Welcome to the new morningstar.co.uk! Learn more about the changes and how our new features help your investing success.

LONDON BRIEFING: Imperial Brands Warns As Altria-Philip Morris Give Up

(Alliance News) - Tobacco firm Imperial Brands warned Thursday it expects net revenue for its ...

Alliance News 26 September, 2019 | 8:06AM
Email Form

(Alliance News) - Tobacco firm Imperial Brands warned Thursday it expects net revenue for its financial year ending on Monday next week to grow around 2%. Earnings per share is expected to be "broadly flat" at constant currency.

This is due to a "challenging" next-generation product market in the US and "changes to our results expectations" in the Africa, Asia and Australasia division.

Imperial Brands expects its NGP business to grow net revenue by around 50% this year, which would be below expectations. The NGP environment in the US has "deteriorated considerably" over the last quarter, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products.

"Whilst this is disappointing for the current year, we believe that NGP provides a significant opportunity to deliver additive growth to complement our Tobacco business. We continue to refine our investment behind building a strong and profitable NGP business in a rapidly evolving market," said Imperial Brands.

Massachusetts this week officially became the first US state to ban – if temporarily – the sale of all electronic cigarettes, going further than states that only prohibited flavoured products. On Wednesday, tobacco giants Philip Morris International and Altria Group said they had ended merger discussions, partly due to challenges to the e-cigarette market in the US.

Imperial was down 7.2% in early trade, with peer British American Tobacco down 3.4%.

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

----------

MARKETS

----------

FTSE 100: up 0.1% at 7,295.95

----------

Hang Seng: flat at 25,944.84

Nikkei 225: closed up 0.1% at 22,048.24

DJIA: closed up 162.94 points, 0.6%, at 26,970.71

S&P 500: closed up 0.6% at 2,984.87

----------

GBP: unchanged at USD1.2360

EUR: soft at USD1.0953 (USD1.0960)

Gold: down at USD1,507.70 per ounce (USD1,523.10)

Oil (Brent): up at USD62.26 a barrel (USD61.45)

(changes since previous London equities close)

----------

ECONOMICS AND GENERAL

----------

Thursday's Key Economic Events still to come

0930 BST UK capital issuance

1000 CEST EU monetary developments in euro area - M3

0830 EDT US 3rd estimate GDP

0830 EDT US goods trade balance

0830 EDT US personal consumption expenditures index

0830 EDT US unemployment insurance weekly claims report - initial claims

0945 EDT US Bloomberg consumer comfort index

1000 EDT US pending home sales index

1030 EDT US EIA weekly natural has storage teport

----------

UK Prime Minister Boris Johnson telling members of Parliament they should honour the memory of murdered parliamentarian Jo Cox by delivering Brexit has been called "deeply shocking" by the murdered politician's successor. There was uproar in the Commons on Wednesday as the prime minister repeatedly berated MPs, rejected calls to temper his language and said the best way to honour Cox – an ardent Remainer – was to "get Brexit done". Tracey Brabin, who succeeded Cox as Member for Batley & Spen following her 2016 murder, said Johnson needed to remember "his words have consequences". Despite Johnson's attacks, opposition parties again made clear they would not agree to an election until they were sure the threat of a no-deal Brexit on October 31 was off the table. Downing Street said if opposition MPs did not take up the prime minister's offer to table a no-confidence motion, the government would take it as a mandate to press on with Brexit.

----------

Car production in the UK increased by 3.3% last month, the first rise in over a year, new figures show. A total of 92,158 cars were built in August, the Society of Motor Manufacturers & Traders said. It was the first increase in 15 months, mainly because several plants brought forward planned summer shutdowns to April to guard against the disruption of the then March 29 Brexit date, the SMMT added. Just over 2,900 more cars were produced in August than in the same month last year, but this was not enough to compensate for April's 56,999-unit loss, resulting in a 17% deficit in the year-to-date.

----------

US President Donald Trump asked Ukrainian President Volodymyr Zelensky to potentially open a corruption investigation into Joe Biden, Trump's political rival, a transcript of a July phone call released Wednesday by the White House showed. "I would like you to do us a favour," Trump said in the call, after Zelensky said he would buy US military hardware, as the US president proceeded to talk about Biden, a former vice president and front-runner for the Democratic Party in the 2020 presidential race. The release of the previously confidential transcript comes as the opposition Democrats launched this week an impeachment inquiry against Trump, threatening, at the very least, to put immense political pressure on the White House ahead of elections next year.

