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FTSE 100 Live: Pound under pressure, L&G profits up

 (Evening Standard)
(Evening Standard)

Sterling remains near its weakest level since November after the head of the Federal Reserve signalled more big hikes in US interest rates may be needed to combat inflation.

Jerome Powell’s testimony in Congress led to heavy selling of Wall Street shares and put upward pressure on the value of the dollar, leaving the pound at $1.18.

London’s FTSE 100 index opened 0.2% lower during another busy session for corporate results, with Legal & General, Hiscox and Admiral among those in the blue-chip spotlight.

FTSE 100 Live Wednesday

  • Federal Reserve rates outlook hits sentiment

  • Admiral reviews options for US arm

  • Darktrace warns on malicious use of ChatGPT

FTSE closes slightly up following afternoon recovery

Wednesday 8 March 2023 16:40 , Daniel O'Boyle

The FTSE 100 closed at 7929.92 today, up 0.1% from where it started the day, as London shares recovered from a morning dip as the day went on.

While the index of blue-chip companies was below 7900 for much of the morning, it rallied later in the day, peaking at 7944.82.

Insurer Hiscox was the biggest riser of the day, with shares up 5.55%.

Little movement in US shares so far

Wednesday 8 March 2023 15:11 , Daniel O'Boyle

There’s been little movement in US shares since markets opened in New York, as stocks failed to rebound from the reaction to Jerome Powell’s comments yesterday.

The S&P 500 is down by a single point to 3985.26, while the Nasdaq is down 11 points to 11520 and the Dow Jones slipped by 0.2% to 32801.

Among the companies that did see notable movement were Molson Coors Beverage Co, with shares up by more than 5%, and Etsy, which saw its share price dip by 5.5%.

US futures stable after yesterday’s decline

Wednesday 8 March 2023 14:18 , Daniel O'Boyle

US stock futures suggest a tentative start to trading when markets open in Ney York today, with all major indices roughly level.

Dow Jones futures are up by 31 points to 32895, S&P 500 futures are up by two points to 3991.75, and Nasdaq futures are up 13.75 points to 12182.75.

Shares dipped yesterday, after Federal Reserve chair Jerome Powell said interest rates may rise higher than was previously expected. However, the dollar strengthened following Powell’s comments before Congress.

Hiscox and Rolls-Royce top risers today, Admiral and Schroders fall

Wednesday 8 March 2023 13:00 , Daniel O'Boyle

Two FTSE 100 insurance businesses have had opposite fortunes so far today, with Hiscox the top riser, while Admiral has been the biggest faller.

Both reported results today, and while profits declined substantially for both businesses, investors saw reasons to be confident in Hiscox’s future outlook, while questions over Admiral’s international performance contributed to its slide.

Hopes for more diverse boards rise after London IPOs had only 15% of women directors in 2022

Wednesday 8 March 2023 12:26 , Daniel O'Boyle

After women made up only 15% of the directors on newly listed London company’s boards last year, there are hopes that 2023 will be better for gender diversity as well as initial public offerings in the City.

Accoring to research from Investec, there are a dozen high-profile names preparing for a listing this year, after a notoriously poor run for flotations in 2022. Of the 97 seats on all their boards, the bank and wealth manager found that 25 are filled by women, making up 26%.

While still some way under the 50% mark, it is an improvement from the even lower levels in 2022. And one of the IPO candidates is run by one of the UK’s highest-profile entrepreneurs, Anne Boden, who founded Starling Bank.

Read more here

L&G boss blasts “political infighting"

Wednesday 8 March 2023 10:38 , Simon English

SIR NIGEL Wilson set the scene for a distinguished exit from the City today as he unveiled record results at Legal & General – and fired a broadside to politicians he thinks are failing the financial sector and the wider public

He leaves L&G soon after ten years as CEO, during which he has tried to overhaul the regulations he believes have held Britain back.

The UK is a “low wage, low growth, low productivity” economy he told the Standard, something he blamed partly on “political infighting.”

The 66-year-old once canvassed for Labour as an 11-year-old, but insists he won’t be moving into politics once he leaves the City. He cited sport as one area of interest.

