BUSINESS LIVE: NatWest posts £3.6bn profit; BA-owner smashes forecasts

By Live Commentary

Updated: 09:40 EDT, 28 July 2023

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The FTSE 100 will is up 0.1 per cent in afternoon trading. Among the companies with reports and trading updates today are NatWest, IAG, AstraZeneca, Rightmove, Standard Chartered and YouGov. Read the Friday 28 July Business Live blog below.

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YouGov hires former Facebook exec as CEO

Polling and data analytics company YouGov has appointed a former Meta executive, Steve Hatch, as its new chief executive.

Hatch takes over from Stephan Shakespeare, who will become chairman, replacing chair Roger Parry, who will leave the company after 16 years..

In a trading update ahead of its annual results, the group also said it expected full-year revenue to be at the lower end of the consensus range.

YouGov shares tumbled more than 10 per cent to 970p.

Air passengers could get payouts if flights are delayed

Air passengers may be more likely to get payouts if their flights are delayed after a landmark ruling against budget airline Wizz Air.

The Civil Aviation Authority (CAA) made it clear that it will take enforcement action against companies that fail meet passenger obligations.

Experts say energy bills will fall faster than expected

Energy bills could fall faster than expected, experts predict, saving the average home more than £200 a year.

Moody’s plans to move out of Canary Wharf in latest blow

Canary Wharf has been dealt another blow after Moody’s became the latest major firm to consider leaving to cut costs – as pictures revealed the once bustling financial district’s deserted streets at today’s 8am rush hour.

The credit ratings agency, which has space for 1,200 employees in its Docklands office, is planning to shrink its footprint by a third in response to the rise of WFH.

Rightmove says buyers spending less time browsing for homes

Rightmove achieved its highest first-half revenue since 2018 after estate agents agreed to pay more to advertise their properties amid a slowing housing market.

The online property portal said its membership base had remained stable, up by just 1 per cent on last year, but it secured ‘core membership price increases’ when estate agents renewed their contracts.

Agents spent on average £1,341 a month to advertise on Rightmove in the first half, or £79 more than a year ago, with 36 per cent of them going for the website’s premium package, up from 34 per cent last year.

Liontrust extends offer period for £96m GAM takeover amid opposition

Liontrust has delayed the offer period deadline for GAM investors for a second time this week, as the London-listed fund manager battles to get the deal over the line.

The FTSE 250 company’s intended takeover of the Swiss fund manager would create a business holding £53billion of assets under management, while boost its fund range and asset class offering.

Interest rate hikes not the only driver of rising business insolvencies

John Cullen, business recovery partner at Menzies:

‘It is highly concerning to see that the number of corporate insolvencies in Q2 was the highest in 14 years – 9% higher than last quarter, and 13% than the same period last year.

‘Whilst interest rates and inflation are a seemingly obvious cause, the need to repay pandemic-related bounce back loans, recent moves by HMRC to issue winding up petitions on outstanding debts quicker and the price of goods and materials generally, have also had an impact.

‘And it’s not just about financial pressures – businesses are grappling with many other changes simultaneously. It takes longer to source goods; longer to find staff; longer to recover debtors. There is only so much pressure businesses can take.

‘Businesses will be hoping that they don’t have to wait too much longer for interest rates to start to fall, particularly as the latest inflation data was more upbeat than expected. This will help by reducing the cost of borrowing. However, the underlying trend is going to require businesses to adjust to a more challenging environment and there will inevitably be a cost attached.

‘Businesses feeling the strain should take advice. They should talk to their stakeholders or even their competitors. Businesses should maintain a dialogue and be prepared to share their experiences as we are all in this together. Above all, it’s important to look after your cash and make sure everything is well costed. It seems likely that there’s a rocky 12 months ahead.’

Business insolvencies hit highest level since 2009

England and Wales saw the most company insolvencies since 2009 during the second quarter of this year, with further business failures likely risks amid rising interest rates.

On a seasonally adjusted basis, 6,342 companies were registered as insolvent in the three months to the end of June, 13 per cent more than a year earlier and the highest since the second quarter of 2009, the official Insolvency Service agency said.

Ian Meakins to take over as chair at Unilever

Unilever has said Ian Meakins will replace Nils Andersen as chair of the company.

Meakins, currently chair of Compass Group, will join the board in September and will succeed Andersen as chairman in December.

Andersen is stepping down after nine years on the board of Unilever, the last four as chair.

