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LONDON BRIEFING: Imperial Brands Names Chair After "Challenging Year"

(Alliance News) - Imperial Brands said early Tuesday that financial 2019 was a "challenging ...

Alliance News 5 November, 2019 | 8:03AM
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(Alliance News) - Imperial Brands said early Tuesday that financial 2019 was a "challenging year", with its annual results coming in below expectations due to "tough trading" in the Next Generation Products business, including e-cigarettes and vaping.

In the year ended September 30, pretax profit slipped to GBP1.69 billion from GBP1.82 billion the year before. Revenue grew 5.1%, however, to GBP31.59 billion from GBP30.07 billion.

Tobacco net revenue increased 2.7% to GBP7.71 billion from GBP7.51 billion with NGP net revenue growing 48% to GBP285 million from GBP187 million.

Despite the sharp rise, Imperial Brands said NGP's growth was "below the level we expected to deliver".

Chief Executive Alison Cooper said: "Our delivery was also impacted by an increasingly competitive environment and regulatory uncertainty in the USA. Growth in Europe was also slower, despite achieving leading retail shares in several markets. We have taken the learnings from this year to reset our NGP investment plans for 2020, prioritising the markets and categories with the highest potential for sustainable, profitable growth. We will scale up investment as the visibility on returns and regulatory uncertainties improves."

Imperial Brands upped its total dividend by 10% to 206.6p.

The tobacco firm also announced Senior Independent Director Therese Esperdy as its new chair, replacing the outgoing Mark Williamson. Esperdy will take over the role at the start of 2020.

The stock was down 1.0% early Tuesday.

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

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MARKETS

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FTSE 100: up 0.1% at 7,379.86

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Hang Seng: up 0.3% at 27,621.28

Nikkei 225: closed up 1.8% at 23,251.99

DJIA: closed up 114.75 points, or 0.4%, at 27,462.11

S&P 500: closed up 0.4% at 3,078.27

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GBP: soft at USD1.2897 (USD1.2908)

EUR: soft at USD1.1135 (USD1.1142)

Gold: firm at USD1,506.30 per ounce (USD1,505.64)

Oil (Brent): soft at USD62.22 a barrel (USD62.70)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Tuesday's Key Economic Events still to come

0900 GMT UK SMMT car registration figures

0930 GMT UK CIPS-Markit services purchasing managers' index

1100 GMT Ireland monthly unemployment

1100 GMT Ireland industrial production and turnover

1100 CET EU producer price index

0745 EST US Retail Economist-Goldman Sachs weekly chain store sales index

0830 EST US international trade in goods & services

0855 EST US Johnson Redbook retail sales index

0945 EST US services PMI

1000 EST US ISM non-manufacturing report on business

1000 EST US IBD/TIPP economic optimism index

1000 EST US job openings & labor turnover survey

1630 EST US API weekly statistical bulletin

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The US is considering rolling back levies on USD112 billion worth of Chinese imports that were introduced on September 1, the Financial Times reported on Monday. The 15% tariffs targeted Chinese consumer goods including televisions, books, nappies and sports shoes for the first time. Five people briefed on discussions said the White House was considering dropping the levies as a concession to cement a partial deal to end the ongoing trade war between the two countries, according to the FT report. In recent days, both Beijing and Washington have spoken positively about negotiations, including on trade in agricultural goods and poultry.

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Both manufacturing and services in China expanded in October, the Caixin PMI showed, reaching the best growth in six months. The composite output index for October reached 52.0 from the 51.9 registered in September, the best reading since April. This was driven by manufacturing, Caixin said. The services business activity index eased to 51.1 from 51.3 in September, meaning although there was still expansion in the sector, the pace slowed.

