LONDON (Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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Royal Dutch Shell said it swung to a loss in the third quarter after booking substantial losses on exceptional items and experienced a fall in revenue. The oil and gas giant reported a USD6.10 billion current cost-of-supply loss in the third quarter of 2015, swinging from a USD5.30 billion profit a year earlier. That loss was caused by exceptional items totalling USD7.90 billion. Excluding those items, current cost of supply earnings came in at USD1.80 billion, still significantly down from the USD5.80 billion reported a year ago. As expected, Shell's downstream results improved whilst upstream earnings were severely hampered by lower oil prices.
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Barclays missed market expectations and cut guidance for 2016, as its adjusted pretax profit fell in the third quarter, with larger losses in the non-core businesses that Barclays is winding down more than offsetting stronger earnings in three of its four main operating businesses. Barclays raised its 2016 core cost guidance by GBP400 million. Previously, Barclays had guided cost of "less than GBP14.5 billion". The new costs relate to implement structural reforms, such as the establishment of an intermediate holding company in the US and, later, ring-fencing its retail bank in the UK from its other activities. The structural costs are expected to cost GBP1.1 billion in total from 2015 as the reforms are implemented over the coming years.
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The UK government has shrunk its stake in Lloyds Banking Group to below 10% of the company's equity, according to a stock exchange document on Thursday. The UK government now has a 9.89% stake in Lloyds. Its plans to fully exit the holding in the coming months include a GBP2.0 billion sale to members of the public.
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BT Group said it is on track to deliver its outlook for its full financial year and increased its interim dividend, as it reported a rise in pretax profit for its first half. BT reported a pretax profit of GBP1.27 billion for the six months to end-September, up from GBP1.11 billion a year before, as revenue rose to GBP8.82 billion from GBP8.74 billion. The company proposed an interim dividend of 4.4 pence, up from 3.9p a year before. BT cited a strong performance from its fibre broadband, as well as good demand from its new BT Sport Europe channel, which helped drive up BT TV customers in the second quarter.
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Aviva said the acquisition of Friends Life, the rival life insurer it bought for about GBP5.6 billion, is "everything we expected it to be", as it continues to work towards its cost savings target through the integration process. Aviva said its UK life business has continued to grow, with customers responding positively to new pensions freedoms on offer since the UK government acted to create more flexibility in how people save for and provide for themselves in retirement. Value of new business in life insurance grew 25% to GBP823.0 million in the first nine months of 2015, with the UK's own figure rising by 36% to GBP404.0 million. UK life value of new business was up 13% excluding Friends Life.
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Smith & Nephew it has agreed to acquire Blue Belt Holdings for USD275 million, as it maintained its outlook for 2015, and reported a slight rise in revenue for the first nine months of 2015. The medical equipment business said it has agreed to acquire Blue Belt, which works in orthopaedic robotics-assisted surgery, funded through its existing debt facilities. The deal is expected to close around the year end, and Smith & Nephew expects revenue growth from the business to be over 50% in the medium-term.
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Transport operator National Express Group said it delivered constant currency growth in all of its divisions in the second quarter, with like-for-like operating profit also increasing. The company said its group revenue was up 3.0% in the second quarter to the end of September on the year before, with growth in all of its divisions. Like-for-like operating profit was up 7%.
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Playtech said it has seen a strong trading from both its gaming and financial divisions in the third quarter of 2015. The gaming division's revenue increased by 23% to EUR143.4 million in the third quarter of 2015, while the financial division's revenue amounted to EUR27.5 million in the period without a prior year comparison. Overall, third-quarter revenue increased by 47% to GBP170.9 million.
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Millennium & Copthorne Hotels said its revenue slowed in the third quarter following a weaker performance in its Asian hotels. Though revenue remains ahead in the year to date, pretax profit was lower, it said. The hotel operator said its pretax profit in the third quarter was GBP36.0 million, a 28% fall on the GBP50.0 million it made a year earlier, and this dragged its pretax profit for the nine months to the end of September down 9.3% to GBP98.0 million from GBP108.0 million a year earlier.
