LONDON BRIEFING: Morrisons Signals Poor Christmas For UK Supermarkets

(Alliance News) - 'Big Four' UK grocer WM Morrison Supermarkets set a low bar for peers to follow ...

Alliance News 7 January, 2020 | 8:00AM
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(Alliance News) - 'Big Four' UK grocer WM Morrison Supermarkets set a low bar for peers to follow later in the week, as it reported on Tuesday a disappointing Christmas performance.

Morrisons said challenging trading conditions and sustained consumer uncertainty led to a sales fall in the 22 weeks to January 5. The grocer said like-for-like sales, excluding fuel, were down 1.7% year-on-year. The decline was solely due to a fall in retail sales, as like-for-like performance in the wholesale unit was flat year-on-year.

"Throughout the period, trading conditions remained challenging and the customer uncertainty of the last year was sustained," Morrisons explained.

Including fuel, like-for-like sales decline 2.8% year-on-year during the 22 weeks. Total sales, were down 2.9% year-on-year, but declined 1.8% when not including fuel sales.

The supermarket reiterated its full-year guidance, expecting pretax profit before exceptional costs to be in line with analysts' forecasts. Morrisons ends its financial year on February 2.

Fellow grocers J Sainsbury and Tesco issue trading statements on Wednesday and Thursday respectively.

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

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MARKETS

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FTSE 100: called up 0.3% at 7,597.50

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Hang Seng: up 0.3% at 28,317.60

Nikkei 225: closed up 1.6% at 23,575.72

DJIA: closed up 68.50 points, 0.2%, at 28,703.38

S&P 500: closed up 0.4% at 3,246.28

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GBP: down at USD1.3142 (USD1.3165)

EUR: soft at USD1.1175 (USD1.1187)

Gold: up at USD1,569.40 per ounce (USD1,562.34)

Oil (Brent): down at USD68.40 a barrel (USD68.94)

(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

1100 GMT Ireland monthly unemployment

1100 CET EU flash estimate euro area inflation

1100 CET EU retail trade

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

1000 EST US manufacturers' shipments, inventories & orders (M3)

1000 EST US ISM non-manufacturing report on business

1630 EST US API weekly statistical bulletin

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UK Prime Minister Boris Johnson is to chair a meeting of the National Security Council as Britain continued to urge all sides in the Middle East crisis to draw back from all-out conflict. Foreign Secretary Dominic Raab spoke on Monday to his Iranian counterpart Mohammed Javad Zarif to stress the need for a diplomatic resolution to avoid a renewed conflict in the region. Tehran has vowed "severe revenge" for the killing of its top military commander Qassem Soleimani in a US drone strike last week. President Donald Trump in turn has warned the US was ready to strike back in a "disproportionate" manner if the Iranians hit US targets.

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The first post-Brexit UK government budget will be on March 11, with Chancellor Sajid Javid promising a spending spree to help "left behind" parts of the country. With Brexit set for January 31, Javid will explain how the UK can take advantage of the "huge opportunities" that he claimed will be presented by leaving the EU. The government is set to increase borrowing in order to fund promises made in the Tory election manifesto, with Javid saying "the country voted for change" by backing Johnson at the ballot box in December. Promising an "infrastructure revolution" in his first budget as chancellor, Javid indicated there would be up to GBP100 billion available for "transformative" projects across the country over the coming years.

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Johnson's Brexit deal returns to the Commons on Tuesday as the government resumes its push to drive through Britain's departure from the EU by the end of the month. MPs, returning to Westminster following their Christmas break, begin three days of detailed debate on the Withdrawal Agreement Bill with the House expected to sit late into the night. The prime minister is determined to deliver on his general election manifesto promise to "get Brexit done" by January 31. The WAB has already cleared its first Commons hurdle, passing its second reading vote before Christmas with a majority of 124. The government now wants it to complete its remaining stages in the lower House by the end of business on Thursday.

