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(Alliance News) - British Airways parent International Consolidated Airlines on Thursday reported growth in third-quarter revenue but profit took a hit from British Airways strike action.
Revenue for the three months to September 30 was EUR7.31 billion, up 2.4% from EUR7.14 billion a year ago. Pretax profit, however, slipped 9% to EUR1.26 billion from EUR1.38 billion.
Results in the third quarter were hit by cancellations relating to industrial action by BALPA pilots and by other disruption, said IAG, causing a hit to profit of EUR155 million.
Passenger unit revenue for the quarter was down 0.5%, and down 1.1% at constant currency. Non-fuel unit costs before exceptional items for the quarter were up 0.5%, and 1.% higher at constant currency on a pro forma basis.
"These are good underlying results. As we said in September, our performance has been affected by industrial action by pilots' union BALPA and other disruption including threatened strikes by Heathrow airport employees," said Chief Executive Willie Walsh.
"In addition, our fuel bill increased by EUR136 million during the quarter with fuel unit costs up 4.2% at constant currency," he added.
Looking ahead, IAG reaffirmed prior guidance, expecting operating profit for 2019, before exceptional items, to be EUR215 million lower than the EUR3.49 billion achieved in 2018. Passenger unit revenue is expected to be slightly down at constant currency and non-fuel unit costs are expected to improve at constant currency.
The stock was down 3.5% in early trade Thursday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.3% at 7,309.32
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Hang Seng: up 0.7% at 26,851.89
Nikkei 225: closed up 0.4% at 22,927.04
DJIA: closed up 115.27 points, 0.4%, at 27,186.69
S&P 500: closed up 0.3% at 3,046.77
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GBP: up at USD1.2937 (USD1.2866)
EUR: up at USD1.1162 (USD1.1122)
Gold: up at USD1,498.40 per ounce (USD1,493.92)
Oil (Brent): flat at USD60.99 a barrel (USD60.91)
(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
1100 CET EU preliminary flash estimate gross domestic product
1100 CET EU flash estimate euro area inflation
1100 CET EU unemployment
0730 EDT US Challenger job-cut report
0830 EDT US personal income & outlays
0830 EDT US employment vost index
0830 EDT US initial jobless claims
1030 EDT US EIA weekly natural gas storage report
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Boris Johnson and Jeremy Corbyn are hitting the general election campaign trail as they trade blows in the run-up to the pre-Christmas poll. The UK prime minister blamed his failure to live up to his "do or die" promise to deliver Brexit on Halloween on the the Labour leader, while Corbyn hit out at the "corrupt" British system of doing business. As the UK braced itself for a bitter winter election campaign ahead of the December 12 poll, Culture Secretary Nicky Morgan cited the "abuse" she had received as she became the latest high profile figure to stand down at the election. Meanwhile, Brexit Party sources told the PA news agency that reports the organisation, headed by Nigel Farage, would stand down candidates in Tory seats and concentrate on challenging some 20 Labour MPs in Leave areas was "wild speculation".
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UK consumer confidence has fallen as ongoing political uncertainty impacts upon the forecast for personal finances, according to a survey. Confidence fell by two points to minus 14 in October amid "too many Brexit shifts and surprises", the long-running GfK Consumer Confidence Index suggests. All five measures of confidence for the survey recorded a fall, including a notable three point drop in the forecast for personal finances over the next 12 months – taking it to three points lower than this time last year. Expectations for the general economic situation over the next year decreased two points to minus 37, nine points lower than last October.
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The US Federal Reserve announced its third consecutive quarter-point interest rate cut since July, while hinting at a pause in further loosening of monetary policy. Investors and economists had widely expected the rate cut, which brings the benchmark rate down to 1.50-1.75%. Fed Chairman Jerome Powell said the US central bank "took this step to help keep the US economy strong in the face of global developments and to provide some insurance against ongoing risks". He said the principal threats were "slowing global growth and trade policy developments, as well as muted inflation pressures." But Powell said risks to the economy "seem to have subsided," citing work towards an initial US-China trade deal and the likelihood of a no-deal Brexit having "materially declined".