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The US began the formal process of withdrawing from the Paris climate accord, Secretary of State Mike Pompeo announced on Monday, the first available day for Washington to legally make the move. US President Donald Trump was a staunch opponent of the accord when he ran for office, and his administration has been proactively rolling back environmental regulations, saying they inhibit business and give other countries an edge. Pompeo cited the "unfair economic burden imposed on American workers, businesses, and taxpayers by US pledges made under the agreement," in announcing the withdrawal. He said a "realistic and pragmatic model" will be proposed by the US to counter the global accord.

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UK retail sales returned to growth in October as shops discounted aggressively, the latest British Retail Consortium & KPMG retail sales monitor showed. Sales were up 0.6% in October annually, which, while slower than the 1.3% recorded in October 2018, was the best performance since April and above the three-month average of a 0.3% decline. On a like-for-like basis, sales rose 0.1%, again a significant improvement from the three-month average of minus 0.8%.

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Ireland registered its slowest new business growth in the services industry in over seven years in October, IHS Markit said. The AIB services PMI stood at 50.6 in October, weakening from 53.1 in September. This was the slowest increase in business activity since August 2012, IHS Markit said. The main cause was a weakening of customer demand, with new order growth "marginal" with some surveyed saying Brexit uncertainty was hurting demand.

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The UK government has held talks with the investment industry over tweaking stock listing rules in a bid to attract high growth companies like technology start-ups and ensure London remains one of the leading markets to list after Brexit, the Financial Times reported, citing three people familiar with the matter. According to the FT, changes to stock listing rules to attract fast-growing companies was one of the recommendations made by a financial services business council set up under former prime minister Theresa May. The business council has continued under new Prime Minister Boris Johnson.

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Lindsay Hoyle has emerged victorious in the election to replace John Bercow as House of Commons Speaker. The Labour politician received more than 50% of votes in the fourth ballot of MPs, defeating his party colleague Chris Bryant. Hoyle, formerly a deputy to Bercow, received 325 votes to Bryant's 213. Speakers must be politically impartial, meaning Hoyle will be required to resign from the Labour Party in order to carry out his duties.

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BROKER RATING CHANGES

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BERENBERG CUTS HSBC TO 'SELL' (HOLD) - PRICE TARGET 490 (700) PENCE

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DEUTSCHE BANK RAISES STANDARD CHARTERED TARGET TO 700 (630) PENCE - 'HOLD'

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DEUTSCHE BANK RAISES RBS PRICE TARGET TO 235 (215) PENCE - 'HOLD'

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COMPANIES - FTSE 100

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Associated British Foods said it was able to deliver a "resilient" annual performance, with growth from its Grocery and Primark units offsetting decline in Sugar. In the 52 weeks to September 14, pretax profit slipped 8% to GBP1.17 billion. Revenue increased 2% to GBP15.8 billion. Chief Executive George Weston said: "We continued to pursue the opportunities to grow our businesses with a gross investment of over GBP800 million. Next year the group is well-positioned for further progress, with the continued expansion of Primark, a material improvement in our Sugar profit and strong profit growth in Grocery." AB Foods upped its total dividend by 3% to 46.35p.

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A postal union has been accused of a "politically motivated" threat ahead of potential strike action in the run-up to the UK general election. The Communication Workers Union insisted it has not yet called action, adding that it had its "ballot in play well before the election". Royal Mail said it wrote to the CWU last week to say that if the union provides a binding commitment to remove the threat of strike action for the rest of 2019, the company will enter into discussions without preconditions. But Royal Mail said the CWU is not prepared to take up the offer. Andrea Leadsom, secretary of state for Business, Energy & Industrial Strategy, said: "CWU's threat to ruin Christmas and disrupt the postal system during the General Election is just a preview of things to come if Jeremy Corbyn is ever allowed near the keys to Number 10."