For 2022 L&G made profits of £2.5 billion, up 12%. It manages funds of £1.2 trillion, which Wilson has always wanted to invest in a wider range of schemes such as infrastructure and housing.

He told the Standard: “Planning is really difficult. Planning in London in particular for housing is about as difficult as anywhere in the world. It takes about eight years from a getting a site to putting a spade in the ground.”

read more here

Headlam Group sales edge up despite housing sector troubles

Wednesday 8 March 2023 10:26 , Joanna Bourke

The boss of Headlam Group, a floor coverings distributor, said revenue performance so far this year is slightly ahead of 12 months earlier, despite a weak residential sector.

The company is used by retailers, housebuilders and building contractors, and recorded sales of £663.6 million in 2022, down 0.5% from a year earlier.

Chief executive Chris Payne said: “Despite very challenging industry headwinds in the year, most notably the UK cost of living crisis and significant operational cost inflation, revenue was maintained and profit improved against 2021.”

Headland said several new larger customers were won during the period, “with considerable potential for scalability”.

Some housebuilders plan to reduce the number of homes they sell amid factors that could hurt demand, such as the cost-of-living crisis and higher mortgage bills.

Admiral slumps in weaker FTSE 100, Wagamama owner down 12%

Wednesday 8 March 2023 10:19 , Graeme Evans

Admiral shares have fallen 6% after the car insurer disappointed the City with its profits haul from a year navigating “stormy waters”.

The FTSE 100-listed stock slid 132p to 1956p, with the 2022 surplus of £469 million some 5% short of hopes as the company grappled with everything from FCA pricing reforms to increased claims frequency, adverse weather and inflation pressures.

Chief executive Milena Mondini de Focatiis said: “At times, over the last 12 months it has felt similar to sailing in the middle of a storm.”

Other factors spooking the City today included the company’s loss-making US-facing arm Elephant and a bigger-than-expected 40% cut in dividend to 112p a share, which dealt a blow to staff as well as income investors.

Under the employee share scheme, about 10,000 staff are due to receive free shares worth up to £3,600 based on the 2022 annual results.

Today's slide in Admiral’s valuation put the insurer at the top of the blue-chip fallers board during a risk averse session for investors after Federal Reserve chair Jerome Powell signalled the potential for more aggressive US interest rate rises.

London’s top flight lost 17.10 points to 7902.38, with technology stocks Ocado and Rightmove among those 2% lower.

A weaker pound and results-day falls of 2% for Tullow Oil and road infrastructure firm Hill & Smith meant the FTSE 250 index dropped 0.6% or 120.13 points to 19,836.48.

In the FTSE All-Share, Restaurant Group shares slid 12% or 5.5p to 39.8p as the Wagamama owner recorded deeper losses but cheered “very encouraging” recent trading.

The casual dining operator, which is under pressure from an activist investor, recorded a pre-tax loss of £86.8 million for 2022, partly due to one-off adjustments around property.

Bank of England MPC member: “Further tightening is a bigger risk” than holding rates at 4%

Wednesday 8 March 2023 09:58 , Daniel O'Boyle

A Bank of England Monetary Policy Committee member has said that “further tightening is a bigger risk” than not raising interest rates enough, and that aspects of inflation may be overestimated.

In a speech for think tank the Resolution Foundation, Swati Dhingra - one of the nine economists who set UK interest rates - said she believed the Bank should keep interest rates at 4%, arguing that the effects of recent rate hikes have not been fully passed through the economy yet.

Her comments follow more hawkish remarks from fellow Monetary Policy Committee member Catherine L Mann before the same think tank last month. Mann said she believed high inflation could persist into 2024, and that the longer it persists, the higher interest rates must rise to tackle it.

Profits build up for brick maker Ibstock

Wednesday 8 March 2023 09:43 , Joanna Bourke

Ibstock’s profits and sales for 2022 are materially ahead of pre-pandemic levels, the clay bricks manufacturer has said.

Chief executive Joe Hudson cheered an “outstanding year” for the company. It recorded a 26% jump in revenue to £513 million and saw pre-tax profits rise to £105 million from £65 million.