I am delighted to welcome Ian to the Board following a thorough global search process. Ian has a strong track record of success in executive and non-executive roles across a range of industries. I am sure Unilever will greatly benefit from his extensive experience and I am confident that he will provide the Board with strong and effective leadership.

Adidas plans more Yeezy stock sales in August

Adidas will sell more of its stocked up Yeezy products in August and donate a sizeable amount to organisations fighting discrimination and hate, the sportswear giant has confirmed.

The group ended its collaboration with rapper Y, formerly Kanye West, following a spate of ant-semitic comments.

‘As with the release in May 2023, the second release will feature products which were initiated in 2022,” it said in a statement.

Unexpectedly strong sales of Yeezy shoes left over from the Ye collaboration will likely help reduce the company’s operating losses this year.

AstraZeneca buys Pfizer gene therapy portfolio for $1bn as profits soar

AstraZeneca’s rare disease division has agreed to buy an early-stage gene therapy portfolio from drugmaking rival Pfizer for up to $1billion.

The deal’s announcement came as the group’s first-half operating profit jumped more than threefold to $5billion on the back of higher sales margins, lower sales costs and modest growth in research development expenses.

Under the deal, expected to close in the third quarter, Alexion Pharmaceuticals will gain access to novel adeno-associated virus (AAV) capsids that are shown to be vital tools in gene therapy and gene editing.

AstraZeneca set for Chinese sales boost

Mark Crouch, analyst at eToro:

‘On the surface AstraZeneca’s high-level sales figures look fairly uninspiring, with sales virtually flat in the second quarter and down slightly year-on-year in the first half of the year.

‘However, strip out its shrinking Covid-19 medicine sales, and total revenue increased by a far more respectable 16% year-on-year, with oncology sales contributing significantly to that growth.

‘A major positive is that revenue from China is expected to grow faster-than-expected, which will help the full-year bottom line.

‘But while growth remains decent, it’s clear that Astra’s sales are growing at a slower pace than they were a year ago. That has contributed to its stuttering share price over the past six months or so.’

Rightmove posts higher profit and revenues

Rightmove clocked up its highest first-half revenue since 2018, despite a troubled mortgage market putting pressure on house prices.

The property webiste said revenue was up 10 per cent to £179.5million in the six months to the end of June, while pre-tax profit rose 7.5 per cent to £130million.

And it forecast that its annual average revenue per advertiser (ARPA) will be at the top-end of its outlook of between £95-£105 for the full-year.

The group told shareholders:

The strength and resilience of Rightmove’s business has remained apparent throughout the first half of 2023.

Agents and developers have continued to use our products to win new mandates and to drive their businesses forward, and home-movers have continued to trust our sites to allow them to see the whole of the property market, helping them to make informed decisions.

This has allowed us to deliver strong results, despite the backdrop of higher mortgage rates and the increased cost of living.

NatWest rewards investors as profits beat expectations

NatWest profits surged by nearly £1billion in the first half of 2023 as the crisis-hit bank was boosted by interest rate hikes.

Earnings surged 37 per cent to £3.6billion in the six months to the end of June, beating analyst expectations of £3.3billion.

NatWest’s latest profit boost has enabled it to announce another investor returns, including a fresh £500million share buyback and an increase to the interim dividend to 5.5p. During the first half, the bank returned some £2.5billion to investors.

Britain sees 6,000 shops shut in five years

Six thousand shops have closed down across Britain in the last five years, according to the British Retail Consortium.

‘Crippling’ business rates and the fallout from Covid lockdowns were driving forces behind the closures and are prompting many retailers to ‘think twice’ about new openings, Helen Dickinson, chief executive of the BRC, said.

In the second quarter of this year, the overall shop vacancy rate increased to 13.9 per cent, fractionally worse than in the first quarter, but slightly better than the same period last year.

Market open: FTSE 100 up 0.1%, FTSE 250 off 0.3%

The FTSE 100 has ticked higher in early trading thanks to strong gains in the pharmaceutical sector, driven by upbeat quarterly results from AstraZeneca, offseting concerns about the impact of higher interest rates on economic growth.

The pharmaceutical sector is up 1.9 per cent after AstraZeneca beat expectations for its second-quarter profit, with its shares climbing 3 per cent.

Rate-sensitive real estate stocks are off 0.9 per cent as UK 10-year gilt yield rose to 4.392 per cent, its highest since 18 July in early trade, after Bank of Japan tweaked its yield control policy during its monetary policy review.

Standard Chartered is up 5 per cent after the Asia-focussed lender upgraded its annual profit forecast and set a new $1billion share buyback after a strong first-half performance.

