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(Alliance News) - Virgin Money UK, formerly known as CYBG, said Thursday it delivered a good performance in "challenging conditions", though suspended its dividend on PPI provisions.
Net interest income for the financial year to September 30 was GBP1.51 billion, nearly double the GBP851 million achieved the year before. Total operating income was GBP1.75 billion, up from GBP1.01 billion.
The company's pretax loss deepened, however, to GBP232 million from GBP164 million.
"Our statutory result was significantly affected by additional PPI provisions, driven by the unprecedented surge in PPI information requests in August, along with anticipated Virgin Money acquisition-related costs," explained Chief Executive David Duffy.
Virgin Money said it was "frustrating" to take GBP385 million in additional PPI provisions for the fourth quarter as it looks to "close out this legacy issue". Meanwhile, acquisition costs in the period totalled GBP189 million and restructuring costs GBP156 million.
The dividend has been suspended for the recently ended financial year in light of additional PPI provisions, and the board will "reconsider" dividends for the 2020 financial year.
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 34.08 points, 0.5%, at 7,395.70
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Hang Seng: down 0.2% at 26,903.84
Nikkei 225: closed down 0.1% at 23,409.14
DJIA: closed up 97.53 points, or 0.4%, at 28,164.00
S&P 500: closed up 0.4% at 3,153.63
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GBP: up at USD1.2949 (USD1.2872)
EUR: flat at USD1.1011 (USD1.1005)
Gold: firm at USD1,456.53 per ounce (USD1,455.35)
Oil (Brent): soft at USD62.76 a barrel (USD62.92)
(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
US Thanksgiving Day holiday. Financial markets closed.
1100 GMT UK CBI service sector survey
1100 GMT Ireland retail sales index
1000 CET EU monetary developments in euro area
1100 CET EU business and consumer surveys
1400 CET Germany provisional consumer price index
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Prime Minister Boris Johnson is on course to win the UK general election with a comfortable 68-seat majority by triumphing in Labour heartlands, according to a projection poll which accurately forecast the hung parliament in 2017. The constituency-by-constituency estimate by YouGov, published in The Times, indicates that if the election was held on Thursday, the Conservative Party would win 359 seats, 42 more than they took in 2017. It would also take 43% of the vote, and in number of seats this would be its best performance since 1987. Labour, meanwhile, is set to lose 51 seats, falling from 262 seats in 2017 to 211 now, and taking 32% of the vote, a nine percentage point decrease. This would be the party's worst performance in seats won since 1983, YouGov said, adding that the opposition is on course to not take any new seats.
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Britain's powerhouse services sector saw activity fall at a steeper pace in the three months to November as Brexit and political uncertainty wrought further havoc, according to a survey. The latest CBI service sector report revealed business volumes fell at a sharper pace in the three months to November, with consumer services firms suffering their fifth straight quarter of declines.
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The number of cars built in the UK fell by over 5,600 last month compared to a year ago, highlighting the "extremely worrying" times for the industry, according to a new report. The Society of Motor Manufacturers & Traders said car production has now fallen for 16 in the last 17 months. Production only went up in August because contingencies for Brexit boosted output that month. Just over 134,750 cars rolled off production lines in October, 5,622 fewer than the same month last year, a fall of 4%.
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China's foreign ministry summoned the US ambassador, urging Washington to refrain from applying a bill supporting Hong Kong's pro-democracy movement to "avoid further damage" to relations. Chinese vice foreign minister Le Yucheng lodged a "strong protest" with Ambassador Terry Branstad after President Donald Trump signed the legislation into law. The passage of the bill comes as the world's two biggest economies are locked in negotiations to finalise a partial deal to soothe their trade war. "Le stressed that China strongly urges the US side to correct mistakes and change course," the foreign ministry said in a statement. Le also urged the US to "refrain from putting the bill into practice, and immediately stop interfering in Hong Kong affairs and China's internal affairs, so as to avoid further damage to China-US relations and bilateral cooperation in important areas". The Hong Kong Human Rights and Democracy Act requires the US president to annually review the city's favourable trade status and threatens to revoke it if the semi-autonomous territory's freedoms are quashed.
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US, Mexican and Canadian trade negotiators met on Wednesday in an effort to put the final touches on a regional free trade agreement that can pass muster in the American Congress. Democratic legislators have been asking for tougher enforcement of labour standards in the agreement formerly known as NAFTA. Mexico's top trade negotiator Jesus Seade said talks appear to be in the final stretch to win approval for the rebranded US-Mexico-Canada Agreement.
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Economic activity in the US continued its "modest" growth in the past six weeks, but trade tensions remain a concern and manufacturing was mostly flat, according to a Federal Reserve report. Nine out of the 12 Fed regions saw slight growth from October through mid-November while three, including New York, stagnated, according to the Fed's Beige Book survey of the economy. Multiple regions mentioned the negative impact created by trade tensions and tariffs, and manufacturing in the majority of regions showed no growth. The report was prepared in advance of the Fed's policy meeting December 10-11.
