The bosses of Sainsbury’s, Whitbread and Unilever have today revealed how consumers are coping with the cost of living squeeze.
Sainsbury’s chief Simon Roberts highlighted “significant external pressures and uncertainties” as he warned of a hit to the supermarket chain’s profits for this financial year.
As well as today’s flurry of FTSE 100 updates, the US earnings season is continuing with figures from Amazon and Apple after the closing bell. Last night, shares in Meta Platforms jumped 18% after better-than-expected profits from the Facebook owner.
FTSE 100 Live Thursday
Sainsbury’s facing profits hit as costs bite
Unilever puts up prices by 8% as costs soar
Twitter falls to first quarter loss
McDonald’s to throw away $100 million of stock in Russia
FTSE 100 higher, Standard Chartered up 15%
Whitbread returns to profit but warns on inflation
Meta shares jump 18% after update
US economy goes into reverse
14:55 , Oscar Williams-Grut
The US economy contracted by 1.4% in the first quarter of 2022, new data out shows.
GDP undershot estimates of a 1% expansion during the first three months of the year and followed a 6.9% expansion in the final quarter of 2021. It marks the first shrink since the depths of the Covid-19 pandemic.
The US Bureau of Economic Analysis blamed the fall on an uptick in Covid-19 cases, which disrupted business, and the end of state and federal support measures meant to help people and businesses weather the worst of the pandemic.
Hinesh Patel, portfolio manager at Quilter Investors, said the economy “had a far poorer show than had been anticipated.”
“While this headline may be a bit of a shocker, price impact is by far the most dominant factor,” Patel said. “Without inflation, the economy grew by a monstrous 6.5% annualised – and that’s including the Omicron overhang. As such, it’s little wonder the Fed is forced into its current stance.
“While consumer consumption has been healthy, a natural demand brake is likely on the horizon as a result of high prices and rising wages.”
Champagne and vodka maker Pernod Ricard sparkles
14:45 , Mark Banham
French spirits group Pernod Ricard, the producer of Mumm champagne and Absolut vodka, has uncorked a market-beating 20% jump in organic sales in its third quarter results as people have returned to socialising following the coronavirus pandemic.
Sales for the first nine months of the year totalled €8.4 billion (£7.1 billion).
However, chairman and chief executive Alexandre Ricard sounded a cautionary note about the future, with the resurgence of the virus in China and Russia’s invasion of Ukraine threatening to derail its progress.
“The global environment remains volatile with an increasingly challenging and inflationary context,” he said. “We expect a softer Q4 impacted by Covid disruptions in China, phasing normalization in the US and conflict in Ukraine.”
An interim dividend of €1.56 (£1.32) per share will be paid on 8 July this year.
Twitter slumps to a loss in final update before going private
14:38 , Oscar Williams-Grut
A huge jump in costs at Twitter wiped out rising revenues at the social media company in the first quarter, pushing it to a loss.
Twitter, which is in the process of being bought by Elon Musk, reported a 16% jump in first quarter revenue to $1.2 billion as advertising income rose 23% to $1.1 billion. But costs rocketed 35% to $1.33 billion in the period.
The result was a negative operating margin of -11% and an operating loss of $128 million in the quarter.
Daily users on the site rose 16% to 229 million in the first quarter.
Earlier this week Musk sealed a deal to buy Twitter for $54.20 per share, valuing the business at $44 billion. The sale still needs to be approved by shareholders and regulators but is expected to close later this year.
“Given the pending acquisition of Twitter by Elon Musk, we will not be providing any forward looking guidance, and are withdrawing all previously provided goals and outlook,” Twitter said.
UK starts trade talks with Switzerland
14:30 , Oscar Williams-Grut
An eight-week consultation on a new UK-Swiss free trade agreement – which ministers hope will be broadened to include the UK’s vital services sector - has been launched after prime minister Boris Johnson hosted his counterpart president Ignazio Cassis.
The government is seeking views from UK businesses and the public about the potential agreement.
At present, the two nations have bilateral trade worth £35 billion annually. While many UK businesses benefit from tariff-free trade on most goods, roughly half of the yearly trade is in services, which are not tariff-free.
