- FTSE 100 down 9 points at 7.495
- Ashtead warns of lower sales and profits than expected
- musicMagpie soars on bid approaches
10:47am: StanChart to outperform peers - Goldman
Standard Chartered PLC (LSE:STAN) is set to show a rare out-performance relative to its bank peers over the next two years, according to Goldman Sachs (NYSE:GS).
The US investment bank expects the bank to print a double-digit EPS compound annual growth rate (CAGR) and show around a 2.7 percentage point return on equity (ROE) improvement vs a low single-digit EPS CAGR and declining ROE at peer banks.
Goldman sees four drivers of this out-of-cycle EPS/ROE improvement.
It sees an unwind of loss-making hedges put-on by the group during late 2021, which are acting as a c.20 basis point drag on group net interest margins (NIM), starting in February 2024.
This benefit, as hedges are rolled over, would come as peers report flat-to-declining NIMs over the next two years on policy rate cuts.
Goldman also highlighted a brighter non-funds income outlook as continued share gains in its fund management are no longer suppressed by declining volatility.
It also suggested the new CFO could focus on the out-sized corporate office/HQ function relative to its peers, which has been the main source of historical ROA under-delivery vs peers.
Finally, capital now at top-end of the target range, with slow balance sheet growth ahead, could translate into continued buy-backs which would reduce share count at 6% p.a.
Upgrading to buy from neutral, Goldman pointed out the stock trades at close to record-low valuations compared to a near decade-high ROTE of 11% next year.
It has price target of 868p, down slightly from 879p, implying 38% potential upside on top of 3% dividend yield.
Shares are up 0.6% at 664p.
10:07am: Foxtons (LSE:FOXT) jumps as shareholders push for sale - report
Shares in Foxtons (LSE:FOXT) have jumped 7.2% to 43.40p after a report suggested shareholders are pushing for a sale of the business.
Milkwood Capital, an investment fund that specialises in investing in undervalued companies over the long term, owns about 4% and is the latest shareholder to demand a sale of the estate agency, according to The Times.
Rhys Summerton, who runs Milkwood Capital, said: “If you look back, in 2015 Foxtons was a £1 billion company. But the public markets are no longer valuing the good work the management has done recently and the only way to extract fair value is for the board to carry out a sale process.”
His statement follows pressure from the Canadian investor Converium Capital, which has been lobbying for Foxtons to carry out a strategic review over the past 18 months.
Converium Capital owns around 6% of the firm.
9:47am: Capita boosted by £239 million contract win
Capita PLC (LSE:CPI) is in demand with shares up 4.1% after it secured a new contract to manage the Civil Service Pension Scheme for the Cabinet Office.
The 10-year deal which kicks off from September 2025 is worth £239 million, the company said in a statement.
The outsourcer explained the CSPS is one of the largest public sector pension schemes in the UK.
9:31am: Ashtead knocked by Hollywood strike and calm weather
Ashtead remains top of the FTSE 100 fallers – and by some margin – with shares down 12% after today’s profit warning.
Analysts at Liberum noted the warning is likely to mean Ebitda estimates for financial 2024 fall by around 2%, with pre-tax profit forecasts moving around 8% due to higher than expected depreciation and interest charges.
But it pointed out the two headline reasons for the revision - little emergency response work this year and the US writers' and actors' strikes lasting longer than expected - seem one-off in nature.
“We would look to buy on weakness as long term drivers are still intact (notably moves from owning to renting, mega-projects and industry consolidation),” it said.
9:10am: Compass buyback disappoints
Shares in Compass Group PLC (LSE:CPG) are 4.8% lower following full-year results today.
EPS came in a touch below forecasts while the share buy-back also disappointed, according to analysts.
Jefferies said EPS was 1% below consensus with a higher tax charge “offsetting better fourth quarter organic revenue growth and a modest margin beat.”
But it said the $500 million buyback was at the bottom end of expectations.
The broker thinks consensus EPS estimates are likely to decrease by low single digits due to higher tax and interest.
8:44am: FTSE 100 on the back foot
It remains a subdued start in London this Monday morning with the FTSE 100 now down 21 points at 7,483.
Susannah Streeter at Hargreaves Lansdown said there doesn’t “seem much motivation on Monday to reverse early losses on the FTSE 100.“
“It’s been on the back foot in early trade, despite a close in the green for Wall Street on Friday.”
She suggested the slight tick up in sterling may be part of the equation, “given the effect on dollar denominated earnings of the raft of multinationals listed on the index.”
Leading the risers, is Diploma. Up 4.9%, after strong full-year results which saw revenue jump 19% and adjusted operating profits rise 24%.
Analysts at Shore Capital said the overall, the group has performed strongly, beating company complied consensus on an earnings basis by c.3%, noting the stronger than expected operating margin performance.
It expects to increase its adjusted pre-tax profit by around 4% to £244 million and sees consensus rising by a similar amount.
Standard Chartered rose 1.0% as Goldman Sachs (NYSE:GS) upgraded to buy from neutral, but Ashtead remains out of favour, down 15%.
8:15am: FTSE 100 opens lower while Ashtead plummets
The FTSE 100 has opened modestly lower, after Friday’s bumper gains, with investors already casting one eye to Wednesday’s Autumn Statement.
