LONDON BRIEFING: Direct Line CEO Penny James out after profit warning

Fri, 27th Jan 2023 07:56

(Alliance News) - Stocks in London were called to opened higher on Friday, after a good day in New York on Thursday following some better-than-expected US GDP figures.

The US economy continued to grow in the final three months of 2022, at a pace slightly above expectations, according to the US Bureau of Economic Analysis on Thursday.

The bureau's first estimate of fourth-quarter gross domestic product showed 2.9% annual growth. Economists had expected an annualised growth rate of 2.8% in the last quarter of 2022, according to market consensus cited by FXStreet.

The data may suggest a soft landing ahead for the world's largest economy. It comes ahead of a two-day Federal Open Market Committee meeting starting on Tuesday next week.

In early UK company news on Friday, the CEO of Direct Line has been ousted after the motor insurer's recent profit warning. Bestway Group has bought a 3.5% stake in Sainsbury's, but said it said it has no intention of making an offer for the supermarket chain. Fashion retailer Superdry lowered its financial outlook, now expecting to only break even.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called up 0.2% at 7,773.2

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Hang Seng: up 0.2% at 22,615.04

Nikkei 225: closed up 0.1% at 27,382.56

S&P/ASX 200: closed up 0.3% at 7,493.80

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DJIA: closed up 205.57 points, or 0.6%, at 33,949.41

S&P 500: closed up 44.21 points, or 1.1%, at 4,060.43

Nasdaq Composite: closed up 199.06 points, or 1.8%, at 11,512.41

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EUR: up at USD1.0875 (USD1.0862)

GBP: up at USD1.2378 (USD1.2363)

USD: down at JPY130.08 (JPY130.40)

Gold: down at USD1,924.81 per ounce (USD1,925,42)

(Brent): up at USD87.59 a barrel (USD87.35)

(changes since previous London equities close)

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ECONOMICS

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Friday's key economic events still to come:

10:00 CET EU monetary developments

11:00 GMT Ireland retail sales index

09:30 GMT UK capital issuance statistics

10:00 EST US University of Michigan survey of consumers

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UK shoppers saw fewer empty stores last year – particularly in the second half – as international tourist visits increased and the return to the office picked up, figures show. The overall vacancy rate improved to 13.8% in the fourth quarter of 2022 – 0.1 percentage points better than the previous quarter and 0.6 points up on the same period a year earlier, according to the British Retail Consortium and Local Data Company Vacancy Monitor. Shopping centres saw a quarterly improvement to 18.2%, down from 18.8%, while high street vacancies improved to 13.8% from 13.9% and retail parks enjoyed a 0.7 percentage point reduction in empty stores.

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BROKER RATING CHANGES

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Peel Hunt cuts Antofagasta to 'reduce' - price target 1,400 pence

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JPMorgan cuts Flutter Entertainment to 'neutral' (overweight) - price target 15,900 (16,100) pence

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Peel Hunt cuts Close Brothers to 'hold' (add) - price target 1,031 (1,264) pence

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COMPANIES - FTSE 100

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Bestway Group said it has bought or agreed to buy 80.8 million shares in J Sainsbury. This represents a 3.45% stake. "Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team," it said. Bestway said it may look to make further purchases in the future and confirmed that it is not considering a takeover offer for Sainsbury's. The supermarket chain noted the announcement and said it will "engage" with Bestway "in line with our normal interactions with shareholders". Bestway is a London-based conglomerate, with operations across the UK, Pakistan and the Middle East. It was first established as a chain of convenience stores in 1963, but now has interests across the wholesale, pharmacy, real estate, cement and banking sectors.

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BT is to recruit more than 400 apprentices and graduates later this year, the telecoms firm has announced. The September intake will include positions in engineering, customer service, applied research, and cyber-security to support the UK's fast-growing digital sectors and the company's plans to build and extend its 5G network around the UK. BT is one of the UK's largest private sector apprenticeship employers and has recruited more than 2,600 apprentices and graduates over the past four years, with around 4,000 employees working towards their qualifications at any given time.

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COMPANIES - FTSE 250

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Paragon Banking said that, in the first quarter to December 31, new lending increased by 22% to GBP861.7 million from GBP708.0 million a year earlier. The Solihull, England-based lender and savings bank said this marks a confident start to its current financial year. The volume of new buy-to-let mortgage advances increased by 45% to GBP591.1 million when compared to the GBP408.5 million reported for the first quarter of financial year 2022. However, it said the mini budget in October together with strong conversion levels have reduced its pipeline to GBP748 million down from GBP1.03 billion year-on-year. Looking ahead, the board increased its net interest margin growth guidance by 5 basis points to 25 basis points.

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Direct Line said Chief Executive Officer Penny James has agreed to step down, with immediate effect. The Bromley, England-based insurance company said it is looking for a new CEO. Until then, Direct Line has appointed Chief Commercial Officer Jon Greenwood as acting CEO. Chair Danuta Gray said: "During her time as CEO, Penny has overseen significant strategic progress, transforming the technology and capability across the business, accelerating the digitalisation of customer journeys and helping to set the company up for the future." Earlier this month, Direct Line shares dropped by a quarter in one day after saying it won't pay a final dividend due a big increase in weather related claims, pushing the insurer into a loss on underwriting.

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OTHER COMPANIES

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YouGov said it has performed well during the six months ending January 31, with growth across most divisions. The London-based research and data analytics company said growth has been driven by clients spending on strategic market research, which has accelerated its panel-based Custom Research work, with increasing opportunities for multi-year contracts and trackers. Geographically, the US remains a major growth driver with large market opportunities, whilst demand in the UK has picked up despite recessionary market conditions. Look ahead, YouGov said it remains confident of achieving top-line revenue growth for the full year in line with current market expectations of GBP264 million.

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Superdry said revenue in the six-month period from May 1 to October 29 increased by 3.6% to GBP287.2 million from GBP277.2 million. However, the Cheltenham, England-based fashion retailer swung to a pretax loss of GBP17.7 million from a GBP4.0 million profit a year earlier. Superdry said this was mainly due to the underperformance of its Wholesale division. "We reorganised our team and our approach to support our wholesale partners and expect to see their confidence return following the retail success of AW22," said Founder & Chief Executive Julian Dunkerton. Looking ahead, Superdry said it remains mindful of the challenges facing customers as it head into 2023. It has therefore lowered pretax profit guidance for all of financial 2023, now expecting to only breakeven. It previously expected profit to be between GBP10 million and GBP20 million.

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By Sophie Rose, Alliance News reporter

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