US economy shrinks for first time since pandemic
14:24 , Bradley Gerrard
The US economy has suffered its first dip since the height of the Covid-19 pandemic, disappointing experts who had predicted another quarter of growth.
The Bureau of Economic Anlaysis said US GDP fell by 1.4% in the first three months of the year, even though economists had predicted a rise of 1%.
This was a huge reversal of fortunes from the 6.9% growth in the previous quarter.
The drop is the first since the second quarter of 2020, when the economy witnessed a major drop of around 30% as the world scrambled to contain the coronavirus.
The Bureau said the decrease in Q1 was partly caused by a drop in exports and government spending, while imports - which act as a drag on the GDP reading - increased.
The body also said that in the first quarter, the Omicron variant of Covid-19 led to continued restrictions and disruptions for businesses.
Hinesh Patel, portfolio manager at Quilter Investors, said: “While this headline may be a bit of a shocker, price impact is by far the most dominant factor.
“Without inflation, the economy grew by a monstrous 6.5% annualised – and that’s including the Omicron overhang. As such, it’s little wonder the Fed is forced into its current stance.”
Volvo profits drop due to supply chain disruption
14:11 , Mark Banham
Volvo is feeling a “gradual impact” from the market disturbances caused by the war in Ukraine and the coronavirus lockdowns in Asia.
The company registered a “stable financial result” in the first quarter of the year, in its own words.
The Swedish car maker’s operating profit for the period stood at SEK 6.04 billion (£484.6 million), down some SEK 2.3 billion (£190 million) on the same period in 2021.
“In the first few months of 2022, the war in Ukraine has destroyed lives and displaced millions of innocent people. The same war has also sent already rising inflation to new heights and further disrupted supply chains that were already fragile,” said Jim Rowan, chief executive of Volvo Cars.
“When summarizing Volvo cars’ performance during this first quarter, I am incredibly pleased that we have delivered such stable results.”
Volkswagen and BP partnership aiming for 8,000 EV charging points by 2024
13:52 , Bradley Gerrard
Volkswagen and BP have joined forces in a bid to add thousands of electric vehicle (EV) charging points at fuel stations in the next two years.
The companies said the first phase of its roll-out would see 4,000 charge points at BP’s Aral retail sites in Germany and its own-brand retail sites in the UK in the next 24 months.
And by the end of 2024, it expected to have created up to 8,000 charge points across Germany, the UK, and other European countries.
Volkswagen said its innovative Flexpole 150kW charging units would be used. These have an integrated battery storage system, meaning they can be connected to existing electricity grids without the need for any upgrades.
One of the biggest obstacles to the roll-out of fast-charging infrastructure is the requirement for high-powered grid connections.
But Volkswagen says its charging points, which can provide enough charge for up to 160km of driving in as little as 10 minutes, do not require “a dedicated substation and costly construction work”, which “significantly reduces installation times”.
Russia costs weigh on McDonalds earnings
13:41 , Bradley Gerrard
Earnings growth at McDonalds was muted in the first quarter as costs related to the suspension of its Russia business weighed on the firm.
The fast-food giant said it had spent $27 million (£21.7 million) as part of its pledge to keep paying its employees and suppliers in Russia and Ukraine, while $100 million had been spent on inventory that it thought would “likely be disposed of due to restaurants being temporarily closed” as Russia’s war with Ukraine wages on.
This meant operating income rose by just 1% in the first three months of the year, even as revenues rose 11%.
In terms of global comparable sales, the US rose by 3.5%, while the international operated markets division, which includes the UK, saw sales jump more than 20%, helped in part by a reduction in Covid-19-related restrictions.
Kevin Ozan, chief financial officer, said on the firm’s results webcast that the UK had been a strong performer, “fueled by sustained digital momentum, the popularity of McPlant offerings, and the succesful Chicken Big Mac promotion”.
The firm also set aside $500 million for a “potential settlement related to an international tax matter”.
Elsewhere, the firm revealed how it was benefitting from the rise of online ordering, with digital sales exceeding $5 billion, representing over 30% of total sales in the company’s top six markets.
Chief executive Chris Kempczinski said the firm was in robust shape and was ready to face challenges including “inflation, supply chain issues and Covid resurgences”, adding that it would “focus on what’s in our control during challenging times”.
