LONDON (Alliance News) - UK shares have shaken off a decidedly mixed earnings reports from Glencore and Barclays to open mostly higher Tuesday.
Barclays is among the leading FTSE 100 fallers at the open, down 2.0%, after revealing an improvement in last year's adjusted pretax profit figures but saying results were dragged down by a new GBP750 million provision for ongoing investigations and litigation into alleged manipulation of the foreign exchange market, as well as a further GBP200 million provision relating to mis-sold insurance.
Glencore leads blue-chip decliners, down 3.2%, after reporting lower 2014 profit and slashing its capex plans.
Rotork leads FTSE 250 gainers, up 8.1%, after saying its pretax profit rose in 2014 as revenue was buoyed by strong sales in the power market.
Here is what you need to know at the UK market open:
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MARKETS
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FTSE 100: up 0.2% at 6,954.90
FTSE 250: up 0.2% at 17,291.63
AIM ALL-SHARE: flat at 713.25
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Hang Seng: closed down 0.7% at 24,702.78
Nikkei 225: closed down 0.1% at 18,815.16
DJIA: closed up 0.9% at 18,288.63
S&P 500: closed up 0.6% at 2,117.39
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GBP-USD: up at USD1.5374
EUR-USD: up at USD1.1189
GOLD: up at USD1,207.73 per ounce
OIL (Brent): up at USD60.08 a barrel
(changes since end of previous GMT day)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
(all times in GMT)
09:30 UK PMI Construction
10:00 EU Producer Price Index
12:30 Canada Gross Domestic Product
13:30 Canada Industrial Product Price
13:50 US Redbook index
14:30 Canada Raw Material Price Index
14:45 US ISM New York index
15:00 US IBD/TIPP Economic Optimism
n/a US Total Vehicle Sales
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The latest set of economic data from the eurozone appears to have vindicated Mario Draghi, the European Central Bank's chief. After signs of the threat of deflation, data released on Monday showed annual consumer prices falling at a slower pace. Unemployment, meanwhile, has dropped to its lowest level since April 2012. But the good news is unlikely to result in the European Central Bank rethinking its monetary stimulus plans. Instead, analysts will be eager to hear more details from Draghi about the central bank's new asset-buying scheme. On Thursday, when the ECB holds its next regular out-of-town meetings, this time in the Cypriot capital Nicosia, the Frankfurt-based ECB is unlikely to announce any new policy measures or changes to its key refinancing rate, currently at an historic low of 0.05%.
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The Reserve Bank of Australia decided to leave its cash rate unchanged at its March meeting, belying expectations for a back-to-back rate cut. The monetary policy board maintained the cash rate at 2.25% after lowering it by 25 basis points last month. Some economists had expected the bank to lower rates further this month.
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Germany's retail sales rose at a faster pace in January from the previous month, taking the annual growth to the highest level in four-and-a-half years , preliminary figures from Destatis showed. Retail sales grew a seasonally adjusted 2.9% month-on-month in January, much faster than December's 0.6% increase. Economists had expected sales to rise at a weaker pace of 0.4%. This was the fourth consecutive monthly increase. On an annual basis, retail sales climbed for the second straight month in January at faster pace of 5.3%, after a 4.8% growth logged in the prior month. Economists had forecast only a 3.0% growth for the month. The latest rate of increase was the highest since June 2010, when sales had risen 6.0%.
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Switzerland's economy grew more than expected in the fourth quarter, data from the State Secretariat for Economic Affairs revealed. Gross domestic product advanced 0.6% from the third quarter, when it was up by 0.7%. Economists had forecast the growth rate to ease to 0.3%. On a yearly basis, GDP advanced 1.9% in the fourth quarter, the same rate as seen in the third quarter. It was forecast to slow to 1.7%. In the full year of 2014, the economy expanded 2%, which was slightly faster than the 1.9% growth seen in 2013.
