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(Alliance News) - The following is a summary of top news stories Wednesday.
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COMPANIES
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Microsoft reported a strong third-quarter performance through continued robust demand for its cloud platform, as well as solid increases from other business lines. For the three months ended March 31, net income rose 8.2% to USD16.73 billion from USD15.46 billion the same period a year before, while diluted earnings per share increased 9.4% to USD2.22 from USD2.03. This was on revenue which grew 18% year-on-year to USD49.36 billion from USD41.71 billion, which the Redmond, Washington-based software giant attributed to Microsoft Cloud generating USD23.4 billion, reflecting a 32% annual increase. Segmentally, revenue from the Productivity & Business Processes increased 17% to USD15.8 billion, through growth in Office products and cloud services.
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Alphabet reported a sharp fall in first-quarter earnings as the Google parent launched a share buyback programme. For the three months to March 31, revenue was up 23% at USD68.01 billion from USD55.31 billion in the first quarter last year. Alphabet posted first-quarter net income of USD16.44 billion, or USD24.62 per diluted share, down from USD17.93 billion, or USD26.29 diluted EPS, last year. The Mountain View, California-based firm reported USD54.66 billion in advertising revenue for the quarter, up from USD44.68 billion the year prior. In addition, Alphabet said that its board of directors approved USD70 billion in share repurchases as part of its strategy to return capital to shareholders.
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Pharmaceutical firm GlaxoSmithKline reported first quarter earnings growth amid "cost discipline" as it readies the demerger of consumer healthcare firm Haleon in the summer. Revenue in the first quarter of 2022 was GBP9.78 billion, up 32% from a year ago. Pretax profit jumped 71% to GBP2.60 billion from GBP1.52 billion year-on-year. Following the results, GSK affirmed its full-year outlook and said it is on track to demerge and list Haleon in July. "We have delivered strong first quarter results in this landmark year for GSK, as we separate Consumer Healthcare and start a new period of sustained growth. Our results reflect further good momentum across specialty medicines and vaccines, including the return to strong sales growth for Shingrix and continuing pipeline progress," said Chief Executive Emma Walmsley. GSK declared a quarterly dividend of 14 pence, down from 19p a year ago. It expects to pay 27p for the first half of 2022, split as 22p from the remaining business - referred to as new GSK - and 5p from the consumer business. New GSK will pay a 22p dividend for the second half of 2022 as well and 45p for 2023, the company said.
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Lloyds Banking reported a dip in first quarter profit and noted that the outlook for the UK economy "remains uncertain", but the lender still upgraded its guidance for all of 2022. Underlying net interest income for the first quarter of 2022 rose 10% to GBP2.95 billion, with total net income for the period up 12% to GBP4.11 billion. Despite this increase, pretax profit fell 14% to GBP1.62 billion, with Lloyds's profit hit by a GBP177 million underlying impairment versus a net credit of GBP360 million a year before. "In the first three months of 2022, we delivered solid financial performance, with strong income growth and capital build. These results demonstrate the consistent strength of our business model," said Chief Executive Charlie Nunn.
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Investment manager M&G said John Foley will step down as CEO, a role he has held since 2015. Foley had joined former M&G parent Prudential in 2000 as deputy group treasurer. "He successfully executed the merger of M&G Investments and Prudential UK in 2017 and the subsequent demerger of the group from Prudential PLC in 2019," M&G noted.
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London Stock Exchange Group said it is on track to meet all financial targets despite expecting a hit from actions taken in response to Russia's invasion of Ukraine. Total income excluding recoveries was GBP1.75 billion in the first three months of 2022, up 8.0% on a year before. Gross profit rose 7.6% to GBP1.59 billion. The revenue hit from Russia's invasion of Ukraine is anticipated to be around GBP60 million in 2022. "Most of the impact reflects the suspension of Data & Analytics services to customers in Russia, with the largest impact in Trading & Banking," LSEG said. More positively, the company said it had achieved GBP25 million in run-rate revenue synergies by the end of the March from its acquisition of Data & Analytics firm Refinitiv.