The firm, which has 36 manufacturing sites across the UK, said market conditions were buoyant for most of the year, with strong demand from the new build residential sector and infrastructure customers.

However, Ibstock, cautioned that activity in the early weeks of 2023 has continued to reflect the more cautious demand environment seen in the final quarter of last year.

Housebuilders have been grappling with a number of headwinds that could impact sales since the September mini-Budget, including a sharp rise in mortgage costs.

The shares decreased 1.9p tp 160.4p.

Accounting watchdog fines PwC

Wednesday 8 March 2023 08:50 , Daniel O'Boyle

Big four auditing firm PwC has been fined £5.62 million by the Financial Reporting Council (FRC) after the regulator identified “numerous, serious breaches” in its audit of the 2017 and 2018 accounts of the defence group Babcock.

Two former audit partners were also sanctioned.

The fine follows an investigation concerning long-term contracts that made up around 25% of Babcock’s revenue.

The FRC said PwC failed to challenge Babcock’s management in auditing these accounts and showed “a lack of competence, care or diligence”.

As an example of the failings, it said that there was “no evidence” PwC had read a contract that was worth £3 billion over the course of its 30-year term.

FRC deputy executive counsel Claudia Mortimore said: “The quality of these audits fell far short of the standards expected of statutory auditors. Of particular concern is the lack of scepticism applied and the failures to follow some basic audit requirements.”

The FRC said it is still investigating PwC’s audits of Babcock’s 2019 and 2020 accounts.

Galliford Try: Inflation beginning to ease

Wednesday 8 March 2023 08:31 , Daniel O'Boyle

Builders Galliford Try said inflation and materials shortages are beginning to ease after reporting profit growth for the first half of its  financial year despite “delays in public sector decision making” slowing new contracts.

The business reported a 14.3% revenue increase to £679 million  in the six  months to 31 December.

Builders Galliford Try said inflation and materials shortages are beginning to ease (Galliford Try press image)
Builders Galliford Try said inflation and materials shortages are beginning to ease (Galliford Try press image)

Almost all the revenue growth came from its infrastructure arm, with building revenue flat year-on-year. This, it said, was partly due to “delays in public sector decision-making” leading to later starts than expected for some new contracts.

Profit, though, was up by 56.5% to £10.8 million.

Looking ahead, Galliford Try said that inflation and materials shortages, which impacted the business last year, “are now beginning to ease”.

FTSE 100 lower, led by Ocado and Admiral

Wednesday 8 March 2023 08:29 , Graeme Evans

The FTSE 100 index is 16.96 points lower at 7902.52 as pressure on global markets continues after the Federal Reserve’s warning over the potential for higher US interest rates.

Big fallers in London included the grocery technology business Ocado, which fell another 2% or 9.3p to 495.7p.

Annual results also failed to boost shares in Legal & General, which dropped 3.7p to 262.1p, and car insurer Admiral tumbled 130.8p to 1957.2p after it reported a 39% drop in profits for 2022.

The FTSE 250 index weakened 0.5% or 105.31 points to 19,851.30, with cyber security business Darktrace among the biggest fallers after its interim results. The shares dropped 5.7p to 258.2p.

Admiral reviews options for “disappointing” US arm

Wednesday 8 March 2023 08:20 , Daniel O'Boyle

Insurer Admiral is “evaluating the options” for its US arm which disappointed in 2022, but said its strategy to hike prices instead of “chasing unprofitable volumes” will pay off in the long-term elsewhere.

Pre-tax profit for the group fell by 39% to £469 million, which CEO Milena Mondini de Focatiis said was down to “FCA’s pricing reforms, increased claims frequency post Covid, supply chain challenges, adverse weather and high levels of inflation”.

Mondini de Focatiis said Admiral was quicker than rivals to react to changing market conditions, raising premiums for customers.

“Although the premium increases impacted our rate of growth in the short term, we continued prioritising sustainable growth over chasing unprofitable volumes,”  she said.

Performance was worse in the US, where the business lost £49 million, which the Admiral CEO said was “disappointingly high” as the business hiked premiums by 25% and cut ad spend.