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The energy ministers of Russia and Ukraine have pledged to live by a deal guaranteeing gas supplies through the end of March and are ready to hash out a follow-on agreement, the EU said. The EU mediated between the two sides after Moscow threatened to cut off supplies to Kiev. There have long been tensions between the two over energy, with Europe often caught in the middle. The continent is highly reliant on Russian gas, much of if passing through Ukraine. "I am reassured that the supply of gas to the EU markets remains secure," the bloc's top energy official, European Commission Vice President Maros Sefcovic, said in a statement after talks in Brussels with the two ministers, Alexander Novak and Volodymyr Demchyshyn.
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The killing of leading Russian opposition politician Boris Nemtsov sent an exchange of warnings and charges across Europe, as a top Polish legislator was denied an entry visa to attend the funeral. Bogdan Borusewicz, president of the Polish Senate, charged that Russian President Vladimir Putin was steering Russia into a dictatorship. "This is without doubt an authoritarian system that is headed into a dictatorship," the one-time rights activist said on Polish television TVN24.
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Israeli Prime Minister Benjamin Netanyahu said his planned address Tuesday to the US Congress on Iran's nuclear programme is not intended as a sign of disrespect to US President Barack Obama. The speech, which has caused a public rift between the two leaders, is instead intended to "speak up about a potential deal with Iran that could threaten the survival of Israel," Netanyahu told the American Israeli Public Affairs Committee in Washington. Iran is negotiating a deal with Britain, China, France, Russia, the US and Germany to curb Tehran's uranium enrichment and other parts of its nuclear programme in return for ending economic sanctions on Tehran.
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BROKER RATING CHANGES
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Cantor Fitzgerald Downgrades IAG To Sell From Hold, Ups Price Target To 520p From 470p
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BERNSTEIN CUTS RSA TO 'MARKET-PERFORM' ('OUTPERFORM') - TARGET 430 (500) PENCE
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TRADERS: UBS RAISES PEARSON PRICE TARGET TO 1400 (1200) PENCE
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Liberum Downgrades National Express To Hold From Buy, Keeps Price Target At 300p
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UBS CUTS SYNTHOMER TO 'NEUTRAL' ('BUY') - TARGET 300 (250) PENCE
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COMPANIES - FTSE 100
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Barclays reported an improvement in last year's adjusted pretax profit figures but said results were dragged down by a new GBP750 million provision for ongoing investigations and litigation into alleged manipulation of the foreign exchange market, as well as a further GBP200 million provision relating to mis-sold insurance. In a statement, Barclays said that adjusted pretax profit, which strips out numerous provisions including for foreign exchange and PPI, increased to GBP5.50 billion in 2014, compared with GBP4.91 billion in the prior year. Barclays maintained its dividend at 6.5 pence per share.
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Metals and mining giant Glencore joined sector peers in slashing its capital expenditure plans, after it reported lower 2014 profits hit by the fall in the oil price and prices for other commodities. In a statement, the company said its capital expenditure fell to USD8.57 billion in 2014, from a pro-forma USD1132 billion in 2013, and it now expects total industrial capital expenditure for 2015 to be between USD6.5 billion and USD6.8 billion, down from its previous guidance of USD7.9 billion.
The company will pay a final cash distribution of USD12 cents a share, up 9% on the year.
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British American Tobacco said its Brazilian unit British American Tobacco Prestação de Serviços Ltda has filed a request with the Brazilian securities regulator to register a public tender offer to acquire up to all of the 24.7% of Souza Cruz shares which are not currently owned by BAT and to delist the company.
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Taylor Wimpey joined sector peers in reporting strong growth in 2014 profits driven by higher home completions at higher average selling prices, and it was also positive about its outlook saying the so-called "spring selling season" has got off to a better start than it had expected. The home builder reported a pretax profit of GBP468.8 million for 2014, up from GBP306.2 million in 2013, as revenue rose to GBP2.69 billion, from GBP2.30 billion. It raised its total maintenance dividend for 2014 to 1.56 pence, from 0.69p in 2013, including a final dividend of 1.32p, up from 0.47p.
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Direct Line Insurance Group warned that the UK motor and home insurance markets are still highly competitive, with the opening months of the new year showing signs of more pressure in motor and "broad stability" in the home market. The group's update came within annual results showing that pretax profit for continuing operations rose to GBP456.8 million in 2014, compared with GBP407.3 million in the prior year. Operating profit from ongoing operations crept down to GBP506.0 million from GBP509.9 million. Direct Line increased its total dividend for 2014 to 27.2 pence from 20.6 pence in 2013.