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Henderson Group said it saw robust net inflows in the third quarter but this was offset by market weakness, which meant its assets under management ticked lower. The FTSE 250-listed fund manager said it secured GBP1.3 billion in net inflows in the quarter to the end of September, helped by strong retail sales. Its investment performance also remained strong, with 82% of its funds outperforming on a three-year basis.
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KAZ Minerals said it is on track to hit or exceed its production guidance for the full year across all of its commodities, which are all still battling lower prices. The FTSE 250-listed copper miner operating in Kazakhstan said it remains on track to produce 80,000 to 85,000 tonnes of copper cathode in the full year. In the first nine months of 2015, the miner has produced 67,000 tonnes, suggesting the company is currently running ahead of its guidance.
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MARKETS
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UK indices were trading lower still feeling the effects of the US Federal Reserve's decision to keep interest rates unchanged on Wednesday. Barclays and Royal Dutch Shell were among the worst blue-chip performers after releasing disappointing third quarter updates.
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FTSE 100: down 0.9% at 6,379.52
FTSE 250: down 0.1% at 17,120.11
AIM ALL-SHARE: down 0.2% at 741.10
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GBP: down at USD1.5268 (USD1.5320)
EUR: flat at USD1.1097 (USD1.1071)
GOLD: down at USD1,159.93 per ounce (USD1,178.78)
OIL (Brent): flat at USD48.47 a barrel (USD48.96)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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The Federal Reserve kept US interest rates unchanged amid internal debate about whether to have tightened monetary policy, according to the central bank's latest policy statement. Policymakers signalled that a rate hike is still possible at their "next meeting" in December. Fed Chair Janet Yellen has repeatedly insisted that a rate hike would be "appropriate" this year, but in recent months global economy has shown signs of strain that may wash ashore in the US. However on Wednesday, Fed policymakers removed a line from the previous statement expressing concerns that "recent global economic and financial developments may restrain economic activity somewhat." The vote to maintain interest rates at zero was 9-1, with only Richmond Fed President Jeffrey Lacker arguing for a rate hike.
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UK house price inflation accelerated unexpectedly in October to the highest level in five months, the Nationwide Building Society said. House prices climbed 3.9% year-over-year in October, slightly faster than September's 3.8% rise. Economists had forecast prices to remain stable at 3.8%. The latest rate of increase was the fastest since May this year, when prices grew 4.6%.
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China is planning an economic growth target of 6.5% in its next 5-year plan. Chinese Premier Li Keqiang floated the target for the world's second-largest economy in private talks with German Chancellor Angela Merkel during her current visit to Beijing. The premier also spoke about prioritising sustainable and better-quality growth. Communist Party of China leaders met from Monday to Thursday to create a five-year economic and social development blueprint for 2016-2020. The party will focus on transitioning away from over-reliance on manufacturing toward a growth model driven by consumption and investment, Beijing News reported.
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Beijing summoned the US ambassador to China to express its "strong discontent" after a US naval destroyer sailed close to islets occupied by China but claimed by the Philippines. Beijing said the USS Lassen illegally entered Chinese territorial waters when it sailed early Tuesday near the disputed Spratly, or Nansha, group of islands.
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The top Republican presidential candidates dug into government spending, debt and taxation during the party's third presidential debate. The 10 leading candidates out of 14 vying for the Republican nomination debated in Boulder, Colorado, opening with a discussion of their proposals to lower taxes and pay off the deficit. The debate was heavy on questions related to the candidates' economic policies. The candidates hit on the themes of cutting taxes, balancing the budget and addressing government debt. Several candidates said they opposed a tentative two-year budget deal passed this week by the House of Representatives because it lifts mandatory spending caps that have been in place for years.
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By Arvind Bhunjun; arvindbhunjun@alliancenews.com; @ArvindBhunjun
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