Weekly review
The FTSE 100 ended the week up 1.37%, or 101.15 points, closing Friday’s session at 7,486.67.
Equity view
Energy utility SSE is selling a 25% stake in its electricity transmission network business to the Ontario Teachers' Pension Plan Board for £1.46bn. The company said the deal would “unlock significant growth in both the transmission business and across the wider SSE group”.
FinnCap tumbled on Friday after it said that takeover talks with Panmure Gordon had ended. The investment bank announced in October that it had received indicative non-binding proposals from peer Panmure about a possible combination and that early-stage discussions were ongoing.
Construction materials group Breedon said on Friday that it was on track for record full-year earnings after trading conditions in the second half remained "supportive", enabling it to fully recover rising input costs through "robust pricing" and "disciplined cost management". In the four months to October, Breedon delivered revenue growth of 16% year-on-year, resulting in revenues of £1.18bn year-to-date, roughly 14% ahead of the same period twelve months earlier and 12% on a like-for-like basis.
Furniture and flooring retailer ScS said in an update on Friday that it was trading “resiliently” through what was still a “challenging” period. The London-listed company said like-for-like order intake had seen an improvement in recent weeks, with trading ahead of the prior year.
Videndum reiterated its full-year guidance for full-year profits before tax despite the uncertain economic environment and weakness in consumer spending. The outfit, a provider of hardware and software for the content creation market, reported "strong" demand in its Media Solution and Production Solutions units, while demand at its Creative Solutions division remained "high".
Kingfisher trimmed full-year profit guidance on Thursday, despite an improvement in third-quarter sales amid strong demand for energy efficiency products. The retailer, which owns B&Q and Screwfix, said underlying group sales rose 1.7% to £3.26bn, or 0.2% on a like-for-like basis.
Testing, certification and inspection company Intertek posted a jump in revenue on Thursday as it hailed robust demand for its ATIC Solutions business and a recovery in China. In an update for the period from 1 January to the end of October, the group said total revenues rose 9% at constant currency, driven by like-for-like revenue growth of 5.2% and the performance of its three recent acquisitions contributing £120m of revenue.
Jet2 lifted its full-year earnings outlook on Thursday as it said it swung to a profit in the first half. In the half year to 30 September, the travel group swung to a pre-tax profit of £450.7m from a loss of £205.8m in the same period a year earlier as revenue surged 730% to £3.6bn.
Industrial thread maker Coats reported a rise in revenues and held full-year guidance, despite strengthening forex headwinds, and said demand had softened in the second half. The company on Wednesday said revenue grew 9% in the four months to October 31. Coats added that foreign exchange headwinds were greater than expected at the half year, with a 3-4% full year adjusted operating profit headwind increasing to 5% based on latest rates.
Drinks maker Britvic posted a rise in full-year profit and revenue on Wednesday, hailing solidly in both the retail and hospitality channels, which benefited from good weather over the summer and no lockdown restrictions. In the year to 30 September, adjusted earnings before interest and tax rose 16% to £206m on revenue of £1.6bn, up 15.5% on the same period a year earlier, with double-digit revenue growth across all its business units. Statutory pre-tax profit increased to £175.1m from £134.6m.
United Utilities reported a dip in half-year earnings on Wednesday, hit by surging inflation and the long dry summer. The utility, which provides water to the north west, said revenues eased 1% in the six months to 30 September, to £919.3m, while operating profits fell to £258.5m from £332.8m a year previously.
Glencore and Metals Acquisition Corp (MAC) said they had agreed to amend terms on the sale of the CSA copper mine in Australia. MAC will now get at least $775m in cash on deal close, with the potential for this to be scaled up to $875m depending on final private equity demand, plus a maximum of $100m in retained equity in the business by Glencore, with an option to scale back subject to MAC raising sufficient equity.
Home repairs provider Homeserve reported a rise in interim profits despite the cost-of-living crisis. The company, which is about to be taken over by asset manager Brookfield in a £4bn deal, posted a 19% rise in pre-tax profit to £22.4m.
