LONDON BRIEFING: Pearson shares rise as lifts payout, reviews OPM arm

(Alliance News) - Education materials publisher Pearson on Monday posted a rise in interim sales ...

Alliance News 1 August, 2022 | 7:26AM
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(Alliance News) - Education materials publisher Pearson on Monday posted a rise in interim sales and profit.

Pearson shares were up 5.8%, outpacing the wider FTSE 100 index.

"Pearson has delivered another encouraging financial performance in the first half of the year. We continue to make excellent strategic and operational progress, with momentum across the business. We are already seeing clear benefits from our increasingly diverse learning ecosystem," Chief Executive Andy Bird said.

Revenue in the first half of 2022 increased 12% to GBP1.79 billion from GBP1.60 billion a year before.

Pretax profit jumped to GBP179 million from just GBP4 million. Pearson had booked GBP85 million in restructuring costs a year earlier. Adjusted operating profit was 26% higher year-on-year at GBP160 million from GBP127 million.

Pearson upped its payout by 4.8% to 6.6 pence per share from 6.3p.

The company said it has completed GBP165 million of its GBP350 million share buyback programme as of Friday last week.

Pearson is launching strategic review of its Online Program Management business, which is part of its Virtual Learning segment. The OPM review comes ahead the end of Pearson's contract with Arizona State University next June.

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

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MARKETS

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FTSE 100: up 0.3% at 7,451.08

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Hang Seng: up 0.1% at 20,177.78

Nikkei 225: closed up 0.7% at 27,993.35

S&P/ASX 200: closed up 0.7% at 6,993.00

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DJIA: closed up 315.50 points, or 1.0%, at 32,845.13

S&P 500: closed up 1.4% at 4,130.29

Nasdaq Composite: closed up 1.9% to 12,390.69

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EUR: up at USD1.0235 (USD1.0196)

GBP: up at USD1.2191 (USD1.2163)

USD: down at JPY132.34 (JPY133.45)

GOLD: flat at USD1,763.64 per ounce (USD1,763.38)

OIL (Brent): down at USD103.63 a barrel (USD105.24)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Monday's key economic events still to come

0955 CEST Germany manufacturing purchasing managers' index

1000 CEST eurozone manufacturing PMI

1100 CEST eurozone unemployment

0930 BST UK manufacturing PMI

0945 EDT US manufacturing PMI

1000 EDT US ISM manufacturing PMI

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German retail sales undershot expectations in July and registered the worst fall since records began in 1994. Retail sales plunged 8.8% on an annual basis in July, reversing a 1.1% increase in June and coming in below already downbeat expectations of an 8% decline, according to FXStreet-cited consensus. "This was the largest year-on-year decrease since the beginning of the time series in 1994," said statistics body Destatis. Month-on-month, sales were down 1.6%, having been expected to rise 0.2% after June's growth of 1.2%.

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Japan's manufacturing sector took a hit in July, with growth in activity slowing to a 10-month low, survey results from S&P Global showed, as new orders suffered from "rising inflationary pressures". The headline au Jibun Bank Japan manufacturing purchasing managers' index slipped to 52.1 points in July from 52.7 in June. A reading above 50.0 signals expansion, and despite the slowdown, July's performance was the eighteenth consecutive month of increasing activity. S&P Global said the headline number masked "some worrying trends". Amid rising costs and raw material shortages, it said, "new order inflows fell for the first time in ten months and at the fastest pace since November 2020, which contributed to a renewed contraction in production levels - the first since February."

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US President Joe Biden tested positive for the coronavirus again on Sunday, one day after it was discovered that he had contracted the disease again just days after being given a clean bill of health following a coronavirus infection earlier this month. Biden's physician, Kevin O'Connor, said in a statement that the president "continues to feel well" and will remain in strict isolation. After the US leader tested positive on Saturday, O'Connor said that rebound infections are common in patients like Biden, who are treated with Paxlovid, an antiviral medication. Biden initially tested positive for the coronavirus on July 21. He isolated, but never reported serious symptoms. He had his second negative test on Tuesday, which qualified him as recovered.

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BROKER RATING CHANGES

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Credit Suisse cuts Aviva to 'neutral' (outperform) - price target 455 (500) pence

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Credit Suisse starts Phoenix Group with 'neutral' - price target 660 pence

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BofA cuts Standard Chartered to 'neutral' (buy) - price target 645 (800) pence

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Bernstein cuts Vodafone to market-perform (outperform) - price target 135 (155) pence

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COMPANIES - FTSE 100

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JD Sports Fashion said it has struck a deal to dispose of Footasylum, a recent acquisition that the UK's competition watchdog had ordered it to sell. The athleisure retailer has exchanged contracts to sell Footasylum to Aurelius Group for GBP37.5 million. JD Sports purchased Footasylum back in March 2019 for GBP90.1 million, but the deal was immediately placed under investigation by the UK Competition & Markets Authority. In November last year, the CMA ordered JD Sports to sell the footwear retailer to address concerns about competition in the UK. "JD has cooperated with the CMA throughout the divestment process, including ensuring that the purchaser was acceptable to the CMA and met certain key criteria set out within the final undertakings. The sale is anticipated to complete in the coming weeks with no conditionality," JD Sports said.