As a result, Admiral will said it is “continuing to assess the options” for its US-facing arm Elephant, but a spokesperson said Admiral could not comment on whether it was up for sale.

In the UK, Admiral made a £616 million profit, despite severe weather increasing the number of claims.

Admiral shares are down 6.7% to 1,949p so far today.

The Restaurant Group losses widen but sales jump for Wagamama owner

Wednesday 8 March 2023 08:14 , Joanna Bourke

Frankie & Benny’s and Wagamama owner The Restaurant Group today revealed a full-year sales leap, but losses widened and it cautioned that challenges persist including inflationary pressures.

The casual dining operator which is under pressure from an activist investor, said sales rose to £883 million in 2022 from £636 million.

The group, also behind brands such as Chiquito, added that current trading is “encouraging”. In the eight weeks to February 26 of this year Wagamama comparable sales have improved 2%, helped by a 9% rise in dine-in sales and offsetting declines in takeaway and delivery demand.

But The Restaurant Group recorded a pre-tax loss of £86.8 million for 2022, which was wider than the £35.2 million loss a year earlier and largely due to one-off non-cash balance sheet adjustments around property.

Adjusted pre-tax profits were £20.3 million and ahead of the £17.7 million the City had been expecting.

Andy Hornby, the former HBOS boss who now leads TRG said: “We’ve delivered a strong operating performance for the year in a market which has continued to pose a number of headwinds for casual dining operators.”

The hospitality industry was battered by lockdowns during the pandemic forcing a number of restaurant firms to permanently close some sites and undertake capital raises.

Post-pandemic challenges have included soaring energy bills and labour shortages.

The Restaurant Group is also facing pressure from Hong Kong-based investor Oasis Capital Management which has a 6.5% stake in the business. The shareholder last month said TRG had “one of the worst performing share prices of any UK leisure company” and added that it has raised equity capital three times in the last five years “whilst markedly underperforming sector peers”.

Oasis called on TRG to “communicate to the market the strategic direction of the company and means of value creation”. The Financial Times this week reported that the investor has threatened to push for the removal of Hornby unless he delivers a shake-up of the firm.

TRG plans to improve margins through a mixture of measures such as more Wagamama openings, not renewing certain leases when they come up.

Hiscox profit before tax tumbles by 76% after investment losses

Wednesday 8 March 2023 07:57 , Michael Hunter

FTSE 100 insurer Hiscox reported a 76% slump in profit before tax for 2022, taking a hit from the drop in value of bonds in its investment portfolio.

Insurance firms have major government bond holdings because the assets can be easily sold to help meet payouts. Rising interest rates at central banks have hit the value of bonds, becasuse the returns on offer outside the bond market improve as interest rates rise.

Hiscox said its investment loss was over $187 million, down from a profit of over $51 million a year ago.

Overall, the Lloyd’s of London company reported of almost $45 million, down from $191 million.

Hiscox also said City veteran Robert Childs will step down as chairman after 37 years with the e firm and 50 years in the industry.

Tullow Oil doubles annual profit to over $1 billion

Wednesday 8 March 2023 07:44 , Michael Hunter

Tullow Oil doubled its annual gross profit in 2022 to $1.1 billion (£0.9 billion), becoming the latest major London resource company to reveal the impact of soaring energy prices after Russia’s invasion of Ukraine.

Revenue rose 40% to almost $1.8 billion at the oil exploration company, which has interests in over 30 licenses in eight countries., including Ghana’s Jubilee field.

L&G profits rise 12%, dividend up 5%

Wednesday 8 March 2023 07:44 , Graeme Evans

Legal & General, the asset management and retirement products business, today said it performed ahead of market expectations in 2022 after operating profits lifted by 12% to £2.5 billion. It also declared a full-year dividend of 19.37p a share, up 5% on a year earlier.

In his last set of annual results as chief executive, Sir Nigel Wilson said the company’s diversified and “highly synergistic” business model continued to deliver significant benefits.

He also highlighted a strong and highly resilient balance sheet, with a record solvency ratio of 236%.

