27th Apr 2015 11:00
LONDON (Alliance News) - Centrica reiterated its full-year guidance Monday, after a cold winter boosted energy consumption in its British Gas business despite a broadly flat number of residential accounts and lower numbers of business customers, but the company noted its outlook is clouded by the upcoming General Election and the regulatory review of the UK gas and electricity market.
"Overall, the group continues to trade in line with the guidance provided at the time of its 2014 preliminary results in February, with improved year-on-year profitability downstream expected to be more than offset by the impact of lower commodity prices on the upstream business," said the company.
Residential gas consumption through British Gas was 10% higher in the first three months of 2015 than a year earlier with electricity consumption increasing by 2%, which Centrica said was due to colder temperatures than normal during the period.
Centrica said its Direct Energy division, operating in North America, "remains on track to deliver material operating profit growth in 2015" compared with a "weak" performance last year. Total Direct Energy gas consumption in the first quarter was 1% higher than the same period last year, also due to the colder-than-expected weather.
Centrica Energy, its upstream gas and power business, is on track to meet the company's target of reducing capital expenditure by about 25%, totalling GBP800 million in 2015, and a 40% reduction to around GBP650 million in 2016. Centrica has also identified a number of initiatives to reduce costs and remain on track to achieve a GBP100 million reduction in cash production costs by 2016.
However, the company did warn that the General Election in 10 days as well as the regulatory review into the UK energy market were clouding its outlook.
"The group’s earnings remain subject to the usual variables of commodity prices, weather and asset performance, and the uncertain outcomes of the UK General Election and the Competition and Markets Authority investigation into the UK energy market," said Centrica.
That caution comes as the latest BBC and Sky News polls of polls both have Labour and the Tories level-pegging on 33%.
The current UK government, meanwhile, has told BP it would oppose any potential takeover of the company, amid speculation the oil major could become a target in the wake of the takeover of BG Group by Royal Dutch Shell, the Financial Times reported.
British officials told the FT that Downing Street would be "sceptical" about any takeover as it wants the UK to retain two big global oil companies. ExxonMobil, the US oil and gas giant, has been tipped by analysts for a possible takeover bid for BP, the FT noted.
The government doesn't have the power to block a takeover of BP if an offer was tabled, but is clearly hoping its stated opposition would be enough to put off potential suitors.
No such protection is being afforded smaller oil company Tullow Oil, which got a boost Monday when it said it can continue developing a key asset that's in a border area being disputed by Ghana and Ivory Coast.
Tullow Oil said its flagship TEN project can continue to be developed, despite an international tribunal ordering all exploration and new exploitation for oil and gas in a disputed offshore area between Ghana and the Ivory Coast, where the project is located, to be suspended. The tribunal ruled that existing developments, like the TEN project can continue to be developed.
"With no suspension to the TEN project, ample credit headroom and revised covenants, concerns over Tullow’s balance sheet should be alleviated. We expect Tullow to get to TEN first oil mid-2016
without exceeding available credit lines or breach covenants on our conservative oil price deck," said Exane BNP Paribas Analyst Alex Topouzoglou. "Therefore, we don’t see Tullow having to slow its East Africa development to conserve cash."
"The UK prime minister has been in the news as he lets BP know that he wants it to remain a British institution and would oppose any takeover attempt. Royal Dutch Shell’s acquisition of BG Group late last month sparked a wave of speculation about who would be next – Tullow Oil was mentioned as one company potentially ripe for takeover," added Augustin Eden, an analyst at Accendo Markets.
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Markets: London stock indices have traded both sides of unchanged Monday morning, with few directional pointers in terms of economic events. HSBC Holdings leads the FTSE 100 gainers for the second consecutive session after reports over the weekend suggesting it will spin off its UK retail bank.
US stock futures point to a higher open on Wall Street. The DJIA, the S&P and the Nasdaq 100 are all currently set to open up 0.2%. Apple reports after the market closes Monday. Applied Materials is set to fall sharply after it agreed to terminate its USD9.4 billion merger with Tokyo Electron after opposition from US regulators.
