Level 2

Weekly review

By Josh White

Date: Friday 13 May 2022

(Sharecast News) - The FTSE 100 ended a turbulent week 30.21 points higher, closing at 7,418.15 on Friday.
Equity view

Wholesale power firm ContourGlobal said on Friday that its diversified business remained "resilient and well positioned" despite "unprecedented turbulence" in global energy markets. ContourGlobal stated it performed ahead of the internal expectations during the first quarter, with revenue up 52.6% at $652.0m, and, as a result, confirmed its first-quarter dividend payment of USD 4.9115 cents per share, representing a 10% year-on-year growth, underpinned by "strong operating cash flows" and a 15.3% year-on-year growth in adjusted underlying earnings to $208.3m.

Company software provider Sage Group reported flat interim profits and revenue as organic growth in all regions was offset by disposals and foreign exchange headwinds. The company on Friday said pre-tax profit for the six months to March 31 fell 1% to £189m and revenue slipped to £934m from £937m.

Engineered electronics provider TT Electronics backed its full-year outlook on Friday as it reported a jump in revenue and "strong" order intake. In an update for the four months to the end of April, the company said group revenue was up 6% on the previous year at constant currency and 5% higher on an organic basis. This reflects "the ongoing healthy growth trends in TT's focus end-markets and the strength of our customer relationships," it said.

Tesco boss Ken Murphy was paid more than £4.74m last year, the supermarket chain said on Friday. Murphy, who has been chief executive since October 2020, was also awarded a 2.25% pay rise for the current year.

Retailer JD Sports said on Thursday that like-for-like sales were more than 5% higher year-on-year, driven by both the "strength and breadth" of its brand relationships and category offerings. The FTSE 100-listed firm believes that headline pre-tax profits for the year ending 28 January 2023 will at least be equal to that for the year ended 29 January 2022, which it expects to be approximately £940.0m.

Infrastructure group Balfour Beatty said on Thursday that overall year-to-date trading had been in line with expectations, including a continuation of its recent strong cash performance. Balfour Beatty said its average monthly closing net cash balance increased to around £800.0m over the first four months of 2022, up from 2021's full-year average of £671.0m. However, it also noted that upon completion of its 2022 share buyback, as well as some expected normalisation of working capital, average monthly net cash for the full year was expected to be "moderately lower" than the first four months of the year.

UK Commercial Property REIT said it had bought a hotel development opportunity in Leeds, from Marrico (Sovereign Square) Ltd, a joint venture between Marrico LLP and Helios for £62.7m. The site was owned by Leeds City Council. UKCM is to fund the development and Marrico will complete construction.

RHI Magnesita said first-quarter profits were materially higher, driven by robust demand for steel and industrial products and price increases. The company on Thursday said earnings before interest, tax and amortisation was up 50% year on year, in line with expectations and at similar levels to that achieved in Q4 2021.

Television network ITV reported "strong" first-quarter revenues on Wednesday, driven by a "robust" operational and financial performance throughout the period. ITV stated Q1 revenues grew 23% year-on-year to £458.0m, with total advertising revenues rising 16% to £468.0m, as expected, and digital revenues increasing 24% to £82.0m.

Manufacturing company Spirax-Sarco Engineering maintained its full-year guidance on Wednesday despite the global macroeconomic outlook weakening since the publication of its full-year results due to ongoing global supply chain constraints, geopolitical uncertainty, Covid-19 related restrictions in Asia, rising inflation, and higher interest rates. Spirax-Sarco stated organic sales growth in the four months ended 30 April was in line with internal expectations, supported by all three businesses expanding manufacturing capacity and mitigating supply chain constraints.

Private hospital group Spire Healthcare maintained annual guidance despite disruption at the start of the year from the Covid Omicron variant. "Notwithstanding the disruption in the first quarter due to the Omicron variant, we are satisfied with our performance in the first four months of 2022," Spire said ahead of its annual shareholder meeting on Wednesday.

Funeral services provider Dignity posted a drop in first-quarter profits and revenues on Wednesday as it pointed to lower deaths. In the 13 weeks to 1 April, underlying operating profits fell 67% to £9m, with underlying revenues down 22% at £73.9m. The number of deaths declined 19% on the first quarter of last year to 166,000.