India’s second richest man eyes bid for Boots
13:38 , Oscar Williams-Grut
Mukesh Ambani is the biggest shareholder and chairman of retail-to-energy group Reliance Industries, which the Financial Times revealed is working on a bid for Boots in partnership with US investor Apollo Global Management.
65-year-old Ambani is the eighth richest person in the world, with an estimated net worth of more than $100 billion.
Sainsbury’s boss attacks rivals for price rises
13:22 , Oscar Williams-Grut
The grocer recorded profit for the year of £730 million, but said that could fall by up to £100 million next year as it keeps the cost of essentials such as bread, milk and potatoes as low as it can to aid struggling customers.
It can do so, say analysts, because it has very little debt compared to private equity owned rivals such as Asda and Morrisons, and has a long running cost cutting programme across the business that has seen it close cafes, Argos stores and specialist fish and deli counters.
Chief executive Simon Roberts said: “Customers are watching every penny and pound. It is tough out there. The cost of living is on everyone’s mind and we will stand shoulder to shoulder with them.”
On food inflation he said: “We are inflating behind the market, our direct competitors are inflating ahead of the market.”
Personal insolvencies ahead of energy price cap hike
13:17 , Bradley Gerrard
A rising number of household saw their finances reach breaking point even before the hike in energy prices, according to new figures which show personal insolvencies spiking at the start of the year.
Data from the Insolvency Service shows there were 32,305 personal insolvencies in England and Wales in the first three months of the year, a 14% jump compared to the same period last year.
This came before the spike in household energy bills caused by the £693 rise in the energy price cap in April.
Personal insolvencies come in various forms, with individual voluntary arrangements (IVAs) and debt relief orders (DROs) increasing in Q1, while bankruptcies - which are often a last resort - falling.
IVAs allow individuals to make regular payments to an insolvency practitioner, who then splits this payment between the organisations that are owed money.
DROs are used by individuals to freeze debt repayments and interest for 12 months, and if the person’s financial situation remians unchanged, then the debt can be written off.
UK car makers suffer worst March since 2009
13:03 , Oscar Williams-Grut
UK carmakers suffered their worst March since the financial crisis as manufacturing dropped by more than a third.
The Society of Motor Manufacturers and Traders (SMMT) said shortages of semiconductors – microchips that are fundamental to modern cars – and other components, meant UK carmakers produced just 76,900 cars last month, representing a 33.4% year-on-year drop and the worst March since 2009.
The production squeeze is pushing up prices of new and used cars, as demand remains elevated at a time when supply is struggling to keep up and household incomes are being stretched.
Barclays puts buyback on ice after $15 billion trading blunder
12:47 , Oscar Williams-Grut
New Barclays chief executive CS Venkatakrishnan had a shaky start to his tenure today, ditching or at least delaying a share buy back plan while he deals with a $15 billion trading blunder.
Since then, things have hardly improved for the bank. Barclays has had to repay investors £450 million after issuing $15 billion more in structured products than it was supposed to, a matter under the direct oversight of the new CEO. He was previously chief risk officer.
Today it said: “Due to the ongoing discussions with the SEC regarding the potential restatement of the 2021 financial statements…Barclays believes that it is prudent to delay the commencement of the buyback until those discussions have been concluded.”
The return of capital would have been worth £1 billion to long suffering shareholders. Profit in the first quarter fell 7% to £2.2 billion, in line with Wall Street rivals such as Citi and Morgan Stanley.
FinnCap buys climate advisor
12:34 , Oscar Williams-Grut
City stockbroker FinnCap waded further into the booming market for green and ethical corporate advice today.
The company, which provides broking and advisory services to corporates, has announced a deal to buy 50% of Cambridge-based Energise for £2.1 million in cash and shares. The broker has the option to buy the rest of the business after 12 months.
The deal will help give FinnCap a stronger foothold in the booming ESG — ethical, social and governance — market, which has exploded in recent years as investors look to tackle climate change and feel good about their investments.
Energise, set up in 2008, is a net zero and sustainability consultancy. It advises around 180 corporate clients on how best to hit climate change targets and report on emissions.
The company had revenues of £1.1 million last year and consulting fees grew 90% in the six month to the end of March.
FinnCap boss Sam Smith, left, said the deal was “another key step in the product diversification strategy” and would help clients “with addressing the key sustainability challenges facing today’s board room table.”