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COMPANIES - FTSE 250

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Business-to-business publisher and events organiser Ascential said it traded in line with expectations in the first half of 2022. "Both major events of the half performed extremely strongly, with Cannes Lions meeting and Money20/20 Europe exceeding 2019, pre-pandemic, levels of revenue and profit. Money20/20 USA, due to take place in October 2022, continues to trade very well," the company said. Revenue jumped 59% year-on-year to GBP95.1 million from GBP59.7 million. However, Ascential's pretax loss stretched to GBP41.6 million from GBP13.6 million. Ascential said it booked a GBP31.4 million impairment related to its Edge Digital Shelf e-commerce analytics platform. It did not book any impairments a year earlier. Ascential, which did not declare a dividend in 2020 and 2021 due to Covid, decided against an interim payout again. "The board will keep capital allocation priorities, including shareholder cash returns, continually under review," it said.

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Cranswick said it has started its new financial year in decent health, as the meat producer bids to fight off inflationary pressures with price increases. Revenue in the 13 weeks to June 25, its first quarter, was 7.6% higher year-on-year. On a like-for-like basis, excluding newer acquisitions, revenue was up 5.8%. "UK revenue across all four food product categories was ahead year-on-year. Substantial and widespread cost inflation continues to be proactively managed and mitigated through tight cost control and ongoing recovery," Cranswick said. In Asia, however, revenue performance was not as strong. Cranswick explained: "Far east export sales were, as anticipated, lower than the same quarter last year due to market prices falling from the elevated levels experienced over the previous two years and the ongoing suspension of our Norfolk primary pork processing facility's China export licence. The China pig price has strengthened in recent weeks, albeit still below the highs of 2019 and 2020." Cranswick expects annual results in line with board expectations.

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COMPANIES - SMALL CAP

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Interim profit at engineering components maker Senior fell on the absence of a chunky disposal gain it booked a year earlier. In the first half of 2020, pretax profit halved to GBP11.1 million from GBP22.3 million a year earlier. Senior reported GBP300,000 in costs related to the acquisition of Spencer Aerospace, a Valencia, California-based maker of high-pressure hydraulic fluid fittings. Senior announced the purchase in June; it will pay up to GBP100 million. Senior on Monday said its expects the acquisition to complete in the current quarter. A year earlier, Senior had booked a GBP24.2 million gain on the disposal of Senior Aerospace Connecticut. Half-year revenue rose 21% to GBP402.2 million from GBP332.8 million a year earlier. Senior reinstated its dividend with a 0.3p per share payout. "The board anticipates further good progress in 2022, in line with previous expectations, with performance in the second half of the year expected to be similar to the first half," CEO David Squires said.

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COMPANIES - GLOBAL

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A unit of embattled Chinese property developer Evergrande has failed to repay its loans and must pay a guarantor USD1.1 billion, the company said in a Hong Kong stock exchange filing. Evergrande has been involved in restructuring negotiations after racking up USD300 billion in liabilities in the wake of Beijing's crackdown on excessive debt and rampant speculation in the real estate sector. The announcement comes after the company failed to publish a "preliminary restructuring proposal" by the end of July, despite assuring creditors it was on track to meet the deadline. Evergrande said on Friday it had made "positive progress" in its restructuring process, floating the potential use of equity in its offshore subsidiaries to repay bondholders but falling short of providing concrete details. And on Sunday, the company said subsidiary Evergrande Group (Nanchang) had failed to fulfil its debt obligations to an unnamed third party.

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Dutch brewer Heineken reported growth at the half-year stage on solid consumer demand despite inflationary pressures strengthening. Revenue rose 37% to EUR16.40 billion from EUR11.97 billion a year before. Beer volume increased 7.6% organically from a year before and was 4.2% ahead of 2019 on an organic basis. Growth was faster in the second quarter, at 9.7%, led by the Americas, an ongoing recovery in Asia Pacific, and the on-trade - bars and restaurants - sector in Europe. Pretax profit rose 24% to EUR2.00 billion from EUR1.61 billion. Operating profit rose 20% to EUR2.07 billion from EUR1.72 billion. Heineken warned there is a growing risk that the squeeze on disposable incomes will start to weigh on beer consumption.

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Monday's shareholder meetings

Cranswick PLC - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Aviva PLC 452.20 GBX 0.47
Phoenix Group Holdings PLC 504.00 GBX 0.20 -
Pearson PLC 953.20 GBX -0.08 -
Standard Chartered PLC 635.00 GBX 4.85
Vodafone Group PLC 66.25 GBX 0.78

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