British Airways operator IAG has gained 2 per cent as its quarterly profit beat analyst forecasts by 40 per cent and it said it was encouraged by the outlook for the summer.

Soaring rents help estate agent Foxtons

Soaring rents have offset a slump in house sales at Foxtons.

The London estate agency posted profits of £6.1m for the first six months of the year, up 41 per cent on the same period of 2022.

Foxtons said it was seeing demand among tenants looking for houses to rent outstrip supply, pushing up those rents.

AstraZeneca makes $1bn drug swoop

AstraZeneca’s Alexion unit has agreed to buy Pfizer’s early-stage rare disease gene therapy portfolio for up to $1billion, plus royalties on sales.

Alexion, which AZN bought in in 2021, focuses on rare diseases and plans to close the deal in the third quarter.

The deal will bring a number of novel adeno-associated virus (AAV) capsids to Alexion and help build on Alexion and AstraZeneca’s capabilities in genomic medicine, it said.

It comes as AZN delivered better-than-expected profits and sales in the second quarter as a strong performance of its blockbuster cancer drugs helped offset the loss of Covid-19 vaccine sales.

The Anglo-Swedish drugmaker posted an adjusted profit of $2.15 per share, up 25 per cent and exceeding the $1.98 per share expected in company-compiled consensus estimates.

Aston Martin names major shareholder as board member

Aston Martin has appointed the chief executive of its third largest shareholder Geely’s to its board.

Geely International in May made a £234million investment in the British firm, giving it the right to one board seat.

‘IAG is trading well…but there is potential turbulence ahead’

John Moore, senior investment manager at RBC Brewin Dolphin:

‘IAG is trading well, as the post-Covid holiday boom continues. The airline group has been relatively unaffected by the circumstances that have impacted some of its peers, and the return of more long-haul travel – particularly China’s reopening – has been a major boost to the likes of British Airways and Iberia.

‘IAG’s share price remains two-thirds below where it was pre-pandemic – today’s results could be a much-needed boost.

‘But there is potential turbulence ahead in terms of weaker demand and industrial action, which may continue to weigh on sentiment towards the sector in general.’

Aviva Investors boss: The Government must invest more in Britain

The Government must be prepared to ramp-up investment in Britain if the private sector is to back the country and the economy is to thrive, the chief executive of Aviva Investors has told This is Money in an exclusive interview.

Mark Versey, who has led the insurer’s £223billion asset management unit since 2021, also highlighted the importance of rebuilding market confidence in certainty of UK policy after a volatile few years, particularly if the country is to successfully transition to net zero by 2050.

BA-owner smashes forecasts

IAG’s quarterly profit beat analyst forecasts by 40 per cent and the British Airways-owner has said it was encouraged by the outlook for the summer as demand for leisure travel remains strong.

The airline group posted an operating profit before exceptional items of €1.25billion (£1.1billion), compared to the €895 million euros analysts were on average expecting.

Luis Gallego, International Airlines Group’s CEO, said:

‘Our strong profits since the start of the year are helping to fund investment for our customers, and to improve our balance sheet by reducing debt.  We are aiming to be back to pre-pandemic capacity at the end of this year.

‘These results are thanks to a strong performance from all companies across the Group, and we would like to thank our teams for their hard work during the year so far.

‘Customer demand remains strong across the Group, particularly for leisure travel, with around 80% of passenger revenue for the third quarter already booked. And our airlines have put in place plans to support operations during the busy summer period.’

ECB hikes rates to a record high – but hints they have peaked

The European Central Bank (ECB) raised interest rates to a joint record high – but hinted borrowing costs in the eurozone may now have peaked.

As it continued its fight against inflation, the Frankfurt-based bank pushed rates up by 0.25 percentage points to 3.75 per cent.

That was the joint highest level on record, and on a par with the rate hit in 2001 when it was trying to boost the value of the newly launched euro. The move followed a rise by the Federal Reserve in the US on Wednesday, with the Bank of England set to follow suit next week.

NatWest posts £3.6bn profit

NatWest has posted a pre-tax profit of £3.6billion for the first half of 2023 as the embattled bank, which is currently embroiled in crisis amid the row over Nigel Farage’s Coutts account, benefited from interest rate hikes.

This compared to £2.6billion at the same time last year and beat forecasts of £3.3billion.

NatWest also announced an interim dividend of 5.5p per share and a share buyback of up to £500million for the second half of 2023.

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