Precision device maker Spectris said it had bought US firm Dytran Instruments for $82m (£66m). Based in California, Dytran designs and makes accelerometers and sensors for measuring dynamic force, pressure, and vibration for the space, aerospace, industrial and automotive industries.

Media platform operator Future has acquired US-based women's lifestyle publisher WhoWhatWear from Clique Brands for an undisclosed sum. Future said on Tuesday that the acquisition of WhoWhatWear, which will be funded from existing debt facilities, would further strengthen its position in the women's lifestyle vertical and give the group greater scale and reach in North America to further monetise its audience.

UK engineering firm Renishaw cut full-year profit forecasts on Tuesday, citing economic uncertainties, and also warned of a possible hit from Covid-19 lockdowns in China. The company said it now expected annual adjusted pre-tax profit of £155m - £170m, compared with its previous forecast of £157m to £181m. Revenue was expected to be in the range of £665m - £675m.

Low-cost carrier Wizz Air has inked a memorandum of understanding with the Ministry of Investment of the Kingdom of Saudi Arabia that will see the pair explore airline market development opportunities in the Kingdom. Wizz Air said on Tuesday that the memorandum of understanding, which was supported by the Saudi National Air Connectivity Programme, comes after the Kingdom launched a "strategic and ambitious vision" to triple passenger traffic by 2030, offering "unprecedented opportunities" for airlines and the aviation supply chain.

Cyber security company NCC Group said it had appointed a new chief executive and lifted revenue guidance for the second half of the year. NCC said Mike Maddison would take over at the helm, replacing Adam Palser. The board added that second-half revenue would be "substantially higher" than both 2021 and the first six months of the year, driven by acquisitions and accelerating sales growth from its assurance unit.

Real estate group Rightmove revealed on Monday that chief executive Peter Brooks-Johnson will step down from the board and leave the company in the coming year. Brooks-Johnson, who has spent more than 16 years with Rightmove, will continue as CEO until the announcement of the firm's full-year results in February 2023, and will assist with the recruitment of his replacement and "a smooth and orderly handover". Brooks-Johnson took over as CEO in 2017.

Hydrocarbon exploration and production company Energean's Athena exploration well has made a commercial gas discovery off the coast of Israel. Energean said on Monday that preliminary analysis of the discovery, made in the A, B and C sands of Block 12, pointed to recoverable gas volumes of 8.0bn cubic metres of natural gas on a standalone basis.

Building materials distributor and DIY retailer Grafton Group has started its £100m share buyback, announced last month. The company on Monday said the buyback was targeted to be completed by the end of the year, subject to market conditions.

Economic news

Jacob Rees-Mogg, the Brexit minister, looked to rule out emergency support to help tackle the soaring cost of living crisis on Friday, as he called on the Bank of England to increase interest rates. During a round of morning media interviews, the MP argued the right responses to soaring inflation were "tighter monetary policy, which is the responsibility of the Bank of England, and constrained fiscal policy".

Consultants KPMG were slapped with a £14.4m fine by the UK accounting watchdog in response to "serious misconduct" on the part of the auditors of failed outsourcer Carillion. The consultancy's settlement with the Financial Reporting Council was one of the largest ever in UK audit history and was triggered by former KPMG staff's forging of documents and after it was found that they misled the regulator, including on the audits of other firms.

The Bank of England may need to hike official interest rates by more than what financial markets are currently pricing in, one of the central bank's top officials said. In an interview with Bloomberg, the BoE Deputy Governor, also said that it might take longer for the inflation crisis to fully unwind - due in part to strength in the labour market.

UK Prime Minister Boris Johnson insisted on Thursday that he was still opposed to a windfall tax on energy companies, but refused to rule the possibility of introducing a one-off levy. Maintaining his claim that a levy would deter investment, despite BP chief executive Bernard Looney saying otherwise, Johnson said he did not believe they were "the right way forward".

The UK economy unexpectedly contracted in March amid rising prices, figures from the Office for National Statistics showed on Thursday, fuelling fears the cost of living crisis will plunge the country into recession. GDP shrank by 0.1% following no growth in February and versus expectations for no change, leaving the economy just 1.2% above its pre-Covid level. The data showed that the main contributor to the monthly decline was a 0.2% contraction in the services sector.

