from USD45.03 billion. Fourth-quarter pretax profit multiplied to USD16.27 billion from USD1.19 billion.
Fourth-quarter earnings were boosted by rampant oil prices.
For the whole of 2021, revenue increased by 49% to USD272.66 billion from USD183.20 billion. Shell swung to an annual pretax profit of USD29.83 billion from a USD26.97 billion loss in a Covid-damaged 2020.
At USD19.29 billion, up sharply from USD4.85 billion, adjusted earnings for the year topped market consensus of USD18.01 billion.
"2021 was a momentous year for Shell. We launched our Powering Progress strategy and simplified our share structure and organisation. Progress made in 2021 will enable us to be bolder and move faster. We have a compelling strategy, with customers at its core. We have ambitious plans to generate shareholder value, to decarbonise our products and to provide energy to our customers while respecting nature," Chief Executive Ben van Beurden said.
Shell said it will increase the pace of its share buybacks to USD8.5 billion in the first half of 2022, including the remaining USD5.5 billion proceeds from its Permian disposal. Shell in January vowed to progress its buybacks "at pace".
Shell also increased its annual dividend by 37% to USD0.8935 per share, from USD0.6530 in 2020. The company will raise its first quarter dividend to USD0.25 per share from the USD0.24 declared for the fourth quarter of 2021.
Looking ahead, Shell said cash capital expenditure for 2022 will be at the lower end of a USD23 billion to USD27 billion range.
Telecommunications operator BT posted weaker year-to-date earnings following the conclusion of its third quarter. It also unveiled a possible joint-venture for its sports broadcasting unit, after "a detailed process to identify the best way to generate investment".
It has entered into exclusive talks with the US's Discovery, which owns Eurosport UK.
"The new business would be a 50/50 joint venture, bringing together BT Sport with Eurosport UK. The new combined business would remain committed to retaining BT Sport's existing major sports broadcast rights while BT Sport customers would get access to Discovery's sport and entertainment content, including the discovery+ app," BT said.
It is aiming to conclude the discussions in "early Q1", eyeing the JV being operational later this year.
BT said revenue in the nine months to December 31 fell 2.4% to USD15.68 billion from USD16.06 billion a year earlier. Pretax profit declined 3.4% to USD1.54 billion from USD1.59 billion.
"BT has had a good quarter with encouraging market share performance, and we continued to make significant improvements in customer service, although revenue from our enterprise divisions was softer than we expected," Chief Executive Philip Jansen commented.
In addition, Jansen noted BT has reached a deal in principle with broadcaster Sky for a "new longer-term reciprocal channel supply deal to beyond 2030".
Jansen added: "Today sees two important strategic partnership announcements on how BT moves forward in the fast-evolving content and TV business. The agreement in principle with Sky will provide our customers more choice and more flexibility for the next decade. Separately, we are excited at the prospect of a new joint venture between BT Sport and Eurosport UK as we enter into exclusive discussions with Discovery."
BT had long been rumoured to sell BT Sport. In January, Reuters reported BT was close to selling the unit to streaming service DAZN in a deal worth roughly USD800 million.
Contract caterer Compass said its revenue grew 39% on an organic basis in the first quarter ended December 31.
"The quarterly improvement was largely driven by new business, continued strong client retention along with some ongoing recovery in the base business. The emergence of the Omicron variant had a limited impact on the group during the period," the company said.
First-quarter revenue hit 97% of pre-virus levels. In North America alone, it topped levels seen in 2019.
Compass warned of a currency hit, however. If currency movements continue as they have been, the company will see a GBP75 million hit to revenue and GBP3 million to operating profit.
"Our guidance for FY22 remains unchanged. We expect full-year organic revenue growth of 20% to 25%, with quarterly growth rates moderating through the year, reflecting more challenging comparatives," Compass added.
The Bank of England reveals its latest interest rate decision at 1200 GMT. The European Central Bank reports at 1245 GMT, before a press conference with President Christine Lagarde at 1330 GMT.
"So, all eyes are on Christine Lagarde and what she has to say at today's press conference. Will she insist that inflation is transitory or will she finally accept the defeat, and call it a problem, in which case we will perhaps see the ECB hawks taking the reins of the market after months of a decent suppression," Swissquote analyst Ipek Ozkardeskaya commented.
"Across the Channel, the discussion will likely not be as heated in the UK, as Brits will probably raise their interest rates by another 25bp for the second time at today's meeting."
Ahead of the two announcements, sterling and the euro gave up ground against the dollar. The pound was quoted at USD1.3550, down from USD1.3560 at the London equities close on Wednesday. The euro stood at USD1.1289, down from USD1.1295.
Against the yen, the dollar was trading at JPY114.58, up from JPY114.33.
In Tokyo, the Nikkei 225 closed 1.1% lower on Thursday, while the S&P/ASX 200 in Sydney fell 0.1%. The Hong Kong and Shanghai exchanges remained closed for the Lunar New Year holiday.
Gold stood at USD1,803.61 an ounce early Thursday, down from USD1,808.75 at the London equities close on Wednesday. Brent oil was quoted at USD89.22 a barrel, up slightly from USD89.02.
Aside from a busy day for central banks, the economic events calendar on Thursday has PMI readings from Germany, the eurozone, the UK and US at 0830 GMT, 0900 GMT, 0930 GMT and 1445 GMT respectively.
On the UK political front, Prime Minister Boris Johnson was showing no sign of bowing to the growing calls from Tory MPs to resign as Downing Street is investigated by police over allegations of lockdown-breaching parties.
Three more Tory MPs withdrew their support on Wednesday. But the Sun newspaper reported that Johnson rejected calls to resign and indicated he would run again at the next general election in 2024, saying in an interview on Wednesday that he is "focussed on the next election".
By Eric Cunha; [email protected]
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