LONDON (Alliance News) - Tesco is once again the worst-performing stock on the FTSE 100 after it revealed that it overstated its first-half profit expectations by GBP263 million, slightly more than the GBP250 million it had revealed last month, and said that some of the accounting issues had occurred in prior periods.
The struggling retail giant also said Chairman Richard Broadbent will step down once the business is "back on track".
The news came as the supermarket reported a first-half trading profit of just GBP937 million, down 41% on the year before, hit by the weakening UK grocery markets and the investments it is making to try and keep customers, but also due to challenging trading conditions overseas. Its UK like-for-like sales were down 4.6%, as the supermarket price war continued.
Britain's largest supermarket chain said the Deloitte investigation into its overstatement of expected half year profit has been concluded, with the overall "impact" confirmed as GBP263 million. Of that, GBP118 million related to this year's first-half trading profit, and the rest to prior years, although the whole amount will be reflected in this year's earnings.
Consumer goods giant Unilever is also amongst the worst-performers in the FTSE 100 after it reported a further weakening in trading, as market growth continued to slow in emerging markets, particularly in China, and its European markets continued to be hit by volume and price declines.
The company said revenue declined 2.0% to EUR12.2 billion in the three months to end-September, with currency movements taking 2.6% off the figure. That was an improvement compared with the first nine months of the year, when revenue declined 4.3% to EUR36.3 billion including a 6.6% currency movement hit. However, underlying sales and volume growth slowed in the third quarter. Underlying sales growth was 2.1%, compared with 3.2% growth for the whole nine months, while volume growth in the quarter was just 0.3%, compared with growth of 1.4% in the first nine months of the year.
It said it was suffering from price deflation in countries like the UK, France and Germany, particularly its ice creams and spreads.
Estate agency Foxtons Group is the worst-performing stock on the FTSE 250 after it warned that its third-quarter performance had been hit by a sharp slowdown in London property sales volumes. It has downgraded its earnings forecast for the year because it thinks market volumes will remain constrained for the whole of the second half.
Foxtons said the slowdown came after an "exceptionally strong" period in the nine months to June 30, when it said volumes hit the highest levels since 2007. Market volumes in the third quarter were more in line with the first half of 2013, and it now expects the second half of 2014 to see a significant fall in volumes year-on-year.
The news came as the British Bankers' Association said UK mortgage approvals declined in September to the lowest level in more than a year.
The seasonally adjusted number of mortgage approvals for house purchase decreased to 39,271 from 41,361 in August, revised from 41,588. Economists had forecast a figure of 41,450. The latest mortgage approvals figure was the lowest since July last year, when it was 38,157. Mortgage approvals decreased 10% from a year ago in September.
The Foxtons news and the latest mortage data also meant Zoopla Property Group and Countrywide are among the worst performers on the mid-cap index.
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Markets: UK stock indices have been lifted from even steeper early falls, along with indices across Europe, by some better than expected eurozone economic data, which showed the German manufacturing industry expanding again after briefly slipping into contraction last month. However, UK indices are still underperforming their European counterparts amid some weak corporate reports.
US stock futures are pointing to a higher start on Wall Street. The DJIA, the S&P 500 and the Nasdaq Composite are all pointed up 0.5%. Amazon, Microsoft and General Motors are among the US companies reporting Thursday.
FTSE 100: down 0.7% at 6,358.11
FTSE 250: down 0.7% at 15,063.86
AIM ALL-SHARE: down 0.2% at 707.97
GBP-USD: down at 1.6010
EUR-USD: up at 1.2666
GOLD: down at USD1,238.37 an ounce
OIL (Brent): up at USD84.78 a barrel
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Other Top UK Corporate News
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Anglo American reported increases in diamond, nickel and iron ore production during the third quarter whilst copper, platinum and thermal coal production declined. The company reported a 37% increase in iron ore production to 13 million tonnes for the third quarter ended September 30, compared to 9.5 million tonnes a year earlier. It also reported an increase in diamond production to 8.2 million carats in the quarter compared to 7.7 million carats in the third quarter of 2013. Nickel production also rose to 10,700 tonnes from 9,500 tonnes. Anglo American saw production of copper, platinum and thermal coal drop.
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Tullow Oil said it encountered hydrocarbon shows at the Kodos-1 wildcat exploration well in the Kerio Basin onshore Kenya, indicating the presence of an active petroleum system, but reservoirs were mixed quality alluvial sands close to the basin boundary fault at this well location. The oil & gas exploration and production group said the Weatherford Rig-804 drilled Kodos-1 to a final depth of 2,500 metres, and the well will be plugged and abandoned. The rig will now be moved to drill the second well in the basin at Epir-1, 25 kilometres north of Kodos-1 in a separate sub-basin. Tullow Oil said further drilling in the greater Kerio Basin can be expected during 2015, following up on the "encouraging" hydrocarbon shows at Kodos-1.