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The Bank of Japan decided to put its ultra-loose monetary policy on hold amid growing pressure to adopt additional easing steps. Japan's central bank said it would introduce more easing measures if downside risks to economic activity and prices are significant. In April 2013, the bank launched a monetary easing campaign to combat stubborn deflation and prop up the economy to achieve the 2% inflation target within two years. Despite years of the bank's easing steps, the rate has never neared the target.
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Top US and Chinese trade negotiators will talk again on Friday, China said, as uncertainty swirls over the cancellation of the APEC summit where leaders of the two countries had been expected to meet. US President Donald Trump said Monday he expected a "phase one" trade deal with Beijing to be signed on the sidelines of the November summit in Chile, after an 18-month trade impasse between the two economic giants. But Chile's President Sebastian Pinera announced Wednesday his country could no longer host the event, due to violent unrest in the city. "Negotiating teams on the Chinese and US sides have continued to maintain close communication, and negotiations are currently making smooth progress," the Chinese commerce ministry said in a statement Thursday.
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Chinese factory activity contracted for a sixth-straight month in October, data showed, as the key manufacturing sector suffers under the weight of a slowing domestic economy and the long-running US trade war. The figures are the latest to highlight a slowdown in the world's number two economy, which in the third quarter expanded at its slowest rate for nearly three decades. The closely watched Purchasing Managers' Index, a key gauge of activity in the country's factories, fell to 49.3 last month, the National Bureau of Statistics said. That is well short of forecasts of 49.8 and also down from September's figure of the same amount. China's official PMI has fallen below the 50 mark that separates growth and contraction every month since April.
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Democrats in the US House of Representatives on Thursday plan to bring a resolution covering the next steps of their inquiry into impeaching Trump up for a vote on the House floor. The resolution is designed to outline how the inquiry will move from closed-door testimony to public hearings that would make the case for impeachment. House Speaker Nancy Pelosi announced the beginning of an official impeachment inquiry against Trump on September 24 after a whistleblower raised concerns about comments Trump made to Ukrainian President Volodymyr Zelensky during a July 25 call. The inquiry has focused on whether Trump pressured Zelensky for personal political gain.
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BROKER RATING CHANGES
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BARCLAYS RAISES ST JAMES'S PLACE TARGET TO 1253 (1241) PENCE - 'OVERWEIGHT'
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DZ BANK RAISES GLAXOSMITHKLINE PRICE TARGET TO 2000 (1850) PENCE - 'BUY'
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UBS CUTS HSBC PRICE TARGET TO 575 (600) PENCE - 'NEUTRAL'
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COMPANIES - FTSE 100
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Royal Dutch Shell said it may not be able to reduce debt as planned and keep on with its share buyback programme. Shell is looking to reduce gearing to 25% by 2020. At the end of September, it stood at 27.9%, higher than the 27.6% at the end of June and 23.1% a year before. The oil major, London's largest listed company, has kept the dividend for the third quarter at 47 US cents, the same as the prior quarter, and also announced a new USD2.75 billion buyback, as it looks to return USD25 billion to shareholders. Chief Executive Ben van Beurden commented: "Our intention to buy back USD25 billion in shares and reduce net debt remains unchanged. "The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback programme within the 2020 timeframe." Shell's CCS earnings, its preferred profit metric, excluding items was USD4.92 billion for the third quarter, 15% lower year-on-year.
