RPS.L Share News (RPS)

LONDON (Alliance News) - Corporate earnings were the main focus for Tuesday, with shares in Standard Chartered reaching new 2016 highs after the bank's first-quarter loan impairment charges and capital strength proved better than the market expected.

In its results for 2015 released late February, when Standard Chartered recorded its first loss since 1989, the emerging markets focused bank said impairment charges for bad loans almost doubled to USD4.01 billion. The fear ahead of its first-quarter results on Tuesday was that more would follow.

Although that turned out to be the case, the bank's reported impairments of USD471 million in the three months ended March 31 were more or less unchanged against the corresponding quarter a year earlier and down by more than half on the USD1.13 billion taken in the final quarter of 2015.

Analysts at UBS said in a note that loan losses were USD805 million lower than they had estimated prior to the results. Joe Dickerson, an analyst at Jefferies, predicted "pressure" on impairments later in 2016, citing "seasonal upticks" and a "challenging" backdrop.

Without the burden of significantly higher impairments, Standard Chartered recorded a pretax profit of USD589 million in the three months ended March 31. That was down from USD1.44 billion a year earlier but an improvement on the USD4.05 billion pretax loss it reported for the three months ended December 31.

Standard Chartered ended the day as the best performer in the FTSE 100, up 9.8% at 571.40 pence. The stock hit a high of 598.00p Tuesday, its highest level since November 2015.

The FTSE 100 closed the day up 0.4%, or 23.60 points, at 6,284.52. The FTSE 250, however, closed down 0.1%, or 20.19 points, at 16,945.49 and the AIM All-Share closed down 0.3%, or 2.50 points, at 729.22.

London's blue-chip index also outperformed its European counterparts. The CAC 40 in Paris and the DAX 30 in Frankfurt both closed down 0.3%.

On Wall Street at the London close, the DJIA was down 0.1%, the S&P 500 was up 0.1% and the Nasdaq Composite was down 0.2%.

Investors will be looking ahead to first quarter earnings from technology giant Apple after the New York closing bell. Apple will be joined by social media company Twitter, telecommunications firm AT&T, and e-commerce company eBay.

Before the earnings reports, the Commerce Department revealed new orders for US manufactured durable goods increased by less than expected in March.

The report said durable goods orders climbed by 0.8% in March after tumbling by a revised 3.1% in February. Economists had expected durable goods orders to increase by 1.6% compared to the 2.8% drop originally reported for the previous month.

Rob Carnell, Chief International Economist at ING Commercial Banking, said, "With forecasters largely geared up for a weak 1Q16 GDP release, these durable goods orders figures should not deliver much of a jolt to markets." The first reading of US first quarter GDP is on Thursday.

At the London equities close, the pound continued its recent strong run against the dollar, trading the greenback at USD1.4590, higher than the USD1.4492 seen at the same time on Monday. Sterling also hit its highest level against the dollar since February at USD1.4638.

The euro traded the dollar at USD1.1310 at the London close Tuesday, also higher than the USD1.1271 on Monday.

Gold edged up, quoted at USD1,241.76 an ounce Tuesday, compared to USD1,240.50 on Monday.

Brent crude regained some lost ground, trading at USD45.60 a barrel at the close Tuesday, versus USD44.79 at the same time on Monday.

BP was another star performer in London's blue-chip index, up 4.1%. The oil and gas major swung to a loss in the first quarter of 2016 from a year before, hit by weak oil prices, but kept its dividend flat as results improved compared to the fourth quarter of 2015.

BP said its loss for the first quarter was USD583.0 million, compared to a USD2.6 billion profit a year earlier. The loss narrowed from the USD3.3 billion loss made in the fourth quarter of 2015.

Underlying replacement cost profit, the preferred measure for analysts, fell to USD532.0 million from USD2.58 billion a year earlier but again improved on the USD196.0 million profit in the fourth quarter. According to RBC Capital Markets, the figure was ahead of market consensus, which estimated a USD140.0 million loss by that measure in the quarter.

The bank said the beat was primarily down to the out-performance in BP's downstream business. BP said its underlying replacement cost profit slipped in its downstream business to USD1.81 billion from USD2.16 billion a year earlier, but was up around 48% from USD1.22 billion at the end of the fourth quarter. The result was also significantly higher than RBC's estimate of USD900.0 million, and above consensus at USD1.12 billion.

BP said it would pay a 10.00 US cents dividend for the quarter, flat year-on-year.