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BROKER RATING CHANGES

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JPMORGAN RAISES BAE SYSTEMS TO 'OVERWEIGHT' ('NEUTRAL') - TARGET 700 (600) PENCE

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CREDIT SUISSE CUTS RENTOKIL INITIAL TO NEUTRAL (OUTPERFORM) - TARGET 450 PENCE

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HSBC CUTS NEXT TO 'HOLD' ('BUY') - TARGET 7050 (7300) PENCE

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GOLDMAN CUTS SSE TO 'NEUTRAL' ('BUY') - TARGET 1461 (1369) PENCE

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COMPANIES - FTSE 100

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Vapers who have also smoked tobacco may be at greater risk of stroke compared to people who only smoke cigarettes, new research suggests. Those who used both at the time of the study were almost two times more likely to have a stroke, compared to those who only smoked cigarettes at the time, according to the study. And they were nearly three times more likely than non-smokers to have a stroke, the research published in the American Journal of Preventive Medicine suggests.

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COMPANIES - FTSE 250

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Aston Martin Lagonda Global Holdings said difficult trading conditions it experienced throughout 2019 continued through December, resulting in lower sales, higher selling costs and lower margins. The luxury sports car maker said core car wholesales declined 7% year-on-year to 5,809 units. It attributed the poor performance to a weaker mix of vehicles and lower-than-expected wholesale sales. Aston Martin now sees 2019 adjusted earnings before interest, tax, depreciation and amortisation to come in at a range between GBP130 million and GBP140 million. In 2018, adjusted EBITDA came in at GBP247 million. The carmaker said sales of its lowest priced Vantage sportscar improved in the fourth quarter, supported by retail financing particularly in the UK and the US. Moreover, the order book for the new DBX sports utility vehicle has "built rapidly" to 1,800 since it opened in November 2019, it added. Chief Executive Officer Andy Palmer said: "From a trading perspective, 2019 has been a very disappointing year. Whilst retails have grown by 12%, our best result since 2007, our underlying performance will fail to deliver the profits we planned, despite a reduction in dealer stock levels.

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Premier Oil reported 2019 production of 78,400 barrels of oil equivalent per day, which is at the upper end of guidance. The oil company said development, exploration and abandonment expenditure for 2019 is estimated at around USD300 million, below original guidance of USD340 million. This, it explained, was due to the release of contingency spend related to the BIG-P drilling programme, the Tolmount project tracking below budget and "some deferral of spend" into 2020. In addition, Premier Oil said it has agreed to acquire Andrew Area and Shearwater assets from oil major BP for USD625 million. The oil company also is to acquire an additional 25% interest in the Premier Oil operated Tolmount Area from Dana Petroleum for USD191 million. The proposed acquisitions, Premier said, will be funded via a USD500 million equity raise which has been "fully underwritten on a standby basis" and existing cash.

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COMPANIES - OTHER MAIN MARKET AND AIM

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Starling Bank plans to seek listing on the London Stock Exchange in two to three years, the Daily Mail newspaper reported. The UK digital-only lender was founded by the former chief operating officer of Allied Irish Banks Anne Boden and has raised GBP263 million from investors since its launch in 2014. When investors want to cash in, Boden plans to list Starling on the London Stock Exchange through an initial public offering, instead of selling it to a major high street banking institution. "I didn't do all of this to sell out to a big bank. I think the future for us will be an IPO in two to three years' time," Boden told the Daily Mail.

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COMPANIES - INTERNATIONAL

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Kraft Heinz announced the appointment of Anheuser-Busch InBev AG executive Flavio Torres. Torres is to become the head of global operations at consumer goods giant Kraft Heinz, which has a vast portfolio of brands such as Philadelphia cheese, Caprisun drinks, and the eponymous tomato ketchup. Torres was most recently vice president of global operations at AB InBev, the largest brewing company in the world. AB InBev owns beers such as Stella Artois, Corona, Budweiser, and Leffe.

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Tuesday's Shareholder Meetings

Carr's Group

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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 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
BAE Systems PLC 643.80 GBX 0.81
Morrison (Wm) Supermarkets PLC 187.65 GBX 2.99
Rentokil Initial PLC 481.40 GBX 2.95 -
SSE PLC 1,529.50 GBX 1.63
Next PLC 7,194.00 GBX 2.04 -

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