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COMPANIES - FTSE 250

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Euromoney Institutional Investor said its financial 2019 results will be "slightly" above its own expectations. Adjusted revenue for the year ended September 30 is guided to be about GBP401 million, with underlying revenue flat. Adjusted pretax profit is expected to be about 9% higher year on year at GBP104 million. Euromoney said this reflects a continuation of "good" growth in the Pricing, Data & Market Intelligence segment, with underlying revenue up about 4% and about 10% growth in Fastmarkets subscriptions. Euromoney is scheduled to release its annual results on November 21. It said the strategic review of its Asset Management business is "progressing well", and this will be reported a discontinued operation in the results.

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Trainline said it saw "good" growth" in the first half, with net ticket sales up 19%. In the six months to August 31, the ticketing website posted a pretax loss of GBP87.5 million, widened from GBP11.1 million a year before. Trainline said the bigger loss could be attributed to exceptional costs related to its IPO. Revenue grew 29% to GBP129 million from GBP100 million, with net ticket sales jumping 19% to GBP1.84 billion from GBP1.54 billion.

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Weir Group reported growth in the third quarter ended September, which the engineering firm said was underpinned by its expanded mining equipment offering. Third-quarter orders for the group were 4% higher than the prior-year period and flat on a like-for-like basis. Original equipment orders increased 41% driven by the GBP100 million Iron Bridge order in Minerals. Aftermarket orders fell 7%, principally as a result of the accelerated downturn in North American oil and gas markets, Weir explained. Oil & Gas revenue was hurt by the same market conditions, while Minerals and ESCO were in line with expectations.

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Budget airline Wizz Air reported a 21% rise in passenger numbers in October to 3.7 million. Wizz Air's load factor increased 1.3 basis points in October year on year to 95.3%. In the rolling twelve months to October, passengers are up 16% to 38.6 million with load factor rising 1.4 basis points to 93.5%.

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COMPANIES - OTHER MAIN MARKET AND AIM

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Ryanair reported 5% traffic growth in October to 13.8 million, with rolling annual growth of 9% to 151.0 million.

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COMPANIES - INTERNATIONAL

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Uber Technologies shares skidded after the ride-hailing giant reported a widened loss in the just-ended quarter as it boosted investment in new services and features. San Francisco-based Uber reported a loss of USD1.2 billion, widened from a loss of USD986 million a year ago. Uber revenue was up 30% to USD3.8 billion in the quarter on growth in its shared rides service as well as its Eats restaurant meal delivery service and the Freight platform, that matches shippers with truckers.

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Hotel chain Marriott International reported flat third-quarter earnings before interest, tax, depreciation, and amortisation of USD901 million adjusted, though earnings per share on a diluted basis fell 19% to USD1.16. The year before did, however, include an asset sale gain. Net income fell 23% to USD387 million, and was down 18% adjusted. Revenue per available room was up 1.5% like-for-like at constant currency, meeting guidance. Looking ahead, Marriott expects demand to remain strong.

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Enterprise software firm SAP announced EUR1.5 billion in shareholder returns by the end of 2020. The plan, SAP said, comes in light of the Walldorf, Germany-based firm's "strong financial performance and balance sheet". Returns will take the form of either buybacks or special dividends, or a combination of the two, valued at no more than EUR1.5 billion combined. This will be on top of SAP's existing dividend policy of at returning at least 40% of post-tax profit to shareholders.

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Safran has appointed Olivier Andries as the successor to Philippe Petitcolin as chief executive with effect from the beginning of 2021 after a transition period of one year. From the start of 2020, Safran said Andries will serve under Petitcolin. The French aerospace and defence company said Andries has acquired "solid" operational experience over the past 10 years in the company's Defence & Security and Propulsion operations.

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Tuesday's Shareholder Meetings

Wilmington

Murray Income Trust

AEW UK Long Lease REIT

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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.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
HSBC Holdings PLC 575.00 GBX 0.23
Standard Chartered PLC 697.60 GBX -0.80
Imperial Brands PLC 1,752.60 GBX 1.17
The Royal Bank of Scotland Group PLC 224.90 GBX 0.09

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