Whitbread pleasantly surprised an increasingly sceptical stock market when it reported results in line with expectations for its recently ended financial year, with revenue ahead of most forecasts following a slowdown in sales growth throughout the course of the year.

Analysts had been left disappointed by Whitbread's updates throughout the year, as the FTSE 100 hotel and coffee shop operator kept reporting slower and slower sales growth.

In March, Whitbread, which owns Premier Inn and Costa, said total sales growth had slowed to 7.7% in the 11 weeks to February 11 from 10.4% in the third quarter, 11.1% in the second quarter and 12.5% in the first.

However, revenue growth of 12% in the full year ended March 3 lifted sentiment among analysts, who said the total figure of GBP2.92 billion came in ahead of their expectations. Berenberg and Panmure Gordon both had predicted total revenue of GBP2.87 billion. Whitbread's revenue in the prior financial year was GBP2.61 billion.

By division, total sales at Premier Inn grew by 13% with like-for-like sales up by 4.2%. Revenue per available room rose by 3.1% and the number of rooms available increased by 9.8%. At Costa, total sales were up by 16%, with system sales increasing by 15% and UK like-for-likes up by 2.9%. Whitbread shares closed up 3.6%.

Cobham ended as the biggest faller by some distance in the FTSE 250, down 18%, after issuing a profit warning for 2016 following a weak first quarter and saying it would launch a rights issue to shore up its financial position.

Cobham, which makes satellite communications equipment, microelectronics products and air-to-air refuelling technology for the aviation, maritime, defence and space sectors, said its trading profit in the first quarter was GBP15.0 million, well behind the GBP50.0 million made in the first quarter of 2015.

As a result of the problems, Cobham expects underlying trading profit will be down around GBP15.0 million year-on-year in 2016, while its earnings will be more heavily-weighted to the second half.

The weaker performance was driven by operational issues in its wireless division which resulted in delayed shipments, and the company booking a GBP9.0 million one-off charge. Cobham said it expects the wireless business to improve over the course of the year and said it has taken action to strengthen internal controls and has made changes to the financial and operational management of the division.

The hit to its earnings, coupled with investment requirements in long-term development programmes, means Cobham now expects its group leverage may be close to a net debt to earnings before interest, taxation, depreciation and amortisation ratio of 3.5 times by the end of June.

Consultancy RPS Group closed down 17% after it said its exposure to the struggling oil and gas industry has continued to hit its performance, guiding for weaker results in 2016.

Oil and gas companies have been cutting spending plans, and delaying and cancelling projects in an attempt to shore up their operations and keep their projects economically viable amid a downturn in oil prices.

This has severely hit demand for RPS's services, and was the primarily contributor the group posting a 79% fall in pretax profit in 2015.

The story has remained the same so far in 2016. RPS said the further fall in the oil price at the end of 2015 and in early 2016 coincided with many of its clients in the oil and gas industry finalising their budgets for the current year.

Due to the challenges facing the market, RPS said it has seen a significant reduction in expenditure plans amongst its oil and gas clients, materially hitting its Energy division and all other businesses exposed to the oil and gas sector in the first quarter.

The main event in the economic calendar for Wednesday comes after the London market close, with the Federal Reserve's monetary policy decision at 1900 BST. Economists overwhelmingly expect the US central bank to leave its Federal Funds rate target unchanged, but a calmer global macroeconomic backdrop could mean the Fed hints at a rate rise at its next meeting in June.

Before the Fed, the highlight in the economic calendar is the first reading of first quarter UK GDP at 0930 BST. Economists expect the UK economy to post a 0.4% quarter-on-quarter rise, following a 0.6% rise in the fourth quarter of 2015.

Elsewhere, the Gfk consumer confidence survey for Germany is at 0700 BST, and French consumer confidence is at 0745 BST. US mortgage applications are at 1200 BST, goods trade balance at 1330 BST, pending home sales at 1500 BST, and the Energy Information Administration's crude oil stocks change at 1430 BST.

There are a number of blue-chip companies reporting in Wednesday's UK corporate calendar. There are trading statements from bourse operator London Stock Exchange and building materials group CRH, while Barclays reports first quarter results and miner Antofagasta reports first quarter production results. Pharmaceutical company GlaxoSmithKline reports first quarter results at 1200BST.

Away from the FTSE 100, transport operator Stagecoach Group issues a trading statement, as do specialty chemicals companies Elementis, Bodycote and Croda International, and Anglo-Australian asset manager Henderson Group.

Argos owner Home Retail Group, which has agreed to be taken over by J Sainsbury, will report full-year results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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