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Deutsche Bank reported its highest quarterly profit in nine years in the first quarter, with all of the bank's units performing in line or ahead of expectations. In the three months to March 31, the Frankfurt-based lender recorded pretax profit of EUR1.66 billion, up from EUR1.59 billion in the same period the year prior. Holding profit back, however, was a sharp rise in credit provisions - which increased to EUR292 million from EUR69 million. Deutsche noted the rise reflects "rating migrations and overlays to reflect macro-economic uncertainties." Deutsche's cost-to-income ratio improved to 73% from 77%. Total net revenue was up to EUR7.33 billion from EUR7.23 billion, with the bank enjoying a rise in income from all of its businesses.
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German automaker Mercedes-Benz said higher sales prices enabled it to lift its bottom line slightly in the first three months of the year, despite a shortage of semiconductors and fallout from the war in Ukraine. Mercedes-Benz said it booked net profit of EUR3.6 billion in the period from January to March, an increase of 3% over the same period last year. Underlying or operating profit rose by 11% to EUR5.2 billion on a 6% increase in revenue to EUR35 billion. The Stuttgart-based carmaker said its results were boosted by a "sharpened focus on top-end vehicles and premium vans, combined with ongoing cost discipline...even as the Covid-19 pandemic, semiconductor supply-chain bottlenecks and war in Ukraine continued to impact business."
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Iberdrola said its first-quarter was saved by a strong international performance, as profit in its home country plunged. In the three months to March 31, the Bilbao, Spain-based electric utility firm said revenue grew 20% year-on-year to EUR12.15 billion, from EUR10.09 billion. The increase came despite a 2.9% drop in demand from the previous year, the company said. Pretax profit in the period grew 8.3% yearly to EUR1.56 billion from EUR1.44 billion. Net profit increased 3% to EUR1.06 billion.
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Advertising and marketing firm WPP reported first-quarter revenue less pass-through costs growth of 9.5% on a like-for-like basis. It now expects full-year growth to be in the region of 5.5% to 6.5%, up from "around 5%" previously. "Demand is strong for our services, particularly in digital media, e-commerce, data and marketing technology," said Chief Executive Mark Read.
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Aveva warned that revenue growth in its current financial year is expected to slow and margins are set to reduce amid cost pressures. The industrial software firm said it delivered a strong end to its 2022 financial year, which finished on March 31. It registered revenue growth of 18% in the fourth quarter on a pro forma organic constant currency basis, with full-year growth of 7%. Aveva aims to drive an acceleration in annual recurring revenue growth in the recently commenced financial year to a level of 15% to 20%. As ARR accelerates, it cautioned, reported revenue will be impacted by the timing of revenue recognition. In addition to this, revenue will be knocked by the war in Ukraine and sanctions on Russia - though Aveva noted that Russia is a "relatively small" market for the group. Adjusted earnings before interest and tax in the current financial year will be pressured by additional costs, including wage inflation, increased travel and event costs post-Covid and investment, the company said.
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MARKETS
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It was all about company earnings on Wednesday, with little in the way of economic data, though Russia's move to cut off gas supplies to Poland and Bulgaria was undermining overall investment sentiment. Among bellwethers reporting, Microsoft was the star, up 5.6% in the New York pre-market, while Alphabet was down 2.7%. In Europe, GlaxoSmithKline was up 1.0% in London and Mercedes-Benz up 3.6% in Frankfurt.