At 8:15am, London’s blue-chip index was down 22.68 points, 0.3%, at 7,481.57 while the FTSE 250 was little changed at 18,569.33.
Ashtead tumbled 14% after warning of lower sales and revenues due to fewer hurricanes and other weather events plus the actors and writers strike in North America running on longer than expected.
Peel Hunt expects a 8-10% reduction in the pre-tax profit consensus.
Compass also fell, down 5%, despite strong growth in profits and a new share buyback.
Richard Hunter at interactive investor said the fall followed a disappointing revenue miss to expectations.
Elsewhere, musicMagpie jumped 33% after revealing bid approaches from BT and Aurelius, while Currys jumped 3.8% as RBC Markets upgraded to outperform.
7:54am: Compass launches fresh buyback as profits surge
Compass Group PLC (LSE:CPG) will also be in the spotlight after announcing plans to return surplus cash through a further share buyback of up to $500 million.
The contract caterer made the announcement alongside full-year results which showed underlying operating profit growth of 30% to £2.12 billion and organic revenue growth of 19%, to £31.3 billion, balanced across all regions and sectors.
Operating margin of 6.8%, were up 60bps year on year, the firm said.
Looking ahead, Compass has forecast underlying operating profit growth towards 13% delivered through high single-digit organic revenue growth and ongoing margin progression.
Dominic Blakemore, group chief executive, said:”Going forward, we expect to sustain mid to high single-digit organic revenue growth and ongoing margin progression leading to profit growth ahead of revenue growth and increased cash generation.”
7:45am: musicMagpie getts bid approaches from BT and Aurelius
One stock that could be heading upwards is musicMagpie PLC which has confirmed it is holding talks with both BT Group PLC (LSE:BT.A) and Aurelius Group over a possible bid for the firm.
Responding to press speculation, the online seller of second-hand electrical goods said talks with both parties were at an “early-stage” and are ongoing.
It said there can be no certainty that any offer will be made and advised shareholders take no action at this time.
The deadlines for bids to be made is December 18.
7:32am: LSEG names new CFO
A new CFO for London Stock Exchange Group PLC (LSE:LSEG) which has appointed Michel-Alain Proch to the job.
Reporting to chief executive David Schwimmer, Proch will join LSEG on 26 February 2024 before joining the Board as CFO on 1 March 2024.
Following publication of the group's 2023 full year annual results on 29 February Anna Manz will step down from the board and leave the group.
Proch is currently chief financial officer for Publicis Groupe and prior to this, held several listed company CFO positions, notably at Ingenico and Atos, where he was also CEO, North America and group chief digital officer.
7:23am: Ashtead warns of lower profit and sales
Ashtead could be set for a rocky start when trading opens.
The company has warned sales and profit will be below current market expectations after a quieter hurricane season and writers’ and actors’ strike persisting longer than expected.
The international equipment rental company now expects both group and US rental revenue growth in the range of 11 to 13% (previous guidance for both: 13 to 16%), which will result in Ebitda being 2 to 3% below current market expectations.
In addition, it expects a full-year depreciation charge of around $2.12 billion and a net interest cost of $540 million which will result in adjusted profit before tax being below current market expectations.
Capital expenditure guidance remains unchanged at $3.9 to $4.3bn, it said.
Ashtead still expects to report expects to report record results for the half year and the second quarter with group rental revenue growth for the half year of 13%, Ebitda growth of 15% to around $2.58 billion and adjusted pre-tax profit growth of 5% to around $1.31 billion.
The firm said revenue late in the second quarter was affected by lower levels of emergency response activity with a significantly quieter hurricane season than seen in recent years and fewer naturally occurring events, such as wildfires, with this effect continuing into the third quarter.
In addition, the well covered writers' and actors' strikes, which has hit its Film & TV business in Canada significantly, persisted for longer than anticipated with some impact on the rest of the Canadian, US and UK businesses that rent into that space.
This has also continued into third quarter, it said.
7:05am: Blue-chips expected to open lower
Stocks in London are expected to open slightly lower as investors look ahead to the Autumn Statement on Wednesday.
Spread betting companies are calling the FTSE 100 down by around 10 points after closing up 93.28 points, 1.3%, at 7,504.25 on Friday.
The Prime Minister Rishi Sunak is expected to use a speech to paint a more upbeat picture of the UK economy ahead of the autumn statement.
Speculation is rife at to what the statement on Wednesday might contain with a reported move to cut inheritance tax now not expected to go ahead.
Elsewhere, oil prices have risen following reports that Saudi Arabia is preparing to prolong oil production cuts into next year as Opec+ weighs further reductions in response to falling prices and rising anger over the Israel-Hamas war.
Back in London, and the early focus will be update from contract caterer Compass and technical products and services supplier Diploma.
https://news.google.com/rss/articles/CBMifWh0dHBzOi8vd3d3LnByb2FjdGl2ZWludmVzdG9ycy5jby51ay9jb21wYW5pZXMvbmV3cy8xMDMzNjA3L2Z0c2UtMTAwLWxpdmUtc3RvY2tzLW9wZW4tbG93ZXItYW5kLWFzaHRlYWQtcGx1bW1ldHMtMTAzMzYwNy5odG1s0gEA?oc=5
2023-11-20 07:00:00Z
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