It’s been a weak start for markets in Europe this morning, with the disappointment of this morning’s miss on Chinese economic data, weighing somewhat, with basic resource stocks underperforming, along with utilities.
The underperformance of utilities is no doubt as a result of leaked reports that the Labour Party would look to nationalise Britain’s energy networks, at a price below market value, if they were able to win a general election. National Grid (LON:NG), as the main pillar of the UK’s grid network, has seen its share price slip back, as has SSE (LON:SSE).
In the banking sector CYBG (LON:CYBGC) shares have jumped sharply after announcing that first half pretax profits came in at £286m, based on the assumption that Virgin Money (LON:VM) was acquired in October 2017. Integration of the business is progressing with £33m of synergies already achieved, however these synergies have been offset somewhat by integration costs.
Net interest income was down 1% though management have put this down to price pressures on the mortgage business. Impairments increased by £77m due to the integration of Virgin’s credit card business. The bank also said it was topping up PPI provision by £33m.
The bank has said it remains on course to deliver on its 2019 guidance, despite a challenging economic environment.
Travel firm TUI Travel, has seen its shares rise after its latest first half numbers showed that the company lost €341.3m, with most of that loss coming in Q2, to the tune of €202m. Revenues came in at €6.76bn, a rise of 1.7% from a year ago.
The company also warned on the prospect of a further profit hit on the back the grounding of its Boeing (NYSE:BA) 737 MAX planes, with no expectation as to when the aircraft would be ready to fly again. Management were able to reiterate full year guidance, but it was caveated on that basis.
Bookings for the summer were down 3%, however there is hope that Q3 will see an improvement, given the late timing of Easter, while the delay to Brexit until October may also unlock some demand on both sides of the Channel, which might suggest a rebound in the coming quarter. TUI had better hope so though its Boeing problems aren’t likely to go away anytime soon.
British Land’s latest numbers also point to a tough environment for the retail sector across the UK, and nowhere has that been more keenly felt in commercial retail estate which has seen its margins battered as retailers struggle to maintain profitability against a backdrop of discerning consumers and the growth in on-line retail. The company posted a loss of £319m led by a decline in the value of its retail assets. In an attempt to pare down its exposure to retail it has already sold off £1.5bn of retail assets with options to do more.
Retail continues to be difficult with B&Q owner Kingfisher (LON:KGF) reporting Q1 numbers that missed estimates. The B&Q business saw total sales rise 2.8%, while Screwfix has once again been the silver lining with like for like sales rising 4.5%.
Once again the French business has been the proverbial ball and chain on the company’s performance, with like for like sales down 3.7%, helping drag the shares to one month lows.
When Cineworld shelled out the sum of $3.6bn to acquire Regal Entertainment in the US last year there was some concern that the price tag was a little on the high side, particularly since the company was also in the middle of a significant refurbishment plan on its UK chain of cinemas, and streaming sites like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) were changing the entertainment landscape.
Since then the business has been performing well, helped by some decent high profile films like Mission Impossible Fallout, at the end of last year. This particular period hasn’t been so good with softer revenues in the first part of 2019, a decline of 9.4% for the group with both the US and UK declining 11%, though comparisons have been affected by a decent performance in 2018 due to the release times of “Black Panther” and “Avengers: Infinity War”
Turnover is expected to pick up in the coming months with the release of “Avengers: Endgame” and the release of films like “Aladdin” and sequels to X-Men, Men in Black and Toy Story, not to mention at the end of this year the latest film in the Star Wars saga, “The Rise of Skywalker”
While management have stated that this underperformance was in line with expectations it does appear to have prompted them to take steps to cut the company’s net debt levels, which have risen to $3.7bn.
In a separate announcement management have said that they are selling off and leasing back 17 of its US based cinemas, over a period of 15 years, for the sum of $286.3m. The company is also in talks to do the same thing on another 18, suggesting perhaps that there is some discomfort about the price the company paid for the acquisition.
US markets look set to open slightly higher this morning ahead of the latest retail sales numbers and a slightly more benign trading backdrop after the volatility of the last few days subsides a little.
Dow Jones is expected to open 20 points higher at 25,552
S&P500 is expected to open 2 points higher at 2,836
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