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Lloyds Banking Group said it made "strong strategic progress" in the third quarter, though its results were dented by an additional payment protection insurance charge. Net interest income for the three months to September 20 was down 2% to GBP3.13 billion, with net income down 6% to GBP4.19 billion. The lender's pretax profit sank to just GBP50 million from GBP1.82 billion a year ago as it took a GBP1.80 billion provision for PPI claims in the quarter, with no such charge booked in the prior period. This PPI provision was "driven by an unprecedented level of PPI information requests received in August", said Chief Executive Antonio Horta-Osorio. Looking ahead, Lloyds is aiming for a net interest margin of 2.88% for 2019, in line with previous guidance of around 2.90%. Operating costs are now expected to be less than GBP7.9 billion, ahead of previous guidance, and its cost-to-income ratio lower than in 2018. "Although continued economic uncertainty could further impact the outlook, the group remains well positioned with the right strategy to continue delivering for customers and shareholders," said Lloyds.
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Telecommunications firm BT said it delivered an in-line set of results for the first half of its financial year, and backed its annual outlook. Revenue for the half year to September 30 dipped to GBP11.47 billion, down from GBP11.59 billion a year ago. Pretax profit was largely unchanged at GBP1.33 billion from GBP1.34 billion. BT declared an interim dividend of 4.62p per share, flat on what it paid out a year ago. "We've invested to strengthen our competitive position. We've accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers," said Chief Executive Philip Jansen. "We continue to make progress on the BT modernisation agenda, delivering over GBP1.1 billion in annualised cost savings, and announcing locations in our Better Workplace Programme," he added.
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Smith & Nephew once again upgraded its revenue growth guidance after a "strong" performance in the third quarter. Third quarter revenue was up 4.0% on an underlying basis, with growth growth 6.5%. Orthopaedics delivered 3.4% revenue growth, while Sports Medicine & ENT delivered 6.9% and Advanced Wound Management 2.1%. For the first nine months of 2019, underlying revenue growth was 3.9%. Looking ahead, Smith & Nephew expects underlying revenue growth for 2019 around 3.5% to 4.5%. This is an upgrade from previous guidance, given in July, of a 3.0% to 4.0% range. This July guidance, in turn, had been lifted from a 2.5% to 3.5% forecast range.
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COMPANIES - INTERNATIONAL
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Apple reported a stronger-than-expected profit for the quarter, fuelled by growth in digital services and wearables that helped offset slower iPhone sales. Profit in the quarter ending in September dipped 4% from a year ago to USD13.7 billion while revenues edged up 2% to USD64 billion. Apple, set to launch a new streaming television service this week, saw strong revenue gains in its services segment, which includes music, digital payments and software, and in its segment for wearables and accessories that includes its Home Pod, Apple Watch and ear buds.
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Facebook reported quarterly profit grew along with its user base as it grapples with concerns ranging from political ads to cryptocurrency. The leading social network said net income rose 19% to USD6.09 billion on revenue that climbed 28% to USD17.38 billion in the quarter that ended on September 30. Diluted earnings per share rose 20% to USD2.12. Meanwhile, the number of active monthly users increased 8% from a year ago to 2.45 billion.
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Samsung Electronics, the world's largest smartphone and memory chip maker, saw net profits slump by more than half in the third quarter, it said, hit by an enduring downturn in the global chip market. Net profits in the three months to September were KRW6.29 trillion, or USD5.40 billion, it said in a statement, down 52% year-on-year. Operating profit plunged 56% to KRW7.8 trillion in the third quarter, the firm said, while sales fell 5.3% to KRW62 trillion.
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The supervisory board of French carmaker PSA Group has given the green light for a proposed merger with the Italian-American rival Fiat Chrysler Automobiles, sources confirmed to dpa in Paris late Wednesday. The Wall Street Journal earlier had reported that the two carmakers had agreed on the terms of a merger. PSA and FCA had confirmed that they were in talks over a merger that would form a nearly 50-billion-dollar company and the world's fourth-largest carmaker group after Volkswagen, the Renault-Nissan alliance and Toyota.
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Thursday's Shareholder Meetings
Go-Ahead Group
Block Energy
Maestrano
Brooks Macdonald Group
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By Tom Waite; thomaslwaite@alliancenews.com
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