FTSE 100: up 0.1% at 7,075.02
FTSE 250: flat at 17,735.00
AIM ALL-SHARE: flat at 753.70
GBP: down at USD1.5124
EUR: down at USD1.0829
GOLD: up at USD1,182.33 an ounce
OIL (Brent): down at USD64.98 a barrel
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Other Top Corporate News
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Drinks giant Diageo confirmed it is considering its options as Indian drinks company United Spirits moved to oust its chairman and former majority shareholder amid an internal probe into its financial statements. Diageo noted a statement by USL, in which it holds a 54.78% majority stake, saying that the board had lost confidence in Vijay Mallya and had called on him to resign. Mallya had indicated he wouldn't tender his resignation, said USL, which had said it would ask shareholders to vote him out if he refused to step down. The Financial Times reported over the weekend that USL's probe found improprieties in financial transactions between United Spirits and Kingfisher Airlines, the now-collapsed Indian carrier also owned by Mallya, between 2010 and 2012.
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Royal Bank of Scotland Group said it will book a USD30 million loss on disposal after it sold a further portfolio of North American corporate loan commitments to Mizuho Financial Group, coming on top of the deal it did with the same bank in February. The British bank said the latest loan portfolio it is selling in North America comprises USD5.6 billion of loan commitments, including USD0.5 billion of drawn assets as of the end of February, and generated a profit after tax in the region of USD20 million in calendar 2014.
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HSBC Holdings is mulling the spin-off of its UK retail bank into a separate business for about GBP20 billion, the Sunday Times newspaper reported. A deal could revive the old Midland Bank, which was bought by the lender in 1992. The move comes amid government requirements that banks separate their retail business from the rest of their operations as of 2019. The lender said Friday that it would review whether to move its headquarters out of the UK, as the Asia-focused bank grapples with higher taxes and regulatory costs in the country.
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Irish building materials company CRH said it will shortly start looking for a new finance director after it said the current holder of the role, Maeve Carton, will lead a new strategic function from the start of 2016. In a statement, CRH said Carton will become group transformation director, identifying and implementing the optimum financial and business model for the group in the years ahead.
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The European Commission on Friday cleared the proposed acquisition of several assets of Holcim of Switzerland and of Lafarge of France by CRH. The Commission concluded that the transaction would raise no competition concerns, in particular because the merged entity will continue to face sufficiently strong competition after the merger and customers will have alternative suppliers in all markets concerned.
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Randgold Resources said the Tongon gold mine in the Ivory coast is on track to achieve its full-year production and cost guidance for 2015 after the company made "significant progress" in dealing with challenges at the mine that had previously hampered operations. The Tongon mine will produce around 260,000 ounces of gold in 2015 at a cash cost of USD820 per ounce. At the current gold price, the project should be able to repay the capital expenditure spent on developing the project in 2015 as scheduled, said Randgold.
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Great Portland Estates said its Great Wigmore Partnership joint venture with FTSE 100-listed fund manager Aberdeen Asset Management has sold the 95 Wigmore Street property in central London for GBP222.4 million. FTSE 250-listed Great Portland said the property has been sold to UBS Global Asset Management's real estate business and said the sale price reflects a net initial yield of 3.4%.
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Playtech expressed confidence for strong growth in 2015 as it delivered a strong start to the year, with revenue up 31% in its first quarter. Playtech provides software and services for the gaming industry. The company said its revenue for the first quarter of 2015 was EUR134.9 million, up from EUR102.7 million a year before, and up from EUR126.2 million in the fourth quarter of 2014. This was mostly driven by a strong performance from its Casino and Services segments, and a big jump in its Land-based revenue, which offset a slight decline in Poker revenue.
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AIM Movers
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Staffline Group shares are up after it said it will pay GBP23.5 million in cash for A4e, a welfare-to-work and skills training services provider in the UK, and will assume the company's GBP11 million debt obligations. Digital Globe Services is doing well after it said it expects to see its core US telecoms market stabilise following the collapse of the potential merger between Comcast Corp and Time Warner Cable, as well as Comcast's deal with smaller rival Charter Communications. Red24 is another gainer after it said it expects its results for the recently-ended financial year to beat its own expectations, after it managed to mitigate the loss of a major client earlier in the year by cutting costs and winning other work with existing and new clients, while the current year has got off to a good start. Baron Oil is up after it said production has now resumed at the Nancy 1 well in the Nancy Burdine Maxine oil field in Colombia and production is gradually increasing to the 400 barrels of oil per day target for the site. Thor Mining has lost a quarter of its value after it noted the recent increase in trading volumes in the company's shares and "bulletin board speculation", but said it is unaware of any reason for the rise, adding it has not held any talks regarding the Molyhil project in Indonesia. The company admitted there are several companies "reviewing the Molyhil project", but said none are guaranteed to lead to a deal. Sprue Aegis is down after it said pretax profit almost doubled in 2014 as European sales rose substantially, but it warned that although revenue in 2015 will be higher than expected, it believes its pretax profit will be below market expectations due to the strong pound cutting into gross margins.