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Ashtead Group said it now expects its full-year results will be above its previous expectations, after it reported strong growth in third-quarter earnings driven by strong revenue growth in both its US and UK operations. The equipment rental company reported a pretax profit of GBP109.9 million for the three months to January 31, the third quarter of its financial year, up from GBP77.9 million a year earlier, as revenue rose to GBP512.9 million, from GBP400.1 million.
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COMPANIES - FTSE 250
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Manufacturing company Rotork said its pretax profit rose in 2014 as revenue was buoyed by strong sales in the power market, and it said that growth in other sectors would help offset the challenging energy markets it is expecting in the current year. The FTSE 250-listed company, which makes actuators and flow control products, said its pretax profit for the year was GBP141.2 million, up from GBP138 million in 2013, as revenue rose to GBP594.7 million from GBP578.4 million on the back of a 16% increase in sales to the power market.
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Marine services company James Fisher & Sons reported a rise in pretax profit and revenue in 2014 and increased its dividend by 10% on the back of a solid performance across its business, and said it has struck a deal to buy a South African marine services company. The FTSE 250-listed company said its pretax profit ticked up to GBP49.2 million, from GBP46.2 million in 2013, as revenue rose to GBP444.8 million from GBP413.7 million.
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Jardine Lloyd Thompson Group reported higher profits and revenue for 2014 as it managed to combat a market decline in both insurance and re-insurance rates, and it said it was confident in its revenue growth momentum going forward. The insurance, re-insurance and employee benefits adviser and broker reported a pretax profit of GBP159.7 million for 2014, up from GBP154.6 million in 2013, as revenue rose to GBP1.10 billion, from GBP979.2 million, but its operating margin slipped to 17.8% from 18.9%.
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Tullett Prebon reported lower profit and revenue for 2014 as market conditions for interdealer brokers remained challenging amid subdued trading activity, and it said revenue in the first two months of 2015 is flat excluding its recent acquisition of PVM. Tullett reported a pretax profit of GBP33.5 million for 2014, down from GBP84.4 million in 2013, while the figure excluding exceptional and acquisition-related items fell to GBP86.6 million from GBP99.6 million as revenue declined to GBP703.5 million from GBP803.7 million. Despite the profit fall, Tullett said it will pay an unchanged total dividend of 16.85p.
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Pace expressed confidence in making "further progress" in 2015, saying it expects earnings to rise, as it posted a increase in pretax profit for 2014. The maker of products such as set-top boxes for pay-TV and broadband providers proposed a final dividend of 4.75 cents per share, taking its total dividend to 7.00 cents, up 27.5% from 5.49 cents in 2013. Pace posted a pretax profit of USD175.7 million, up from USD130.8 million, as a rise in revenue to USD2.62 billion from USD2.47 billion offset an increase in cost of sales and a rise in administrative expenses to USD351.6 million from USD309.4 million.
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Vesuvius reported a rise in pretax profit in 2014 despite lower revenue as the group improved its profit margins and brought down costs. The molten flow engineering company said its pretax profit for 2014 was GBP111.2 million, compared to GBP104.1 million last year. Revenue fell to GBP1.44 billion from GBP1.51 billion last year, but the group brought down its manufacturing and administrative costs in the year to improve profitability. The group will pay a total dividend for the year of 16.125 pence, compared to 15 pence last year.
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Moneysupermarket.com Group reported a big rise in pretax profit for 2014 as swelling revenue significant outpaced an increase in costs, prompting the company to hike its dividend. The price comparison site operator said its pretax profit for the year to the end of December was GBP66 million, up from GBP43.1 million a year earlier. The company lifted its total dividend for the year up to 8 pence per share from 7.28 pence a year earlier.
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Office provider Regus reported a rise in 2014 pretax profit and revenue, even as both measures were held back by the strength of sterling over the year, and said it would hike its dividend payout. FTSE 250 constituent Regus said its pretax profit for the year to the end of December was GBP87.1 million, up from GBP81.5 million a year earlier, despite being held back by sterling strength. At constant currencies, pretax profit rose 19%, Regus said. The company increased its total dividend for the year by 11% to 4 pence from 3.6 pence.