Whitbread returns to profit but warns on inflation
12:09 , Oscar Williams-Grut
Hotel prices are set to rise as costs increase and an acute shortage of staff puts pressure on operators.
Two of the largest hotel groups — PPHE, which owns the Park Plaza and art’otel chains, and Whitbread, owner of Premier Inn — flagged the issues in updates today, though both reported a bounce-back in profits as the impact from Covid-19 restrictions fades.
Whitbread said it was enjoying “strong current trading momentum” but warned that cost inflation this year was set to reach between 8% and 9%.
PPHE said “the labour market remains highly pressured” but the easing of coronavirus restriction had led to a “swift return in bookings”. First quarter revenues hit £32.0 million, up from from £5.3 million last year, as guests returned.
Daniel Kos, chief financial officer at PPHE, said: “We need to ramp up our staffing levels, and that’s where the difficulty comes in. We are currently reporting around 180 vacancies.”
Unilever facing ‘frankly unprecedented’ inflation
11:54 , Oscar Williams-Grut
The FTSE 100 giant said today it had increased its prices by 5.4% in Europe over the last three months. Around the world, prices rose by 8.3% in the first quarter, accelerating from 4.9% in the final three months of 2021.
Prices are rising in response to what CFO Graeme Pitkethly called “frankly unprecedented” increases in raw material costs.
French oil giant facing $4 billion hit in Russia
11:16 , Oscar Williams-Grut
French oil company Total Energies will take a $4.1 billion hit divesting its interests in Russia and pulling out of its Arctic LNG 2 project.
Arctic LNG 2, above, is a liquefied natural gas development project in the Russian Arctic. Sanctions against Russia after its invasion of Ukraine have dimmed the project’s prospects.
Total Energies said the decision to pull out followed “new sanctions” by European authorities prohibiting the export of goods and technology for use in the liquefaction of natural gas if it is “benefiting a Russian company”.
Standard Chartered surges, FTSE 100 higher
10:31 , Graeme Evans
Corporate earnings put traders in a better mood today as Standard Chartered and Smith & Nephew led a charge for the FTSE 100 index.
The stagflation fears behind April’s wild ride for global stock markets were put to one side as more blue-chip bosses offered reassurance through their quarterly updates.
With a few notable exceptions, the majority of results in London and New York this month have delivered on expectations as companies battle rising costs and consumer uncertainty. Top performing stocks have included Facebook owner Meta Platforms, whose Nasdaq-listed shares jumped 18% in after-hours trading last night.
In today’s hectic session for corporate updates, Standard Chartered emerged from the pack as London’s biggest winner after shares surged 15% on underlying profits 30% above City forecasts.
The emerging markets lender also reported strategic progress as chief executive Bill Winters backed a 10% return on tangible equity by 2024, “if not earlier."
Analysts at UBS called Standard their “top international pick“ in the UK banking sector and said the stock should re-rate as profits improve. The company, whose logo appeared on Liverpool shirts in last night’s Champions League semi-final, rose 66.9p to 546.6p.
Medical devices business Smith & Nephew was also on the front foot after all three of its operating divisions contributed to 5.9% underlying revenues growth in the first quarter. Shares improved 3% or 35p to 1303.5p.
Results-day gains of 2% for Barclays and Whitbread added to momentum as the FTSE 100 index rallied 64.20 points to 7489.81.
Mining stocks were largely under pressure but Glencore bucked the trend after its production update. Shares rose 6.7p to 486.35p, even though boss Gary Nagle reduced full-year guidance for copper and cobalt output.
The FTSE 250 index rose 192.31 points to 20,630.08, led by a 12% gain for Lancashire Holdings after the reinsurer said underlying trading conditions remain favourable.
Bitcoin miner Argo Blockchain boosted by record price
09:38 , Oscar Williams-Grut
A record high for bitcoin last November helped deliver soaring profits for Argo Blockchain, London’s only publicly listed bitcoin miner.
Argo’s earnings before tax and other costs jumped 584% last year to £52.9 million, with revenue up 291% to £74.2 million.
CEO Peter Wall said: “2021 was truly a year of transformation for Argo.”
Argo shares are up 7.9p, or 13.1%, to 68.99p this morning.