Silver mining group Fresnillo said on Tuesday that testing to verify compatibility between new and updated substation equipment at its Juanicipio Project site had been concluded successfully. Specifically, Fresnillo confirmed that the site's main substation had been inspected by Mexican state-owned power company Comisión Federal de Electricidad and approved for use.
British pharmaceutical giant GSK on Tuesday said it has started proceedings to pull US approval for its blood cancer drug Blenrep after it failed to meet the requirements of a late-stage trial. GSK earlier in November said Blenrep had failed to demonstrate it was more effective than a rival treatment in the market. However, the company maintained that the drug’s benefit-risk profile “remains favourable in this hard-to-treat patient population”.
Energy services company Petrofac said on Tuesday that chief executive Sami Iskander will leave the business at the end of March 2023 in order to pursue other interests. Petrofac stated Tareq Kawash will be appointed as CEO from 1 April, following an orderly handover, and will also be appointed as an executive director to the FTSE 250-listed group's board of directors.
RHI Magnesita said it had bought the Indian refractory business of Dalmia Bharat Refractories in a share swap agreement. The deal will see RHI take on the business in exchange for 27 million shares in its 70%-owned India-listed subsidiary of the group valued at around €212m.
Solar and energy storage investor NextEnergy Solar Fund said on Monday that both net asset value and earnings per share had risen in the six months ended 30 September. NextEnergy posted a 9.4% increase in net asset value to 122.9p, while ordinary shareholders' NAV rose by £56.2m to £724.7m and earnings per share grew from 7.74p to 13.1p.
Technical products and services group Diploma delivered a "very strong" set of full-year results on Monday, with both revenue and profits improving year-on-year. Diploma said revenues and adjusted operating profits had both grown 29% year-on-year, to £1.02bn and £191.2m, respectively, while statutory operating profits grew 38% to £144.3m. Adjusted operating profit margins remained flat at 18.9%
Endeavour Mining said on Monday that it has made a major discovery at its 100%-owned Tanda-Iguela greenfield exploration property in Côte d’Ivoire. The company said a major maiden resource has been outlined in under 15 months on the Assafou target. It has indicated a resource of 14.9m tonnes of ore at 2.33 grams per tonne for 1.1m ounces. There is an inferred resource within this of 32.9m tonnes at 1.80grams per tonne for 1.9m ounces.
Economic news
Britain’s energy regulator has been attacked for failing to protect consumer deposits as part of measures to protect customers in the wake of several suppliers going bust last year. Taxpayers were left with a bill of almost £10bn after 30 new market entrants such as Tonik and Bulb went under as gas prices surged, exposing weak balance sheets.
The UK’s Office for National Statistics has been forced to revise up its producer price inflation figures due to an error, which means factory gate inflation has been higher than published. Headline annual output producer price inflation (PPI) was revised up by an average of 1.8 percentage points from January - October 2022, with the latest reading for last month revised to 17.2%, from 14.8% previously.
Ongoing supply chain issues are seeing Jaguar Land Rover cut its UK production, it emerged on Friday, for at least three months. The Guardian reported that the carmaker, a subsidiary of the Mumbai-traded Tata Motors, would be trimming its output at plants in Solihull and Halewood from January through March.
UK car production returned to growth in October, rising 7.4% to 69,524 units, according to the latest figures released on Friday by the Society of Motor Manufacturers and Traders (SMMT). The industry body said the rise followed September’s fall, which came after four consecutive months of growth.
Manufacturing output in the UK weakened a touch in November, according to the latest survey from the Confederation of British Industry. The total orders balance fell to -5 in November from -4 in October, but was above consensus expectations of -9 and the long-run average of -13.
The Bank of England’s Dave Ramsden would consider cutting interest rates should the economy strengthen sufficiently. Speaking at King’s College London on Thursday, Ramsden - a member of the Monetary Policy Committee - said his current bias was towards further tightening. Since December, the BoE has increased the cost of borrowing eight times, to 3%, as it looks to tackle surging inflation, now at a 41-year high of 11.1%. The markets continue to price in further rises.
