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TOP NEWS SUMMARY: Profit Warnings By Imperial Brands, IAG And Pearson

(Alliance News) - The following is a summary of top news stories ...

Alliance News 26 September, 2019 | 11:18AM
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(Alliance News) - The following is a summary of top news stories Thursday.

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COMPANIES

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Big tobacco's high stakes bet on vaping as a way of replacing falling cigarette sales appeared to be folding in the face of intense concerns it is no healthier, with a cancelled mega-merger in the US and a revenue warning from London-listed Imperial Brands. The Davidoff, West and Gauloises Blondes cigarette maker said it expects net revenue for its financial year ending on Monday to grow by 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. Next-generation products include e-cigarettes and vapes. Reflecting the increased pressure on tobacco firms, Philip Morris International and Altria Group ended merger talks on Wednesday, partly over the increasingly fraught US vape market. Imperial Bands has "stepped up" its retail engagement programmes in the US over the second half of the year, and has generated improved customer off-take, but it was "less than expected" due to the "slowdown in the US vapour category combined with increased competitor discounting".

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International Consolidated Airlines issued a full-year profit warning and said industrial action and other recent disruption has cost the company EUR170 million. The British Airways owner said the net financial impact of allowing customers to re-book flights or receive refunds due to pilot strikes has resulted in a EUR137 million hit with other "disruption events" at Heathrow costing the company a further EUR33 million. Booking trends in low cost airlines in IAG's portfolio will also knock the company's finances, the firm said. At current fuel prices and currency exchange rates, IAG expects its 2019 operating profit before exceptional items to be EUR3.27 billion, 6.6% lower than the EUR3.49 billion pro-forma figure achieved in 2018. Previously, IAG had guided for profit in 2019 to be flat on the year before.

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Pearson warned annual adjusted operating profit will be at the lower end of its guidance range due to weaker-than-expected trading in its US Higher Education Courseware business in key selling season. Pearson said it anticipates revenue to stabilise in 2019, but adjusted operating profit to be at the bottom of its guidance range of GBP590 million to GBP640 million. Adjusted earnings per share also are predicted to be at the bottom of the guidance range of 57.5p to 63.0p. In 2018, adjusted operating profit totalled GBP546 million, while adjusted earnings per share was 70.3p. Pearson said revenue from US Higher Education Courseware is down by around 10% in the first nine months of 2019, mainly due to significant acceleration of print attrition in the key trading season, with students returning to school turning away from print products more rapidly than anticipated. It also blamed lower college enrolments and use of open educational resources.

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SSE reiterated its intention to pay an 80 pence full-year dividend despite an "uncertain backdrop" and a first half profit warning. The electricity utility said adjusted operating profit, which in the interim is typically 35% of the full-year total, is "likely to be around 20% this year". SSE explained that 90% of the expected GBP115 million loss in Energy Portfolio Management will be incurred in the first half. The suspension of the Capacity Market will also affect its interim operating profit. The suspended payments total GBP148 million, SSE said. Turning to the full-year, lower than expected Distribution Use of System electricity volumes, coupled with a higher number of network faults will hurt adjusted operating profit in its electricity network unit.

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CRH has appointed Non-Executive Director Richard Boucher as its chair designate ahead of the current incumbent leaving at the end of 2019. Boucher - non-executive since March 2018 - will replace Chair Nicky Hartery at the start of 2020. Hartery will depart the FTSE 100-listed firm at the end of 2019, having been in the role since 2012. Boucher was previously the chief executive at Bank of Ireland Group between 2009 and 2017. Prior to this, he served in senior roles at Royal Bank of Scotland Group and at Ulster Bank.

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MARKETS

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London shares were mostly higher amid optimism over US-China trade deal prospects, following positive comments from US President Donald Trump on Wednesday. Beijing said Thursday it had bought a "considerable" amount of US pork and soybeans, the latest sign of appeasement between the two sides in the drawn-out trade war.

Conversely, Pearson, Imperial Brands and IAG were the worst blue-chip performers after all three firms issued profit warnings.

Wall Street was pointed to a higher open.

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FTSE 100: up 1.1% at 7,368.00

FTSE 250: up 0.5% at 19,884.48

AIM ALL-SHARE: down 0.1% at 873.88

GBP: down at USD1.2306 (USD1.2360)

EUR: down at USD1.0932 (USD1.0960)

GOLD: down at USD1,508.90 per ounce (USD1,523.10)

OIL (Brent): up at USD62.65 a barrel (USD61.45)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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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.

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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.

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US President 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.

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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.

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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.

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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.

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Copyright 2019 Alliance News Limited. All Rights Reserved.

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