LONDON MARKET PRE-OPEN: Ryanair swings to profit on Q1 revenue surge

(Alliance News) - Stock prices in London are seen opening lower on Monday, tracking US and Asian equity markets, as investors gear up for a big week of corporate earnings and an interest rate decision from the US Federal Reserve.

In early company news, telecommunications firm Vodafone maintained annual guidance after a rise in first-quarter revenue. Molten metal flow engineer Vesuvius said it was confident in delivering a resilient annual performance. Premier Foods made a meal kit acquisition. Ryanair's first-quarter revenue jumped.

IG futures indicate the FTSE 100 index to open 28.97 points lower at 7,247.40. The index closed up 5.86 points, or 0.1%, at 7,276.37 Friday.

New York ended lower on Friday, with the Dow Jones Industrial Average down 0.4%, S&P 500 down 0.9% and Nasdaq Composite down 1.9%.

In Asia on Monday, the Nikkei 225 index in Tokyo closed down 0.8%. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was down 0.3%. The S&P/ASX 200 in Sydney ended marginally lower.

The US central bank is widely expected to hike borrowing costs by 75 basis points on Wednesday. Investors will be poring over policymakers' views on the outlook for the world's biggest economy as Fed officials try to rein in inflation while sustaining growth.

CMC Markets analyst Michael Hewson said: "US markets also finished the week higher, however a disappointing set of numbers from social media minnow Snap, as well as a sharp drop in the July services PMI, saw stocks there finish the week on the back foot. This late slide looks set to translate into a slightly lower European open later this morning.

"This late Friday weakness appears to have sharpened concerns that it might be a forewarning of similar disappointments as we look towards the likes of Google owner Alphabet, and Facebook owner Meta Platforms who report their numbers later this week, starting with Alphabet tomorrow. There is also the not insignificant matter of the latest US central bank rate decision which is expected to see the Federal Reserve raise interest rates by another 75bps on Wednesday."

Vodafone said its first-quarter performance was in line with expectations, with continued growth seen in both Europe and Africa.

For the three months to June 30, revenue was up 1.6% to EUR11.3 million from EUR11.1 million in the first quarter last year.

Looking ahead, Vodafone said it was on track to deliver financial 2023 guidance, with adjusted earnings before interest, tax, depreciation and amortisation after leases expected to be between EUR15.0 billion and EUR15.5 billion and adjusted free cash flow of EUR5.3 billion.

Vodafone said its Europe Consumer contract mobile average revenue per user grew by 0.7% year-on-year. It added 215,000 mobile contract customers, but lost 72,000 broadband customers in the quarter.

Vodafone also said growth in Africa was supported by data revenue and financial services growth, as its M-Pesa customer base grew to almost 50 million in the quarter.

"We have executed in line with our expectations, delivered another quarter of growth in both Europe and Africa, and seen an acceleration in business growth. Whilst we are not immune to the current macroeconomic challenges, we're on track to deliver financial results for the year in line with our guidance," said Chief Executive Officer Nick Read.

"Our near-term focus on our operational and portfolio priorities remains unchanged. We've made good progress towards stabilising our commercial performance in Germany, and we continue to actively pursue opportunities with Vantage Towers and to strengthen our market positions in Europe."

Airtel Africa said its Kenya subsidiary, Airtel Kenya Networks, has purchased 60 megahertz of additional spectrum in the 2600 MHz band from the Communications Authority of Kenya for USD40 million. The licence is valid from this month and runs for a period of 15 years.

Airtel Africa said the additional spectrum will support 4G network capacity expansion in the market for both mobile data and fixed wireless home broadband capability. It will allow for future 5G rollout, providing significant capacity to accommodate continued strong data growth in the country, it added.

Vesuvius said trading for the months of May and June remained stronger than anticipated, despite ongoing end-market weakness.

As such, Vesuvius expects to report a trading profit for the first half of 2022 of GBP127.4 million. The company said its outperformance in the first half was due to the successful implementation of pricing strategy to recover input costs as well as market share gains, supported by "technological differentiation".

In addition, Vesuvius said there remains significant uncertainty as to the strength of its end markets in the second half due to the ongoing geo-political environment and potential macroeconomic weakness. Due to this uncertainty, its expectations for trading in the second half of the year, including a material drop in volume compared to the first half and challenging cost inflation, remain broadly unchanged.

Vesuvius now expects its full year trading profit to be towards the top end of the range of current analysts' expectations of GBP155 million and GBP199 million.

"While the scale of the potential slow-down remains highly uncertain, we are confident that we can deliver a resilient performance and emerge stronger once end markets return to growth," the company said.

Premier Foods said it has agreed to acquire Indian and South East Asian meal kit brand Spice Tailor for an initial GBP43.8 million on a cash free and debt free basis.

Premier Foods said Spice Tailor is expected to generate revenue of GBP17.3 million in financial 2023. It has a strong geographical fit with Premier Foods' existing footprint, with a presence in the UK, Australian, Canadian and Irish markets, the company noted.

Ryanair Holdings reported a sharp rise in first-quarter revenue, even as Easter bookings and fares were badly damaged by the Russian invasion of Ukraine in February.

For the three months to June 30, revenue was EUR2.60 billion, up sharply from EUR370 million in the first quarter last year. This helped swing the budget airline to a profit after tax of EUR170 million from a EUR273 million loss a year before.

Average fares were down 4% on the same quarter pre-Covid. Ancillary revenue continued to perform strongly, delivering over EUR22.50 per passenger, Ryanair noted.

Looking ahead, Ryanair said it could not "ignore the risk" of new Covid variants in Autumn. The carrier pointed to its experience with Omicron last November and the Ukraine invasion to demonstrate how "fragile the air travel market remains". Ryanair said the strength of any recovery will be dependent on there being no adverse or unexpected developments over the remainder of financial 2023.

The airline said bookings remain closer-in than normal, leaving it with "almost zero visibility into H2".

The dollar was higher across the board. The pound was quoted at USD1.1967 early Monday, down from USD1.2028 at the London equities close Friday.

The euro was priced at USD1.0198, down from USD1.0223. Against the yen, the dollar was trading at JPY136.41, up from JPY136.11.

Brent oil was quoted at USD102.63 a barrel on Monday morning, down from USD104.74 at the close Friday. Gold stood at USD1,724.21 an ounce, lower against USD1,731.12.

The economic events calendar on Monday has a Germany Ifo business climate index print at 0900 BST.

Earnings season in London continues this week. Drugmaker GSK, Lloyds Banking, miner Rio Tinto and British American Tobacco report interim results on Wednesday. On Thursday, there are half-year results from defence contractor BAE Systems, lender Barclays, fund manager Schroders and oil major Shell. On Friday, drugmaker AstraZeneca and British Airways-parent International Consolidated Airlines report interim results.

In the US, tech earnings season begins in earnest this week with updates from Alphabet and Microsoft on Tuesday, Meta Platforms on Wednesday, and Apple on Thursday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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