LONDON MARKET PRE-OPEN: IAG loss narrows; Pearson launches buyback

(Alliance News) - Stock prices in London are seen opening higher on Friday following a rise on Wall Street overnight despite Russia's invasion of Ukraine.

In early company news, British Airways-parent International Consolidated Airlines posted a narrowed loss for 2021 as travel reopened. Educational materials publisher Pearson launched a share buyback programme.

Russian steelmaker Evraz delivered a robust financial performance in 2021 as demand increased, saying it is "conscious of the current geopolitical circumstances".

IG futures indicate the FTSE 100 index is to open 88.39 points higher at 7,295.40. The index closed down 291.17 points, or 3.9%, to 7,207.01 on Thursday in its biggest single-day fall since June 2020.

IAG reported an improved performance in 2021 as the airline operator expressed confidence that a strong recovery is underway.

IAG reported a pretax loss of EUR3.51 billion, narrowing sharply from a EUR7.83 billion loss in 2020, this was on total revenue of EUR8.46 billion from EUR7.81 billion.

The carrier posted an operating loss of EUR2.77 billion in 2021, narrowing from EUR7.45 billion in 2020. Its operating loss before exceptional items narrowed to EUR2.97 billion from a EUR4.39 billion, beating consensus estimates for a loss of EUR3.03 billion.

IAG said the spread of Omicron, which became apparent in late November, had a negative short-term effect on the operating result, passenger bookings and cancellations.

As such, IAG expects a significant quarterly operating loss for the first quarter of 2022, due to normal seasonality, the effect of Omicron on near-term bookings, and the operating costs involved in re-building capacity.

However, IAG expects operations to be profitable from the second quarter, leading to a significantly positive year for both operating profit and net cash flows from operating activities.

"Prior to Omicron, long-haul traffic had seen the highest booking activity in October and November at over 80% of 2019 levels. This was driven by the re-opening of the North Atlantic corridor and the strength of long-haul leisure markets and travellers visiting families and friends," said Chief Executive Officer Luis Gallego.

"Demand slowed down for very near-term trips following the emergence of Omicron in late November. However, bookings have remained strong for Easter and summer 2022 having picked up in the New Year. We expect a robust summer with IAG returning to around 85% of its 2019 capacity for the full year," added Gallego.

Pearson said 2021 brought a strong financial performance and that it was building growth momentum.

Pearson posted pretax profit of GBP157 million, down from GBP354 million in 2020, on total sales that rose marginally to GBP3.43 billion from GBP3.40 billion.

Operating profit was GBP183 million in 2021, down sharply from GBP411 million in 2020. Pearson said the decrease in 2021 was mainly due to the gain on sale of its remaining interest in Penguin Random House recognised in 2020 and restructuring costs in 2021.

Pearson declared a total dividend of 20.5 pence, up 5.1% from 19.5p in 2020. In addition, the publisher said it intends to start a share buyback of GBP350 million in 2022.

CEO Andy Bird said: "Pearson has been reorganised and refocused with a new purpose to 'add life to a lifetime of learning' at the heart of everything we do. Our direct-to-consumer strategy is being driven by Pearson+, which had 2.75 million registered users at the end of 2021, with a strategy in place to engage more consumers and grow beyond Higher Education. Pearson is a digital first business, with consumer grade products, and the momentum across the company underpins our confidence for further growth in 2022 and beyond."

Evraz delivered strong earnings in 2021 as steel prices rose to their highest in years in anticipation of more robust demand from the construction and manufacturing sectors.

For 2021, the Russan steelmaker posted pretax profit of USD4.18 billion, more than three times higher than USD1.30 billion in 2020 on total segment revenue of USD14.16 billion, up 45% from USD9.75 billion.

Evraz generated free cash flow of USD2.26 billion last year, doubled from USD1.02 billion in 2020.

The demerger of Evraz's coal business is expected to complete in late March 2022, the company said.

"In 2022, we will press ahead with further improving our ESG performance and strengthening our culture of continuous operational improvement. I strongly believe in our long-term success given the commitment of our employees, who represent the forefront of the industry.

"We are conscious of the current geopolitical circumstances. We continue to monitor the situation and will keep you updated regarding any material developments that can influence our business," Chief Executive Officer Aleksey Ivanov said.

Russian forces pressed deep into Ukraine on Friday as deadly battles reached the outskirts of Kyiv, with explosions heard in the capital early Friday that the besieged government described as "horrific rocket strikes".

The blasts in Kyiv set off a second day of violence after Russian President Vladimir Putin defied Western warnings to unleash a full-scale ground invasion and air assault that quickly claimed dozens of lives and displaced at least 100,000 people.

The US and its allies responded with a barrage of sanctions, but the Russian forces appeared intent Friday on pressing home their advantage after a string of key strategic victories on day one.

Share prices in New York ended higher on Thursday after staging a late turnaround, with the Dow Jones Industrial Average up 0.3%, S&P 500 up 1.5% and Nasdaq Composite up 3.3%.

In Asia on Friday, markets mostly followed suit, with the exception of Hong Kong. The Japanese Nikkei 225 index closed up 2.0%. In China, the Shanghai Composite ended up 0.6%, but the Hang Seng index in Hong Kong was down 0.7%. The S&P/ASX 200 in Sydney closed up 0.1%.

Despite a chorus of outrage at Putin's move, the punishments have so far been seen by markets as well short of the most stringent.

While the latest measures from Washington target Russia's two largest banks and see controls on high-tech items aimed at crippling its defence and aerospace sectors, US President Joe Biden has not cut off oil exports.

The pound was quoted at USD1.3417 early Friday, up from USD1.3353 at the London equities close Thursday.

The euro was priced at USD1.1211, up from USD1.1148. Against the safe-haven yen, the dollar was trading at JPY115.30 in London, lower against JPY115.43.

Brent oil was quoted at USD101.43 a barrel Friday morning, down sharply from USD104.19 at the close Thursday, though still above USD100 a barrel. Gold stood at USD1,919.24 an ounce, lower against USD1,924.11 late Thursday.

Friday's economic calendar has eurozone economic sentiment at 1000 GMT, followed by US personal consumption expenditures at 1330 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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