UK house prices edged higher in April, industry research showed on Thursday, as demand continued to outpace supply. According to the latest RICS residential market survey, 80% of respondents reported a rise in house prices across the UK in April, up from 74% in March.

An estimated 1.5 million UK households face being unable to pay food or energy bills this year, a think tank has warned, as the UK falls into recession. The National Institute of Economic and Social Research, publishing its latest quarterly UK Economic Outlook, said real incomes were likely to decline by 2.4% this year, followed by a small rise in unemployment in 2023, to 5.1%.

UK retail sales fell in April, industry research showed on Monday, as the mounting cost of living crisis started to bite. According to the latest BRC-KPMG Retail Sales Monitor, like-for-like sales fell 1.7% in the four weeks to 30 April compared to the same period a year previously, when they increased 39.6%. On a total basis, sales decreased 0.3%. It was the first decline in sales for over a year.

City commuters will be relieved from 17 weeks of disruptions next week, with the reopening of the Bank branch of the Underground's Northern line. Services between Kennington and Moorgate were suspended in January, to allow the track to be realigned through a new southbound platform built over the last couple of years.

International events

Americans' confidence in the economy and their finances fell further in the beginning of May, the results of a closely-followed survey revealed. The University of Michigan's consumer confidence index retreated from a reading of 65.2 at the end of April to 59.1 in early May.

US import prices were flat month-on-month in April, following an upwardly revised 2.9% increase in March, missing market forecasts for a 0.6% uptick and marking the first time that import prices failed to rise year-to-date. According to the Bureau of Labor Statistics, fuel prices declined 2.4% following a 39.2% increase from December to March, as lower petroleum prices more than offset increased natural gas costs, while prices for non-fuel imports increased 0.4%, mainly due to the cost of industrial supplies and materials. Year-on-year, import prices were up 12%

Eurozone Industrial production fell 1.8% in March compared with February, according to data released by European Union statistics agency Eurostat on Friday. On a year-on-year basis output fell by 0.8% in the single currency area.

Growth in the US producer price index slowed as expected in April, according to figures released on Thursday by the Labor Department. The producer price index for final demand rose 0.5%, in line with analysts' expectations and down from 1.6% in March and 1.1% in February.

US first-time jobless claims ticked up by 1,000 in the week ended 7 May to hit 203,000, ahead of both the prior week's upwardly revised print of 202,000 and estimates for a reading of 195,000. According to the Labor Department, the four-week moving average was 192,750, an increase of 4,250 from the previous week's revised reading, which grew from 188,000 to 188,500.

The cost of living in the US dipped last month, but not by as much as anticipated as food prices continued to run up. According to the Department of Labor, in seasonally adjusted terms the annual rate of headline consumer price inflation slipped from 8.5% in March to 8.3% for April.

China's annual inflation rate rose more than expected in April as Covid lockdowns took their toll. According to figures released on Wednesday by the National Bureau of Statistics, consumer price inflation rose to 2.1% in April from 1.5% in March, versus consensus expectations of 1.8%. Meanwhile, producer price inflation slowed to 8.0% from 8.3%, versus expectations of 7.8%.

German inflation hit a new record high in April as food and energy prices rose, according to figures released on Wednesday by Destatis. Annual inflation grew to 7.4% from 7.3% in March, with higher food prices contributing the most to the increase.

The European Commission is considering a new debt issuance to provide financial support for Ukraine, it was reported on Tuesday. Citing an unnamed European Union official, Reuters said the joint borrowing would be used to cover Ukraine's liquidity gap of €15bn over the next three months, by allowing the country to access cheap loans from the EU.

German investor confidence strengthened slightly in May, against expectations, according to a closely-watched survey published on Tuesday. The ZEW Indicator of Economic Sentiment increased to -34.3 in May, up from a two-year low of -41 in April. Most analysts had been expecting -42.

A top US central bank official defended the Federal Reserve's recent decision to raise official short-term interest rates by 50 basis points instead of acting even more forcefully. In an interview with Bloomberg, the President of the Federal Reserve Bank of Atlanta, Raphael Bostic, reportedly said that the most recent 50 basis point hike on 16 March "is already a pretty aggressive move".


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