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Mining giant Rio Tinto said it has extended the tenure of of Chief Executive Sam Walsh and Chief Financial Officer Chris Lynch, saying the move provided a strong endorsement of their leadership, the company's strategy and its focus on driving shareholder value. Walsh and Lynch will transfer to open-ended contracts after Rio Tinto's annual general meetings in 2015, the company said. Walsh's initial contract was due to end on December 31, 2015 with a break clause from October 31, 2014 and Lynch's initial contract was due to end on February 28, 2017. They will both move to a rolling contract with no end date and a 12-month notice period.
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BHP Billiton says it will have increased production by 16% over the two years to the end of 2015 and will make USD3.5 billion in productivity gains by the end of the 2017, as it pushes forward with its proposed demerger to focus on four commodities. BHP Billiton’s strategy will remain unchanged in 2015, continuing to own and operate large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography and market to provide the energy and minerals that support global economic growth and development, BHP said in a statement ahead of its annual general meeting.
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Reed Elsevier said underlying revenue growth continued in the first nine months of the year and reaffirmed its outlook for the full year, expecting revenue growth in all of its divisions. The FTSE 100-listed information company said underlying revenue growth in the first nine months was 4%, with an improvement in all of its operating divisions. It said it has maintained its outlook for the full year, with profit and revenue both expected to grow.
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Lloyds Banking Group will next week disclose plans to cut about 9,000 jobs as part of plans to automate consumer-facing services, Sky News reported. According to the report, Lloyds will disclose the cuts, which will take place over three years to December 2017, alongside its third-quarter results next Tuesday.
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Department store operator Debenhams reported a lower pretax profit for its last financial year, but said the efforts it is taking to turn the business round are paying off as operating profit rose in the second half of the year. It reported a pretax profit of GBP105.8 million for the 52 weeks to August 30, down from GBP139.0 million a year earlier, as higher sales and distribution costs as well as administrative expenses offset a revenue rise to GBP2.31 billion, from GBP2.28 billion. Its operating profit for the year fell to GBP128.6 million, from GBP155.4 million. However, its operating profit in the second half of the year was up 2.9% on the same period a year earlier, compared with the 22.9% decline it reported in the first half of the year, showing the impact of its turnaround plan, the CEO said.
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SEGRO said it made good progress in the third quarter on the back of stronger occupational market conditions in the UK. The FTSE 250-listed property company said it added GBP1.9 million in annualised net rent in the quarter to the end of September, against a GBP0.1 million net take-back in the same period last year. The group let 149,000 square metres of existing space in the quarter.
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Inchcape said it produced a strong performance in the third quarter but said its revenue growth in the period and for the year to date has been hit by the strength of sterling. The FTSE 250-listed car retailer said third quarter revenue was GBP1.7 billion, up 10.6% on a constant currency basis but up only 4.4% at actual currency rates. Like-for-like revenue increased 11.6% at constant currency, but only 6% in actual rates.
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Colt Group said earnings fell in the third quarter, reflecting its decision to withdraw from low margin voice services business, but the telecom company maintained its outlook for the full year as its restructuring efforts continue. Sales in the three months to September 30 fell 8.4% to EUR354.2 million, from EUR386.5 million a year earlier. Earnings before interest, taxes, depreciation and amortization, and exceptional items, fell 5.5% to EUR73.7 million.
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Ladbrokes said it is on track to meet full-year expectations and reaffirmed its dividend plans after it posted a jump in operating profit and a rise in revenue in the third quarter. The FTSE 250 bookmaker said group operating profit in the third quarter to September 30 was GBP33 million, nearly double the GBP17 million posted a year earlier. That came on the back of a 13% rise in net revenue in the period, it said. Still, its shares fell as analysts warned that it faces lower profits next year due to higher duties and new regulation.
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Britvic raised its guidance for full year operating earnings, even as it reported a drop in fourth-quarter revenue, citing poor summer weather and subdued retail spending in Europe. The drinks company said it expects earnings before interest and taxes to be ahead of the top end of its GBP148 million to GBP156 million estimate, as revenue and volumes grew over the full year and cost cuts took effect. Still, Britvic reported a 4% fall in revenue to GBP344.2 million in the fourth quarter.
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Premier Foods said it expects full-year earnings to be at the low end of market expectations, citing "challenging" market conditions as it reported a 4.7% drop in third-quarter sales. The company, which owns food brands such as Mr Kipling and Oxo, said it will introduce a new organisational structure to combat changes in the industry and in a bid to improve market focus.
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Shares in drug development company C4X Discovery climbed 4% in early trading following its GBP11 million listing on the AIM market in London. The company sold 11 million shares to investors at a price of 100 pence a share and at 1020 BST the shares were up 4 pence at 104 pence. The IPO price gave the company an initial market capitalisation of about GBP31 million. The funds will all be used by the company and there are no selling shareholders.