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BROKER RATING CHANGES
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HSBC CUTS ASHTEAD GROUP TO 'HOLD' ('BUY') - TARGET 2350 (2500) PENCE
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MORGAN STANLEY RAISES BRITISH LAND CO TO 'OVERWEIGHT' (EQUAL-WEIGHT) - PRICE TARGET 630 PENCE
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RBC CUTS MELROSE INDUSTRIES TO 'OUTPERFORM' ('TOP PICK') - TP 265 (245) PENCE
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COMPANIES - FTSE 100
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Life and pensions consolidator Phoenix Group said its cash generation for 2019 is ahead of target. Phoenix said it has generated GBP707 million of cash in 2019, exceeding the upper end of its GBP600 million to GBP700 million target. It also continued to meet, or exceed, customer service metrics, and remains on track to deliver the GBP1.2 billion total synergy target for its Standard Life Assurance purchase. "This trading update further reinforces Phoenix's conviction in its business model and its capacity to generate Cash, deliver Resilience and exploit multiple avenues of Growth to deliver long-term sustainable cash generation, not just today but in the years ahead," said Chief Executive Clive Bannister.
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Online grocer Ocado said it will be building its first "mini-CFC", which will be located in Bristol. The CFC, or customer fulfilment centre, will have the capacity for 30,000 orders per week compared to approximately 85,000 orders per week expected from Ocado CFC 5, which is currently under construction at Purfleet. The Bristol CFC is expected to go live at the end of 2020 or early 2021 and, despite its smaller size, is expected to achieve productivity close to that of standard facilities. It is being built to support the growth plans of Ocado Retail, a joint venture between Ocado and Marks & Spencer.
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The new digital bank set up by Royal Bank of Scotland to compete with fintech rivals has become a target for fraudsters, The Times reported. According to the newspaper, about 30% of applications received by Bo since the app-based venture went live two weeks ago were fraudulent. The figure underscores the scale of the challenge facing British banks in the digital age as they seek to counter money laundering and cybercrime, the Times commented. RBS has been developing Bo since 2017 and hopes that the app will help it to withstand competition from fast-growing digital-only rivals. Mark Bailie, chief executive of Bo, said that criminals wanted accounts for money laundering but that the bank had been blocking them. Given that Bo is new, RBS expected the venture to draw the attention of fraudsters, The Times said.
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COMPANIES - FTSE 250
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Transport operator Go-Ahead Group said its performance in both bus and rail have been mixed. The performance of regional bus operations has been "slightly weaker" than expected in the period June 30 to November 27. London & International bus continued to perform well, however. In rail, overall expectations remain unchanged with a good performance in the UK offsetting a challenging operational start to two new German contracts.
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Avanti West Coast has been unveiled as the name of the operator replacing Virgin Trains. Aberdeen-based transport company FirstGroup and Italian firm Trenitalia announced the brand name for their partnership which will run services on the west coast route from December 8. Their trains and station signs will display an orange triangle logo symbolising the 400-mile train network which links London with towns and cities across England, North Wales and Scotland. The word avanti means forward in Italian.
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Marine services firm James Fisher & Sons said it expects profit for the full-year to be ahead of 2018, but "modestly below" board expectations. Offshore Oil and Tankships have seen trading "well ahead" of the prior year, reflecting improved market conditions in the oil and gas sector. Specialist Technical continued to perform broadly in line with a strong prior year comparative while Marine Support's performance improved in the period following a slow start to the year. "The group anticipates continued good performance in its Offshore Oil and Tankships divisions for the remainder of the year. Specialist Technical is expected to perform broadly in line with the previous year and Marine Support to recover from its performance in the period," said James Fisher. While "modestly below" board expectations, pretax profit for 2019 is expected to be above last year's GBP56.1 million.
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The trade union representing postal workers is set to challenge a High Court injunction to block potential strikes by members. Royal Mail was granted an injunction to prevent members of the Communication Workers Union from taking industrial action in a dispute over job security and employment terms. Giving his ruling two weeks ago, Justice Swift said there was "improper interference" by the union with a strike ballot, because members had been encouraged to remove their voting papers from work before they were delivered to their home addresses. But CWU general secretary Dave Ward immediately vowed to challenge the decision, and the union's case will be heard by the Court of Appeal in London on Thursday.
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COMPANIES - OTHER MAIN MARKET AND AIM
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Tharisa lowered its annual dividend following a sharp drop in profit amid a revenue decline due to lower sales of platinum group metals and chrome concentrates. For the year to the end of September, pretax profit dropped by 83% to USD11.2 million from USD65.0 million the year before, on revenue that declined by 16% to USD342.9 million from USD406.3 million. This was due to lower sales, with the sales of PGM concentrate at USD177.9 million compared to USD250.4 million the prior year, amid a drop in chrome prices. PGM production declined by 8.1% to 139,700 ounces from 152,000 ounces the year before, with recoveries at 82% compared to 84.1%. Tharisa declared a dividend of 0.75 US cents per share, down 81% from 4.0 US cents the year before.
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COMPANIES - INTERNATIONAL
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Japanese car manufacturers Nissan Motor and Toyota Motor both reported steep declines in sales in October. Nissan's global sales in October were 405,991 vehicles, down 9.2% on the same month the year before. In the year to October, sales have declined by 7.8%. Toyota's October sales were 854,168 units, down 5.5% on the year before.
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Thursday's Shareholder Meetings
LMS Capital (re investment management arrangements with GHAM)
DX Group
Pan African Resources
Seeing Machines
CVS Group
Target Healthcare REIT
Bagir Group
Cap-XX
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By Tom Waite; thomaslwaite@alliancenews.com
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