Sir Nigel said: “At a time when many households are being affected by the rising cost of living, our commitment to inclusive capitalism is more important than ever to help improve the lives of our customers, build a better society for the long-term and create value for our shareholders."

Profits melt away at Hotel Chocolat after botched international expansion

Wednesday 8 March 2023 07:30 , Simon Hunt

Profits have melted away at confectioner Hotel Chocolat after botched international expansion plans led to reorganisation costs at its overseas businesses.

Pre-tax profits for the six months to December shrunk 59% to £8.3 million, while sales fell 9% to £130 million.

The firm said it had “re-engineered our approach to international growth” after international sales fell 69% over the period. That included shutting down stores in the US and pulling out of the Japanese market, instead partnering with a local firm under a franchise agreement.

CEO Angus Thirlwell said: “Having grown sales by 66% since the start of the last pre-pandemic year, as previously announced, we are taking this year...to sharpen-up our operating model before we embark on the next stage of growth.

Wall Street falls on Fed comments, FTSE 100 seen lower

Wednesday 8 March 2023 07:23 , Graeme Evans

Jerome Powell’s comments highlighting the potential for a return of more aggressive US interest rate rises drew a predictable response on Wall Street, with the Dow Jones Industrial Average and the S&P 500 index both more than 1.5% lower.

The US Fed funds rate is currently in a range of 4.5%-4.75% but Powell told Congress that “we would be prepared to increase the pace of rate hikes” if inflation pressures linger.

He added that the ultimate level of interest rates is likely to be higher than previously anticipated, leading Wall Street to last night lift forecasts for the terminal rate to 5.62%.

Deutsche Bank strategist Jim Reid said the remarks from Powell mark a significant pivot for the Federal Reserve.

He added: “Last year they signalled and then delivered a slowdown in rate hikes, moving away from four consecutive 0.75% moves to 0.5% in December, and then 0.25% at the last meeting.

“Up to that point, all the indications had been that they wanted to move cautiously and assess the cumulative impact of what they’d delivered so far. In essence, the signal was that any further hikes would be at a 0.25% pace until they stopped.”

The dollar strengthened on the back of Powell’s comments to leave the pound at a three-month low of just above $1.18.

The potential demand impact of higher rates meant the price of Brent crude weakened to $83 a barrel, while the FTSE 100 index is forecast by CMC Markets to open 19 points lower at 7900.

Darktrace warns on malicious use of ChatGPT amid slowdown in new customers

Wednesday 8 March 2023 07:18 , Simon Hunt

Darktrace today sounded the alarm on the power of ChatGPT to scam and attack individuals online as the firm reported a slowdown in new customers.

The cybersecurity business said ChatGPT “ may have helped increase the sophistication of phishing emails, enabling adversaries to create more targeted, personalised, and ultimately, successful attacks.

“Darktrace has found that while the number of email attacks across its own customer base remained steady since ChatGPT’s release, those that rely on tricking victims into clicking malicious links have declined, while linguistic complexity, including text volume, punctuation, and sentence length among others, have increased.”

The firm posted revenues of £259 million for the six months to end December, while profits slumped 86% to £581k amid a slowdown in new customer acquisition due to “challenging macro headwinds.”

Recap: Yesterday’s top stories

Wednesday 8 March 2023 06:40 , Simon Hunt

Good morning. Here’a a summary of our top stories from yesterday:

  1. London estate agent Foxtons has said rents in the capital soared by 20% in 2022, but house prices were set to stall as it posted a doubling in pre-tax profits to £11.9 million.

  2. Sausage roll maker Greggs said it was exploring expansion to over 3,000 stores in the UK after sales soared past £1.5 billion last year.

  3. A report has found AstraZeneca doubled its exports from Sweden to Russia after the invasion of Ukraine last year.

  4. Mr Kipling owner Premier Foods upped its profit outlook after improved demand in its sweet treats division.

Today we’re expecting results from:

  • Tullow Oil

  • Hiscox

  • Legal & General

  • Admiral

  • Darktrace

  • Necall

  • Hotel Chocolat

  • The Restaurant Group