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Top Economics And General
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Labour put housing policy at the centre of its UK election campaign, pledging a stamp duty holiday for first time buyers and a clampdown on landlords, as the Tories launched a small business manifesto in an attempt to deflect Labour's accusation that it is the party of big business. Labour leader Ed Miliband will announce plans to scrap stamp duty for first-time buyers purchasing a property of up to GBP300,000, an attempt by the party to try and build momentum in the last full week of campaigning. In a speech in Stockton, Labour will say it would implement a "holiday" on stamp duty for first time buyers for the first three years of its tenure in government, claiming the plan will cost GBP225 million.
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The Conservatives retained a lead in the latest Opinium poll over the weekend, but Labour continues to narrowly top the YouGov surveys as polls of polls have the two parties in a dead heat as the UK General Election campaign moves into its final 10 days. The latest Opinium/The Observer poll has the Conservatives retaining their lead, albeit at a narrower margin than a week earlier. The Tories are on 34%, down two points from a week ago, but remain a point ahead of Labour on 33%. The YouGov/The Sun poll for Monday saw Labour lose a point but also retain a lead over the Tories, at 34% to 33%. The BBC and Sky News polls of polls both have Labour and the Tories level-pegging on 33%.
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Germany's import prices continued to decline in March but the pace of decrease slowed for the second month, data from Destatis showed. Import prices fell by less-than-expected 1.4% in March from last year, following a 3% drop in February. Prices were expected to fall 2%. Nonetheless, the import price index has been falling since January 2013. At the same time, the annual increase in export prices doubled to 1.4% from 0.7% in February. Similarly, monthly growth accelerated to 0.6% from 0.3%.
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Greece scrambled Monday to find enough cash to pay pensions and public employees after eurozone ministers insisted that the country should not expect any more aid until all bailout terms are met.
Over the weekend, mayors and the heads of local governments agreed to hand over their cash reserves to the state after initially balking at the request made by Greek Prime Minister Alexis Tsipras. Greece owes payments in the coming weeks to bondholders and other creditors, including EUR950 million due in May to the International Monetary Fund and EUR1.7 billion euros in public sector wages and pensions.
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Top EU officials met with the Ukrainian leadership in Kiev on Monday in a bid to push the country's reform agenda forward. President Petro Poroshenko called for the implementation of a trade agreement between Ukraine and the EU as he welcomed EU President Donald Tusk and Commission President Jean-Claude Juncker outside his office. The refusal by former president Viktor Yanukovych to sign the agreement sparked mass protests that eventually led to his ouster, in February 2014. This is the first Ukraine-EU summit since last year's so-called Maidan revolution.
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The death toll from the 7.8-magnitude earthquake at the weekend in Nepal was 3,432, the Interior Ministry said Monday, after thousands more spent a second night in the open. The government said around 6,505 people were injured in the quake that hit on Saturday.
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Afternoon Watchlist (all times in BST)
14:45 US Markit PMI Composite
15:30 US Dallas Fed Manufacturing Business Index
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Tuesday's UK Corporate Events
Allied Minds - Full Year Results
Avocet Mining - Full Year Results
Synety Group - Trading Statement
Henderson Group - Interim Management Statement
BP - Q1 Results
SEGRO - Q1 Interim Management Statement
St James's Place - Q1 Interim Management Statement
Xeros Technology Group - Half Year Results
Gresham House - Full Year Results
Whitbread - Full Year Results
Rexam - Interim Management Statement
Standard Chartered - Q1 Interim Management Statement at 0915 BST
Aseana Properties - Full Year Results
AB Dyanamics - Half Year Results
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Tuesday's Key Economic Events (all times in BST)
00:50 Japan Retail Trade
07:45 France Consumer Confidence
09:30 UK Gross Domestic Product
13:55 US Redbook index
14:00 US S&P/Case-Shiller Home Price Indices
15:00 US Consumer Confidence
15:00 US Richmond Fed Manufacturing Index
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