LONDON MARKET PRE-OPEN: IHG Lifts Dividend As Annual Profit Rises

(Alliance News) - Stock prices in London are seen opening lower on Tuesday amid fears over the impact of the deadly coronavirus on corporate earnings and global economic growth, as Asia-focused lender HSBC reported disappointing annual results.

In other company news, hotel operator InterContinental Hotels raised its dividend as annual results missed expectations, commodities firm Glencore beat market expectations for earnings, packaging firm Mondi named its new chief executive, and bookmaker Flutter Entertainments's merger with Stars Group moved closer to approval in Australia.

More than 72,000 people have now been infected by the virus in China and hundreds more abroad, as China's official death toll neared 1,900 on Tuesday.

IG futures indicate the FTSE 100 index is to open 41.35 points lower at 7,391.90. The blue-chip index closed up 24.12 points, or up 0.3%, at 7,433.25 on Monday.

The Japanese Nikkei 225 index closed down 1.4%. In China, the Shanghai Composite closed up 0.1%, while the Hang Seng index in Hong Kong is down 1.3%.

"Stocks in Europe look set for a weaker start after a fall in Asia while US futures point to a lower open on Wall Street. It's a reaction to major companies warning the coronavirus outbreak will eat into the current quarter's earnings. Heavy losses and a big organisational shake up at HSBC are adding downward pressure to the FTSE 100," said London Capital Group's Jasper Lawler.

InterContinental Hotels Group raised its dividend after reporting annual results that missed analyst expectations.

IHG reported an 7% rise in revenue of USD4.63 billion in 2019 from USD4.33 billion in 2018. Pretax profit came in at USD542 million for 2019, up 12% from USD482 million in 2018. According to company-compiled analyst consensus, IHG was expected to post pretax profit of USD711.16 million for 2019.

Operating profit from reportable segments was USD865 million in 2019, up 4% from USD832 million in 2018. The consensus estimate had operating profit from reportable segments coming in at USD859.83 million for 2019.

Reportable segments exclude system fund results, hotel cost reimbursements and exceptional items.

IHG reported a decline in revenue per available room of 0.3% at group level, including a 0.2% slip in the Americas region and a sharper fall in Greater China of 4.5%. IHG said the performance was hurt by macroeconomic and geopolitical factors, increased supply growth ahead of demand in some markets, and the political protests that took place in Hong Kong.

IHG raised its total dividend 10% to 125.8 US cents from 114.4 cents.

"Given the ongoing impact of coronavirus following the outbreak in China, our top priority remains the health and safety of our colleagues, guests and our partners on the ground, and we are doing all we can to support them at this difficult time. The fundamentals of our industry remain strong, and our cash-generative, resilient fee-based model, underpinned by a commitment to operate a responsible business, gives us confidence to continue making the strategic investments that will drive our long-term growth," said Chief Executive Keith Barr.

Glencore's annual profit was hurt by weak commodity prices and trade uncertainty, the miner said Tuesday, though it did beat market forecasts.

Swiss firm Glencore, which also has a significant commodities trading unit, posted adjusted earnings before interest, tax, depreciation and amortisation of USD11.60 billion for 2019, 26% lower than the year before.

However, according to company-compiled analyst consensus the market had forecast adjusted Ebitda of USD11.25 billion.

Glencore's adjusted earnings before interest and tax fell 55% to USD4.15 billion, while it posted a net loss attributable to equity holders of USD404 million after a profit of USD3.41 billion the year before.

Paper and packing firm Mondi promoted Chief Financial Officer Andrew King to chief executive effective April 1. Mondi said Peter Oswald is to step down as CEO and leave Mondi on March 31, as planned.

Bookmaker Flutter Entertainment confirmed that it has received notification from the Australian Competition & Consumer Commission that its proposed combination with the Stars Group has been granted informal approval. Flutter said the deal remains subject to approval by the Australian Foreign Investment Review Board as well as further international regulatory bodies.

Residential landlord Grainger said it has agreed to forward fund and acquire a 348-home, private rental sector development at Queens Road in Nottingham for GBP55.6 million from Blocwork, a joint venture involving Network Rail. Grainger said construction is expected to start in the second half of 2020, with the scheme expected to be leased and stabilised by early 2024. Grainger expects the investment to generate a gross yield on cost of over 7% once stabilised.

HSBC Holdings reported a 33% drop in pretax profit for 2019 to USD13.34 billion even as revenue rose by 4.3% to USD56.10 billion.

HSBC shares were down 2.2% in Hong Kong.

The reported pretax profit fell way short of market expectations. Analyst consensus had HSBC achieving pretax profit of USD20.03 billion for the year. The group profit performance was hurt by a total goodwill impairment of USD7.35 billion.

Looking ahead, HSBC said the coronavirus outbreak has created significant disruption for its suppliers and customers, and could lead to a reduction in revenue from lower lending and transaction volumes, as well as credit losses.

It plans to cut 15% of its global workforce as it embarks on a radical cost-cutting plan, the banking giant's interim chief said Tuesday.

"It's fair to say that our direction of travel will be to move the current headcount of 235,000 to be closer to 200,000 over the next three years," Noel Quinn told Bloomberg News in an interview.

HSBC is London's second largest company by market capitalisation behind oil major Royal Dutch Shell.

Anglo-Australian miner BHP Group on Tuesday increased its interim dividend, as profit and revenue rose on higher prices and favourable currency movements.

For the six months to the end of December, pretax profit rose by 15% to USD7.79 billion from USD6.80 billion the year before, as revenue grew by 7.5% to USD22.30 billion from USD20.74 billion.

BHP's profit performance was helped by stronger iron ore prices and favourable exchange rate movements, despite overall lower volumes and increased costs.

BHP lifted its interim dividend by 18% to 65 US cents per share compared to 55 cents the prior year, even as net debt increased by 21% to USD12.84 billion from USD10.64 billion.

The pound was quoted at USD1.2997 early Tuesday, lower than USD1.3013 at the London equities close Monday.

The euro was at USD1.0832 early Tuesday, flat from USD1.0836 late Monday. Against the yen, the dollar was quoted at JPY109.79 early Tuesday, slightly lower than JPY109.91 late Monday.

Brent oil was trading at USD57.08 a barrel early Tuesday, soft from USD57.34 late Monday.

Gold was quoted at USD1,585.40 an ounce early Tuesday, firm against USD1,582.14 late Monday.

Financial markets in the US will reopen on Tuesday after being closed on Monday for the Presidents Day holiday.

The economic events calendar on Tuesday has UK unemployment data at 0930 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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