----------

The Federal Reserve Bank of New York announced it will increase Thursday's money market cash injections as it seeks to keep short-term interest rates under control. Banks this week have repeatedly asked for more overnight cash than the New York Fed offered to help financial institutions meet minimum reserve levels. The New York Fed on Thursday morning will offer up to USD100 billion in so-called repurchase agreements – exchanges secure assets for cash over very short periods – up from the USD75 billion offered on prior days. The New York Fed branch's open market trading desk will also double the amount of two-week agreements offered Thursday to USD60 billion.

----------

Japanese Trade Minister Isshu Sugawara welcomed an initial trade deal reached between Japan and the US. The initial deal "has great significance as it ruled out protectionist steps that could distort global supply chains," Sugawara told reporters. The deal has secured a reduction in trade barriers for US agricultural products and in American tariffs on some Japanese machine and industrial goods. It was announced on Wednesday during a signing ceremony in New York between US President Donald Trump and Japanese Prime Minister Shinzo Abe.

----------

Iranian President Hassan Rowhani told the United Nations General Assembly that the US must end the sanctions it has applied to Iran to clear the way for talks on a nuclear deal. "We cannot believe the invitation to negotiations of people who claim to have applied the harshest sanctions in history against the dignity and prosperity of our nation," Rowhani said. His speech came amid worsening tensions between Iran and the US and as Washington continues to ramp up its so-called maximum-pressure campaign to cripple the Iranian economy and force changes to Tehran's foreign policy. In the latest move, the US Treasury on Wednesday added more than 10 Chinese individuals and companies to a sanctions list over their trade with Iran.

----------

BROKER RATING CHANGES

----------

CITIGROUP RAISES UNITED UTILITIES TO 'BUY' ('NEUTRAL') - TARGET 865 (892) PENCE

----------

CITIGROUP RAISES CENTRICA TO 'BUY' ('NEUTRAL') - TARGET 100 (102) PENCE

----------

CITIGROUP RAISES PENNON GROUP TO 'BUY' ('NEUTRAL') - TARGET 870 (783) PENCE

----------

UBS CUTS SOUTH32 TO 'NEUTRAL' ('BUY') - TARGET 145 (170) PENCE

----------

COMPANIES - FTSE 100

----------

International Consolidated Airlines said it expects annual operating profit to be lower than in 2018. IAG expects to take a EUR137 million hit from strikes at British Airways, with "further disruption events", included including threatened strikes by Heathrow Airport employees, to see the airline group book a further EUR33 million charge. In addition, IAG said that the latest booking trends in its low-cost airlines, primarily Vueling and Level, should result in a EUR45 million hit. Overall, IAG expects operating profit before exceptional items in 2019 to be EUR215 million lower than the EUR3.49 billion achieved in 2019. Passenger unit revenue is expected to be slightly down at constant currency, compared to flat guidance previously. Meanwhile, there have been no further talks between British Airways and union BALPA. "The airline's offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways' other unions, representing 90% of the airline's employees. Clearly any further industrial action will additionally impact IAG's full-year 2019 operating profit," IAG said.

----------

Educational publisher Pearson said it expects annual profit at the bottom of its guided range. Pearson said it continues to expect revenue to stabilise this year, but weaker than expected trading in the US Higher Education Courseware business in its key selling season means adjusted operating profit is now expected to be at the bottom of the company's GBP590 million to GBP640 million guided range. "The third quarter has been significantly weaker than we expected in US Higher Education Courseware. Whilst difficult in the short term this places more importance on our work to remake this part of Pearson and we are exploring new ways of deploying our new technology platform so that we can offer students highly affordable, convenient, adaptive, digital courseware," said Chief Executive John Fallon.

----------

Energy provider SSE said it made "encouraging" progress in its first half with annual earnings seen in line with analyst forecasts. The power utility said it expects adjusted earnings per share for the current financial year around 85p to 90p, in line with consensus and guidance. SSE added that it is making good progress with the planned disposal of its interests in gas production. "SSE has made encouraging progress in the first six months of the financial year. The agreement to sell Energy Services to OVO paves the way for an even clearer strategic focus on regulated electricity networks and renewable energy," said Finance Director Gregor Alexander.

----------

COMPANIES - FTSE 250

----------

Wizz Air Holdings and peer Virgin Atlantic Airways are eyeing take-off and landing slots at London Gatwick airport left vacated by collapse of Thomas Cook, the Financial Times reported. According to the newspaper, Wizz Air Chief Executive Jozsef Varadi is eyeing the Gatwick airport slots as part of the company's growth plans in London. In 2017, Wizz Air acquired landing slots at London Luton Airport following the collapse of Monarch Airlines. The newspaper also reported that Virgin Atlantic is targeting slots at the airport, particularly for evening flights. Thomas Cook had around 15 daily slot pairs at Gatwick during the summer and roughly eight in the winter, according to the newspaper.