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AIM Movers
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StratMin Global Resources shares have risen strongly after it identified "substantial" surficial regolith-hosted graphite mineralisation at its Mahefadok prospect, in the central part of the Loharano property in Madagascar about 1,500 metres south-east of its producing Loharano graphite deposit. Baron Oil is up after it obtained approval in Peru to move to a drilling programme at the Block Z-34 well and said studies conducted on the Block XXI area, also in Peru, showed significantly higher hydrocarbon potential than previously thought. Porta Communications is also up after it said trading in the third quarter was strong, with all of its operating units hitting targets, and it is in talks about possible acquisitions that could further boost profitability. Porta said it is in advanced talks on two potential acquisitions which, if completed, are expected to have an impact on both its trading and profitability levels.
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Top Economics And General
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UK retail sales declined more than expected in September on a notable fall in non-food store sales. Retail sales fell 0.3% in September from a month ago, when it rose 0.4%, the Office for National Statistics reported Thursday. This was the first fall in four months. Economists had forecast a 0.1% drop for September. Food sales recovered in September, up 0.6% versus a 0.8% drop in August. Meanwhile, non-food sales declined 1.9% compared to a 1.6% rise in the prior month. Sales excluding auto fuel also fell by 0.3%. Economists had forecast a flat growth for September after rising 0.3% in August.
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UK mortgage approvals declined in September to the lowest level in more than a year and came in below expectations, figures from the British Bankers' Association showed. The seasonally adjusted number of mortgage approvals for house purchase decreased to 39,271 from 41,361 in August, revised from 41,588. Economists had forecast a figure of 41,450. The latest mortgage approvals figure was the lowest since July last year, when it was 38,157. Mortgage approvals decreased 10% from a year ago in September.
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The Bank of England Thursday detailed how it would manage the failure of a bank, building society or investment firm, in a step that highlights the importance regulators are placing on minimising the consequences such an event could have for the broader financial system and the economy as a whole.
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China's manufacturing sector continued to expand at a slightly accelerated pace in October, the latest survey from HSBC Bank revealed in a preliminary reading with a PMI score of 50.4. Now at a three-month high, the October score is up marginally from 50.2 in September.
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Japan's manufacturing sector continued to expand at an accelerated pace in October, the latest survey from Markit Economics revealed in a preliminary reading with a PMI score of 52.8. That follows the reading of 51.7 in September.
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UK car production declined in September due to a planned re-tooling for model changes, the Society of Motor Manufacturers and Traders said. However, car manufacturing recorded its best year-to-date performance since 2008, the industry body said. Output totaling 137,068 units in September was down 2.8% from a year ago. Car production for home market surged 17.7%, while that for exports dipped 8.1%. At the same time, the year-to-date production gained 0.6% to 1.13 million.
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The suspect in Wednesday's fatal shooting near Canada's Parliament was a 32-year-old who had been designated a "high-risk traveller," news reports said, in what was the second killing of a Canadian soldier this week. Michael Zehef-Bibeau recently had his passport confiscated, according to the Globe and Mail daily, citing federal authorities. Zehef-Bibeau, a Canadian citizen, was shot dead inside the Canadian Parliament building after allegedly killing a Canadian soldier as he stood guard at the National War Memorial.
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NATO detected and intercepted a Russian aircraft flying over the Baltic Sea early Tuesday, in a breach of NATO airspace, the alliance said on Wednesday. The aircraft was identified as a Russian IL-20 intelligence aircraft," NATO said in a statement, adding that the plane took off from the Russian Baltic exclave of Kaliningrad. After several manoeuvres, the Russian plane "entered Estonian airspace near the island of Saaremaa for a period of less than one minute, which represented an incursion of about 600 metres into NATO airspace," according to the statement. The plane was first intercepted by Danish F-16's and then by Swedish fighter jets, before being escorted away by Portuguese planes, NATO said.
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The regional parliament of Iraqi Kurdistan voted Wednesday to send Peshmerga forces to relieve the northern Syrian town of Kobane, which is under siege by the Islamic State. The decision was supported by all parties in the assembly, with lawmakers applauding and singing the Kurdish national anthem when it was approved, Kurdish news site Rudaw reported. The move offers the first prospect of reinforcements to the outgunned defenders of the enclave, which has been under attack for more than a month and can be accessed only through Turkey.
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Afternoon Watchlist (all times British Summer Time)
13:30 US Chicago Fed National Activity Index
13:30 US Jobless Claims
14:00 US Housing Price Index
14:45 US Markit Manufacturing PMI
15:00 US CB Leading Indicator
15:00 EU Consumer Confidence Preliminary
15:30 US EIA Natural Gas Storage change
16:00 US Kansas Fed manufacturing activity
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Friday's Key UK Corporate Events
Dechra Pharmaceuticals - Interim Management Statement
Shire - Q3 Results
Vesuvius - Interim Management Statement
Spectris - Interim Management Statement
TSB Banking Group - Interim Management Statement
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Friday's Key Economic Events (all times British Summer Time)
02:30 China House Price Index
07:00 Germany Gfk Consumer Confidence Survey
09:00 Italy Retail Sales
09:30 UK Gross Domestic Product
10:00 Italy Consumer Confidence
10:00 Italy Wage Inflation
15:00 US New Home Sales
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