Bitcoin reached a peak above $65,000 in November 2021 but has since fallen back to trade closer to $40,000.
“Onwards and upwards,” said Wall.
Standard Chartered leads FTSE 100 higher, Sainsbury’s down 4%
09:04 , Graeme Evans
Shares in supermarket Sainsbury’s have fallen 4% after boss Simon Roberts warned that 2022/23 profits will be between £630 million and £690 million, compared with the £730 million reported in today’s annual results.
The guidance reflects “significant external pressures and uncertainties”, including higher operating cost inflation and the squeeze on its customers' disposable incomes.
Unilever also reported a 1% drop in sales volumes for the first quarter, but shares lifted 8p to 3585p as the decline was offset by 8.3% price growth.
Standard Chartered led the FTSE 100 risers board, jumping 11% after chief executive Bill Winters said the Asia-focused lender was on track to meet its 10% return on tangible equity target by 2024 “if not earlier”.
The busy day of corporate results left the FTSE 100 index 0.9% or 64.97 points higher at 7490.5, while the FTSE 250 index rose 184.17 points to 20,621.94.
Conduct charges dent Barclays’ results
08:41 , Graeme Evans
Barclays has reported a strong start to the year, although conduct issues overshadowed the results following last month’s censure for over-issuing securities in the US.
Today’s £500 million of litigation and conduct charges also covered customer remediation costs relating to a legacy loan portfolio. The company added in today’s first quarter results that the start of share buybacks remains on hold while it completes discussions with the US regulator over the securities blunder.
Group income of £6.5 billion for the first three months of 2022 was 10% higher and the company reported a 7% drop in pre-tax profits to £2.23 billion, still comfortably ahead of City forecasts despite the litigation hit. Shares were 1% higher today.
There was also encouragement in the company’s credit loss provisions, which remain low in the face of inflation headwinds and general consumer affordability issues.
Richard Hunter, head of markets at Interactive Investor, said: “While the provision has risen to £141 million versus £55 million the previous year, these numbers are minimal compared to the swings already seen in the updates from HSBC and Lloyds.”
Meta surges despite slow revenues growth
08:10 , Graeme Evans
Facebook’s slowest revenues growth in a decade was taken in Wall Street’s stride, given that owner Meta Platforms had previously warned about rising competition from the likes of TikTok as well as the impact of Apple’s recent privacy update.
Revenues rose 7% to $27.9 billion (£22.2 billion) and operating income fell 25% to $8.5 billion (£6.8 billion), but Meta’s under-pressure share price jumped 18% in after-hours trading due to the latter figure being ahead of expectations.
Hargreaves Lansdown analyst Laura Hoy said: “The market seemed to take comfort in the fact that user numbers are back on the up after the group reported its first ever user-number decline in the fourth quarter.
“This is indeed a green shoot, though 6% growth isn’t exactly shooting the lights out. Still, with almost three billion people logging in each day mid-single digits may be the new normal.”
Meta impresses, US GDP figures due later
07:49 , Graeme Evans
Tech sector valuations were boosted overnight after better-than-expected figures from Meta Platforms sent the Facebook owner’s shares up 18% in after-hours trading.
The company’s beat on first quarter earnings means Nasdaq futures are currently pointing to a 1.5% rise when the tech-laden index opens later, having been battered in recent days on fears over sharply higher US interest rates.
Results from Apple and Amazon are due after tonight’s closing bell, but for now traders have been happy to put April’s stock market volatility to one side and reflect on what’s been a largely positive earnings season.
Asian markets benefited from the improved sentiment, helped by pledges of further fiscal support from Chinese policymakers.
Today’s Bank of Japan meeting saw monetary policy left unchanged after the central bank cut its GDP forecast for 2022 to 2.9% from 3.8% and revised the inflation estimate from 1.1% to 1.9%. Unlike the Federal Reserve and other central banks, the Bank signalled that it has no intention of tightening policy.
Figures due this afternoon will show how the US economy performed in the first quarter of 2021, a period of continued resilience in the labour market. Expectations are for quarter-on-quarter growth of 1.1% and an annual figure of 7.3%.
Ahead of this key release, CMC Markets is forecasting that the FTSE 100 index will open 20 points higher at 7445.