----------

Travel concessions operator SSP said it had a "good" fourth quarter. Revenue is expected to have risen 7.8% on a constant current basis for the quarter ended September 30, comprising like-for-like sales growth of 1.8% and net contract gains of 6.0%. At actual exchange revenue, revenue is expected to have growth 10% year-on-year. "After another strong quarter, net contract gains for the full year are expected to be just above our previous expectations, at around 5.5%, and as usual they will be accompanied by pre-opening costs," said SSP.

----------

Mitchells & Butlers said it expects annual profit to be at a similar level year-on-year, despite cost headwinds, following a strong end to the financial year. The pub firm said like-for-like sales in the eight weeks to September 21 were up 3.3%, with drinks growth particularly strong, the firm noted. In the year-to-date - or 51 weeks to September 21 - like-for-like sales were up 3.6%, with total sales 4.0% higher. "Sales growth has remained consistently ahead of the market and we carry this momentum forward into the new financial year. We remain confident of the impact of our Ignite initiatives which will be continually reviewed and refreshed as the business moves forward," said Chief Executive Phil Urban.

----------

Capital & Counties Properties said it has largely finalised preparations for the demerger of its Covent Garden business as a Central London-focused real estate investment trust. In addition, the property investor said there has been a "broad range of interest" expressed for an acquisition of its Earls Court business. In late July, Capital & Counties said it planned to launch its property portfolio in Covent Garden as a new central London-focused real estate investment trust through a demerger process. The remaining business of the group, which comprises its property interests in Earls Court, would be renamed EC Properties. Capital & Counties said on Thursday that progress has been made with parties interested in making an acquisition of Earls Court, with relevant stakeholders indicating that some potential buyers may be acceptable. The indicative pricing for the Earls Court business has continued to reflect a discount to its balance sheet value, it said.

----------

COMPANIES - INTERNATIONAL

----------

Volkswagen said it "unreservedly" stands by its boss and chair after German prosecutors decided to bring charges against them as part of the diesel emissions scandal that broke in 2015. The German carmaker said the board and founding family shareholders both "unreservedly stand" by Chief Executive Officer Herbert Diess and Chair Hans Poetsch in their current roles at both Volkswagen and its majority shareholder Porsche. Porsche owns 53.1% of Volkswagen. The announcement comes after prosecutors in Brunswick charged Diess, Poetsche and former chair Martin Winterkorn with "market manipulation" following the 2015 emissions scandal in which a device was attached to vehicles to see them pass emissions testing.

----------

Alphabet's Google said it will not pay European media outlets for displaying their articles, pictures and videos in search results in France, a move that undercuts EU copyright law and could set up a legal fight between the US tech giant and Brussels. Google routinely shows extracts of news articles or small "thumbnail" images in its results and on Google News, without paying the publishers. The new EU rule, which France will be the first to implement starting next month, would require internet companies to pay for such content. But Google has baulked, saying it will not use the content in search results unless publishers make it available for free.

----------

Ford Motor is likely to sign a joint venture deal for its Indian operations with local carmaker Mahindra & Mahindra Ltd which will see it step back from the market, Reuters reported. The news agency - citing two sources - said Ford and Mahindra are set to sign a deal next week. The two companies have been discussing details of the new entity for some months, with Reuters having previously reported Ford would hold a 49% stake and Mahindra the remaining 51% in the joint venture.

----------

Boeing has settled its first lawsuits with the families of people killed in plane crashes involving its 737 MAX model, a US attorney said. Settlements have been reached on behalf of 11 of the 17 descendants of the Lion Air crash victims, Alexandra Wisner confirmed to dpa. The Indonesian airline was operating a flight from Jakarta on October 29, 2018, when the Boeing 737 MAX 8 plane plummeted into the sea minutes after take-off, killing all 189 people on board.

----------

Thursday's Shareholder Meetings

Kainos

Argo Group

Kromek

Trakm8 Holdings

Ilika

Sure Ventures

----------

By Tom Waite; thomaslwaite@alliancenews.com

London Briefing is available to subscribers as an email newsletter. Contact info@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

Email Form

Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
United Utilities Group PLC 865.80 GBX 2.61
Centrica PLC 73.60 GBX 0.22
Pennon Group PLC 918.00 GBX 2.94 -
British American Tobacco PLC 2,916.50 GBX 0.21
Imperial Brands PLC 1,799.60 GBX 0.27
South32 Ltd 144.36 GBX -0.26
South32 Ltd 2.74 AUD -0.36

About Author

Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites