UK TOP NEWS SUMMARY: Bank of England Improves Outlook On UK Economy

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

Alliance News 6 August, 2020 | 11:28AM
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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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Aviva said its financial performance in the first half of 2020 was "solid" and hailed its operational response to the Covid-19 pandemic. Aviva's pretax profit for the six months to June 30 slumped 61% to GBP804 million from GBP2.05 billion recorded a year ago. Operating profit - the company's preferred profit measure - fell 12% to GBP1.23 billion from GBP1.39 billion. Excluding Covid-19 impact on general insurance claims of GBP165 million, operating profit was flat year-on-year. First-half income dived 75% to GBP10.51 billion from GBP42.57 billion. The sharp drop was primarily due to an investment loss of GBP3.64 billion versus GBP28.01 billion income. The insurer added that it will pay a second interim dividend of 6.0 pence per share and has decided to review its longer-term dividend policy "in light of our strategic priorities and the future shape of the group".

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ITV offered a bleak picture to investors after its two main sources of revenue took a knock in the first half. The UK television broadcaster and programme maker's pretax profit for the six months ended June 30 dropped 93% to just GBP15 million from GBP222 million recorded a year ago. Revenue for the half year fell by 17% to GBP1.45 billion from GBP1.75 billion a year prior. The company saw its two main sources of income decline: advertising revenue fell 21% to GBP671 million, while production division - ITV Studios - saw a 17% drop in revenue to GBP630 million. ITV said it has decided not to pay an interim dividend in light of continued economic uncertainty.

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Phoenix Group reported a substantial increase in written premiums, alongside a more than doubled profit for the first half of 2020. For the six months to the end of June, pretax profit more than doubled to GBP611 million from GBP217 million the year before, as the insurance firm's net written premiums rose by 37% to GBP2.17 billion from GBP1.58 billion. Gross written premiums meanwhile jumped by 32% to GBP2.46 billion from GBP1.86 billion. Total revenue grew by 28% to GBP2.48 billion from GBP1.93 billion the prior year, however, net income fell sharply to GBP3.07 billion from GBP20.41 billion, as net investment income declined to GBP534 million from GBP18.44 billion. Phoenix Group declared an interim dividend of 23.4 pence per share, in line with the year before.

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Mondi said it is resuming dividend payments despite a double-digit profit fall in the first half of 2020. The packaging and paper company said it has delivered a robust financial performance in a challenging environment. For the six months to the end of June, revenue fell 8.4% to EUR3.45 billion from EUR3.77 billion a year earlier, resulting in pretax profit of EUR466 million, down 26% from EUR632 million. Mondi chopped its dividend for the half-year by 30% to 19.00 euro cents per share from 27.28 cents. In addition, the company said it will pay a 29.75 euro cents per share dividend relating to 2019. Going forward, Mondi said it is "well-positioned" for recovery with resilient business model, cost-advantaged asset base, strong balance sheet and unique portfolio of sustainable packaging solutions.

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Glencore posted a swing to a loss for the first half of 2020 and said it will not pay a dividend but instead focus on reducing its net debt. Glencore said that for the six months ended June 30, it swung to a net loss of USD2.60 billion from a USD226 million profit last year, as revenue fell to USD70.96 billion from USD107.43 billion. Adjusted earnings before interest, tax, depreciation and amortisation dropped 13% to USD4.83 billion but was ahead of market expectations of USD4.29 billion. The company booked impairments of GBP3.2 billion as a result of lower commodity prices related to the uncertainty arising from the coronavirus pandemic. Glencore said it will not pay its deferred dividend, saying the economic outlook is too uncertain due to the coronavirus. The dividend was put on hold earlier this year due to the pandemic. It stated that it would instead focus on reducing its net debt to less than USD16 billion by the end of 2020.

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Evraz said first-half adjusted pretax profit fell year-on-year on a drop in commodity sales and prices in the face of the Covid-19 pandemic, but reported pretax profit was up slightly on the absence of impairment charges and a lower interest expense. For the six months to June 30, the London-headquartered company recorded pretax profit of USD700 million, up 1.4% from USD690 million a year ago. Earnings before interest, tax, depreciation and amortisation - the company's preferred profit measure - amounted to USD1.07 billion for the period, down 28% from USD1.48 billion a year ago, driving Ebitda margin down to 21.5% from 24.1%. First half revenue fell 19% to USD4.98 billion from USD6.14 billion, primarily due to lower sales prices for construction, coal products, and lower flat-rolled sales volumes, as well as reduced prices and volumes for vanadium products.

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Hammerson announced a series of transactions to recapitalise the business and reduce leverage by a quarter after its loss widened in the first half of 2020. The shopping centre owner proposed a rights issue to raise gross proceeds of GBP552 million and the sale of substantially all of its 50% interest in VIA Outlets to a mutual fund managed by APG Asset Management for estimated cash proceeds of EUR301 million. In conjunction with the rights issue, Hammerson said it will implement a capital reorganisation, comprising a sub-division and share consolidation to reduce the nominal value of its existing shares. This should result in a higher market price for the consolidated shares and, accordingly, a more appropriate issue price in the rights issue. The capital reorganisation will result in Hammerson shareholders holding one consolidated share for every five existing shares. Hammerson then will offer 24 new consolidated shares for every 1 consolidated share.

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MARKETS

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London shares were mostly lower with ITV and Glencore weighing on the FTSE 100, down 1.1% and 4.8%, respectively. The pound rose to a five-month high against the dollar following a more upbeat assessment of the UK's economic prospects from the Bank of England. US stock market futures were pointed to a higher open.

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FTSE 100: down 1.3% at 6,025.41

FTSE 250: down 0.6% at 17,536.47

AIM ALL-SHARE: up 0.5% at 916.09

GBP: up at USD1.3172 (USD1.3144)

EUR: down at USD1.1853 (USD1.1901)

GOLD: firm at USD2,047.70 per ounce (USD2,046.16)

OIL (Brent): down at USD45.12 a barrel (USD45.96)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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The Bank of England offered a more optimistic outlook for the UK's economic prospects than initially feared, as the central bank kept monetary policy unchanged. The BoE said its policymakers unanimously voted to keep the Bank Rate unchanged in light of the challenges posed by the coronavirus pandemic. The BoE's nine-member Monetary Policy Committee all voted to keep the UK's key interest rate at 0.1% and asset purchases at GBP745 billion, as widely expected. The BoE improved its "indicative projection" for growth for the UK economy, forecasting that gross domestic product will shrink by 9.5% in 2020, following UK government measures to protect the economy. In May, the central bank had warned that economic growth could slump by 14% this year.

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UK construction sector activity grew at the fastest rate in almost five years in July as coronavirus-related shutdowns eased, IHS Markit said. The HS Markit/CIPS UK Construction purchasing managers' index reading was 58.1 in July, up from 55.3 in June. The score was above the 50.0 neutral mark for the second straight month and beat market forecasts of 57.0. Markit said UK construction companies signalled a sharp and accelerated expansion of business activity during July, led by another strong increase in house building. Further, new orders also picked up for the second month running, with survey respondents pointing to a boost to sales from the easing lockdown measures and the restart of work on site. In addition, Markit said construction firms were optimistic overall about the prospect of a recovery in business activity during the next 12 months.

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An uptick in industrial output in Ireland was not enough to stave off a quarterly decline, data from the Central Statistics Office showed. Production in manufacturing industries for June surged 13% monthly and 5.4% annually. Output had fallen 11% monthly in May and 12% annually. "Industrial production in manufacturing industries for the three months April 2020 to June 2020 was 6.3% lower than in the preceding three-month period," CSO said.

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The eurozone's construction slump eased somewhat in July with sentiment finally turning positive after five months in the doldrums, IHS Markit said on Thursday. IHS Markit eurozone construction total activity index edged up to 48.9 in July, from 48.3 in June. The July print remained below the 50.0 no-change mark. IHS Markit noted that July registered "the weakest decline in construction activity across the eurozone in the current five-month sequence". In France, construction activity declined, with the index slumping back down to 49.4 in July after rising to 53.8 in June. Germany's decline eased; the index rose to 47.1 in July from 41.3 in June. Italy remained in growth, though the index eased to 51.0 in July from 51.6 the previous month.

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German manufacturing orders promisingly rose in June on a month before, data from Destatis showed on Thursday, though remained down on a year before. New orders in manufacturing surged 28% monthly in June, beating FXStreet-compiled consensus of a 10% rise. In May, orders had risen 10% on April. Annually, they dropped 11% in June, though this still beat consensus estimates of a 34% plunge. In May, orders fell 29% annually.

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