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CAC 40: up 0.4% at 6,439.58
DAX 40: up 0.2% at 13,779.10
FTSE 100: up 0.5% at 7,422.34
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Hang Seng: closed up 0.1% at 19,946.36
Nikkei 225: closed down 1.2% at 26,386.63
S&P/ASX 200: closed down 0.8% at 7,261.20
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DJIA: called up 1.0%
S&P 500: called up 0.9%
Nasdaq Composite: called up 1.1%
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EUR: down at USD1.0603 (USD1.0655)
GBP: down at USD1.2564 (USD1.2622)
USD: up at JPY127.91 (JPY127.27)
Gold: down at USD1,895.10 per ounce (USD1,903.55)
Oil (Brent): up at USD105.61 a barrel (USD103.65)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The governments in Bulgaria and Poland said Russia was halting delivery of natural gas supplies as of Wednesday, marking a major escalation in the face-off between Moscow and Europe over the war in Ukraine. The Bulgarian Energy Ministry said late Tuesday that the Bulgarian natural gas supply company Bulgargaz had received a notification of the gas cut from Russia's state-backed energy giant Gazprom. Bulgaria has taken steps towards alternative gas supplies, said the ministry, adding that for the time being no limits on gas consumption was necessary. The Polish natural gas company PGNiG said Tuesday afternoon that Gazprom was stopping gas flows as of Wednesday morning because Warsaw refused a demand by Moscow to pay for its supplies in roubles. Polish officials said the country has been preparing for such a scenario and that gas storage facilities are currently 76% full, compared to 39% a year ago.
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Ukraine announced that Russian forces had pushed deeper into the east of the country and captured several villages, as part of Moscow's offensive to take control of Donbas. Moscow said earlier this month it was withdrawing its invading troops from around the capital Kyiv to focus its military efforts on capturing Donetsk and Lugansk in east Ukraine. The defence ministry said that Russian forces had pushed out Kyiv's army from Velyka Komyshuvakha and Zavody in the Kharkiv region and had gained control over Zarichne and Novotoshkivske in the Donetsk region.
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The mood of consumers in Germany has plunged to an all-time low as the Russian invasion of Ukraine saps confidence in Europe's largest economy, according to a key survey. Pollster GfK's forward-looking barometer fell to minus 26.5 points for May from a revised minus 15.7 points in April. The drop represents "a new historic low", GfK said in a statement. The previous low point had been in May 2020, when the index reached minus 23.1 points amid the first lockdowns to curb the coronavirus pandemic.
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The US Senate on Tuesday confirmed Lael Brainard to serve as the Federal Reserve's vice chair, but Covid infections among Democratic senators allowed Republicans to block a vote on Lisa Cook becoming the first Black woman on the board. Brainard, who has served on the Fed board since 2014, was promoted to her new post by a 52-43 vote with the support of seven Republicans. But the upper house of Congress failed to hold a final vote on Cook's nomination, amid Republican opposition and because Democrats, who hold a slim edge, were unable to force the issue since two senators announced they have Covid, as does Vice President Kamala Harris who could cast a tie-breaking vote. Fed Chair Jerome Powell is still awaiting confirmation for a second term at the helm of the central bank, which is set to raise interest rates aggressively to combat record-high inflation. Even Brainard, who is generally less hawkish on inflation, supports a series of rate hikes to try to cool prices that have risen to a 40-year high.
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Chinese President Xi Jinping has called for an "all-out" campaign to build infrastructure, according to state media, marking the latest attempt by leaders to boost growth in the Covid-battered economy. Despite struggling to defeat the country's worst outbreak in two years, the leadership is digging in its heels with a strict zero-Covid policy that involves lockdowns in the biggest cities and mass testing. But the measures have snarled supply chains and hammered business morale, sending shockwaves through the global economy and markets. "Infrastructure is an important support for economic and social development," Xi said at a high-level meeting on Tuesday, according to the official Xinhua news agency. The meeting identified several sectors such as transport and energy where an infrastructure boost was needed, including the construction of ports and airports.
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Consumer prices in Australia in Australia rose by 5.1% annually in the first quarter of 2022, picking up speed from the 3.5% annual rise in the final quarter of 2021, according to the Australian Bureau of Statistics. This was the highest recorded annual increase since 2001. The consumer price index was 2.1% higher in March than in December, as inflation accelerated from 1.3% from seen in December from the quarter before. The figures were higher than FXStreet-cited market consensus estimates of a 1.7% quarterly rise and a 4.6% annual rise.
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By Tom Waite; thomaslwaite@alliancenews.com
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