The UK property market will be Europe’s best performing in the next five years, according to a research report published on Thursday. A debt funding gap of €24bn is estimated for the next three years in the UK, France and Germany, as re-financings of maturing loans are expected to face issues from the decline in capital values and lenders’ reduced risk appetites, said real estate investor AEW.
Royal Mail’s “best and final offer” to striking workers was rejected on Wednesday afternoon, with hundreds of thousands of postal workers set to walk out on Thursday and Friday. The national postal operator, owned by the FTSE 250 company International Distribution Services, made the offer earlier in the day as it said the series of industrial action over recent weeks had cost it £100m so far.
The UK economy continued to struggle in November, a closely-watched survey showed on Wednesday, as the cost of living crisis weighed heavily. The latest S&P Global/CIPS UK PMI Composite Output Index came in at 48.3, broadly unchanged on October’s 48.2. It was, however, above consensus, for around 47.5.
The UK is on track to be the worst-performing G20 country in the next two years apart from Russia, according to the latest economic forecasts from the OECD. The Paris-based Organisation for Economic Co-operation and Development said economic growth was slowing in the UK. It forecast GDP would grow by 4.4% this year but would then contract by 0.4% in 2023 before growing by just 0.2% in 2024.
International events
China said on Friday that it will cut its reserve requirement ratio for banks next month as it looks to bolster the economy. The People’s Bank of China announced a 25 basis points cut, effective 5 December, for all banks except those already charging a 5% RRR. This follows a 25 basis points cut in April for all banks.
German consumer sentiment is expected to continue to stabilise next month, according to a survey released on Friday by market research group GfK. GfK’s forward-looking consumer sentiment index for December printed at -40.2, up 1.7 points from November. Economists had been expecting a reading of -39.6.
The German economy grew more than initially estimated in the third quarter, according to data released on Friday by Destatis. GDP rose 0.4% on the previous quarter, coming in ahead of an initial estimate of 0.3% growth.
The Turkish central bank cut interest rates again on Thursday despite surging inflation. The Central Bank of the Republic of Turkey cut its benchmark rate to 9% from 10.5%, pointing to increased inflation risks, but also said this would mark the end of the easing cycle.
Fresh concerns over Twitter’s ability to comply with stringent European Union regulation emerged on Thursday, after it emerged that its entire Brussels office had left the company. According to the Financial Times, Dario La Nasa and Julia Moser left the company last week, after new owner Elon Musk issued his ultimatum to all employees to commit to a “hardcore working culture”.
German business sentiment improved in November, according to a survey released on Thursday by the Ifo Institute. The business climate index rose to 86.3 from 84.5 in October, coming in above consensus expectations for a reading of 85.0.
Beijing instructed lenders to increase their financial support in order to stabilise the economy and consolidate the foundations for future growth. To the surprise of some observers, included in the measures outlined by the State Council overnight were instructions for lenders to use reductions in their reserve requirement ratios to ease liquidity conditions for companies.
US hedge fund Pershing Square Capital Management took out a bet on the Hong Kong dollar, arguing that its peg to the Greenback had outlived its usefulness. In a post to social media website Twitter, the fund's founder, Bill Ackman, said that: "we have a large notional short position against the Hong Kong dollar through the ownership of put options.
Minutes from the Federal Open Market Committee’s most recent meeting were met with some Thanksgiving cheer late on Wednesday, as most policymakers agreed that smaller interest rate hikes would “soon be appropriate”. The Dow Jones Industrial Average closed up 0.28% at 34,194.06 ahead of the holiday on Thursday, getting a small bump after the minutes were released late in the session.
New Zealand’s benchmark stock index was in the red on Wednesday, after the country’s central bank delivered its biggest-ever rise in interest rates as it tightened policy for the eighth consecutive time. The S&P/NZX 50 lost 0.85% by the close in Wellington, to 11,323.80, after the Reserve Bank of New Zealand tacked 75 basis points onto the official cash rate, taking it to 4.25%.
Reporting by Sharecast.com staff and contributors.