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Transport company Stagecoach Group reported like-for-like revenue growth across its operations as the company said it remains on track to meet its expectations for the year. Stagecoach said its overall profitability in the first 40 weeks of its financial year, ending April 30, was "satisfactory", and it remains on track to meet its expectations for its full-year results.
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Laird said it has good momentum for further growth in 2015, as it posted a rise in pretax profit for 2014 and upped its total dividend. The company proposed a final dividend of 8.23 pence, taking its total dividend for 2014 up to 12.5 pence from 12.0 pence in 2013. Laird posted a pretax profit of GBP48.1 million, up from GBP43.2 million, as revenue rose 5% to GBP564.9 million from GBP537.0 million. On a dollar basis, revenue was up 11%. The company makes around 70% of its revenue in dollars.
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COMPANIES - LONDON MAIN MARKET AND AIM
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Irish bookmaker Paddy Power posted strong growth in both profit and revenue for 2014, which prompted a 13% increase in its dividend for the year plus an additional cash return to shareholders of EUR392 million. As it had expected, Paddy Power said it delivered double digit earnings growth in 2014, recording a pretax profit of EUR166.6 million, up from EUR141.0 million, as net revenue rose 18% to EUR881.6 million, up from EUR746.0 million in 2013, driven by strong growth in mobile, online and new customer acquisitions.
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Pub operator Punch Taverns announced that it had appointed Duncan Garrood as its chief executive officer, who will join the company on or before June 15. Garrood joins Punch from MH Alshaya where he has been the president of the food division, since 2009, with broad responsibility across a retail division of 1,000 franchised outlets.
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COMPANIES - INTERNATIONAL
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Google plans to launch a limited US wireless service, a top company executive said at the World Mobile Congress in Barcelona. Sundar Pichai - senior vice president at Google overseeing Android, Chrome, and Google Apps - said the proposed wireless service would be limited in scale and would not take on entrenched players such as Verizon and AT&T. Further details will be provided in the coming months, Pichai said. But what Google would focus on is incorporating technical innovations for its wireless service that could be absorbed by the carriers. Pichai said Google would partner with carriers to launch the service, the way it does works with hardware makers for its Nexus devices.
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PayPal, the online payment unit of Ebay, said it has agreed to buy mobile payment company Paydiant as part of efforts to expand its mobile offerings for merchants. The financial terms of the deal were not disclosed, but Re/code reported the acquisition to be valued at about USD280 million.
PayPal said it expects to close the deal in late March or April. Founded in 2010, Paydiant helps companies such as Subway, Harris Teeter and Capital One build mobile payments, offers and loyalty into their own mobile applications.
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Merck Group reported that its 2014 net income decreased to EUR1.16 billion from EUR1.20 billion the previous year. The Group said its profit declined 3.7% as the previous year benefited from the one-time effect of a very low tax ratio of 13%. Total revenue of the Merck Group rose by 3.7% to EUR11.5 billion from EUR11.1 billion the prior year.
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Responding to a report that appeared in Japan's Nikkei newspaper, electronics maker Sharp Corp said it is currently considering various possibilities for reform, but no specific decisions have been made yet. The new medium-term management plan is currently being reviewed and will be announced around May, it added. On Tuesday, the Nikkei published an article reporting on what it called Sharp's plans for a capital increase and business restructuring.
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Lafarge said that it has signed an agreement to acquire the 45% stake held by SOCAM Development in Lafarge Shui On Cement, for a consideration of HKD2.55 billion, subject to the completion of its merger with Holcim. With a total cement production capacity of 32 million tonnes in South West China, Lafarge Shui On Cement would become a wholly-owned subsidiary of LafargeHolcim following completion of the merger.
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Tuesday's Scheduled AGMs/EGMs
CareTech Holdings
Sage Group
SSP Group
First Derivatives
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By Tom Waite; thomaslwaite@alliancenews.com; @thomaslwaite
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