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09/02/24 Briefing


AstraZeneca, Unilever and British American Tobacco are part of a heavyweight line up of FTSE 100 companies in the results spotlight today.

The presentation by Unilever included an admission that its competitiveness had been “disappointing” as consumers shifted to non-branded goods.

Other companies reporting today included Rolex retail business Watches of Switzerland and the contract caterer Compass Group.

In the US, the S&P 500 is just a few points shy of the 5000 mark, with shares of Arm rocketing this morning.

Key Points

  • Unilever hit by non-brand competition

  • AstraZeneca forecasts strong 2024

  • BAT shares in results-day rebound

FTSE 100 closes below 7600

Thursday 8 February 2024 16:38 , Daniel O'Boyle

The FSTE 100 closed at 7,595.48 today, suffering yet another late fall.

London’s top flight had been as high as 7652, but slipped back in the late morning before falling further in the afternoon, in what has become a familiar pattern this year.

Among the biggest fallers was the FTSE’s largest constituent AstraZeneca, with shares down more than 6% after its results today. DS Smith was the top riser as it confirmed a takeover approach from rival Mondi.

CBI boss warns against ‘large scale tax cuts driven by short-termism’

Thursday 8 February 2024 16:18 , Daniel O'Boyle

The boss of one of Britain’s most influential business groups has said that “large-scale” tax cuts should be kept off the table as the country gears up for an election.

Rain Newton-Smith said that companies do not want to see tax reductions “driven by short-termism” and also called for green investment to hit about £50 billion per year by the end of the decade.

At a speech in Westminster, the Confederation of British Industry (CBI) chief executive said that companies are crying out for sustainable growth in the British economy.

“The need for growth that is sustainable, not fuelled by pre-election giveaways,” Ms Newton-Smith said.

Arm now up 53.6%

Thursday 8 February 2024 15:30 , Daniel O'Boyle

Arm’s share price surge has continued, with the chip firm now up a massive 53.6%.

That is more than double Arm’s IPO price and values the company at a huge $121.6 billion, which would have made it the London Stock Exchange’s fourth-largest company had it been listed here.

The rise equates to about $44 billion added to Arm’s market cap.

It hasn’t been enough to drag the S&P 500 above 5000 though.

Arm rockets on AI chip demand

Thursday 8 February 2024 14:40 , Daniel O'Boyle

Shares in Arm Holdings have soared to nearly twice their IPO price in early trading on Wall Street today.

Shares are up 36.7% to $105.61, adding about $35 billion to the Cambridge-founded chip firm’s market cap.

It comes on the back of strong results yesterday, as a growing demand for AI products led to more orders of its chips.

Arm famously snubbed London when it chose to relist its shares last year.

S&P 500 set to dip slightly, remain near 5000

Thursday 8 February 2024 14:17 , Daniel O'Boyle

The S&P 500 looks to stay a little below the 5000 mark when trading begins on Wall Street, according to futures markets.

S&P 500 futures are down 0.1%, after the index closed only four points short of the mark yesterday. Nasdaq futures are also down a little while Dow Jones futures are slightly up.

It comes as US initial jobless claims fell, in the latest sign of the surprising strength of the US labour market.

Luxury slowdown will continue into 2024, Gucci owner Kering says

Thursday 8 February 2024 12:19 , Daniel O'Boyle

Gucci owner Kering says that the luxury goods downturn will continue this year, after a “trying” 2023.

Revenue fell by 4% to €19.6 billion, as appetite for expensive clothes and handbags faded. Much of the fall-off came late in the year, with fourth-quarter revenues down by 15%.

At Gucci, full-year revenue fell by 6% to €9.87 billion, while sales at Yves Saint Lauren were down by 4%. Revenue also declined at Bottega Veneta and Kering’s other clothes-led houses like Alexander McQueen, but its eyewear division saw sales rise.

Market snapshot: FTSE 100 slips into red

Thursday 8 February 2024 12:06 , Daniel O'Boyle

The FTSE 100 has slipped into negative territory today, after modest gains earlier this morning.

Take a look at the latest market snapshot.

Mondi falls as merger talks confirmed

Thursday 8 February 2024 11:23 , Daniel O'Boyle

While DS Smith’s share rose even higher as it confirmed its merger talks with Mondi, the Weybridge-based firm saw its own shares fall.

Shares are down as much as 3.5% for the day to 1,333.00. Given they were up before the announcement, that’s a 6% fall since the deal was announced.

The board of DS Smith confirmed it had received ‘a highly preliminary expression of interest from Mondi’ (DS Smith/PA) (PA Media)

DS Smith confirms Mondi merger talks

Thursday 8 February 2024 10:32 , Daniel O'Boyle

DS Smith has confirmed that rival packaging company Mondi has made a “highly preliminary expression of interest” about a merger of the two FTSE 100 firms.

It said:: “The board of DS Smith understands that Mondi is considering a possible offer for DS Smith although no proposal has been received at this stage.

“There can be no certainty as to whether any proposal will be made or the terms of any such proposal. A further announcement will be made if and when appropriate.”The news of a potential deal follows Irish packaging giant revealing plans to merge with American firm WestRock and leave the FTSE 100.

DS Smith shares rose by as much as 13.4% today to 318.9p. They had already climbed as high as 296p before the announcement, amid speculation about a possible deal.

BAT and packaging firms top FTSE 100, SSE down 2% after update

Thursday 8 February 2024 10:12 , Graeme Evans

British American Tobacco shares put back some of 2023’s 30% slump after annual results included a forecast of revenues growth in the year ahead.

The Rothmans-to-Vuse firm pleased income investors by sticking to its progressive dividend policy while it also signalled a potential sale of some of its stake in Indian conglomerate ITC, a shareholding that dates back to the early 1900s.

BAT jumped 6% or 128p to 2447p, the best performance in the FTSE 100 and just ahead of 5% gains for packaging firms DS Smith and Smurfit Kappa.

The top flight improved 12.08 points to 7640.83, with SSE among the fallers after mixed weather contributed to renewables output 15% below plan in the opening three quarters of its financial year.

SSE fell 2% or 33.5p to 1619.5p, despite unchanged full-year earnings per share guidance of more than 150p and “increasingly supportive” policy conditions for its net zero strategy.

The FTSE 250 index outperformed with a gain of 114.98 points to 19,219.51. Defence firm Babcock International surged 7% or 30.2p to 454.4p, buoyed by JP Morgan’s “overweight” recommendation and 630p target price.

Tasty rise at Compass Group

Thursday 8 February 2024 09:55 , Simon English

Catering giant Compass enjoyed a tasty jump in its shares today as it beat City forecasts for growth and said recent acquisitions were bedding in well.

The company, which employs 500,000 worldwide providing food to schools, hospitals, armies and sports events, said sales are up 11.7% in the last quarter.

Its Levy Restaurants brand is the lead caterer for the 2024 Super Bowl at the Allegiant Stadium in Las Vegas.

The purchase of HOFMANNs in Germany and CH&CO in the UK helped those sales.

CEO Dominic Blakemore said the trend for large companies to outsource catering was helpful.

He said: “Outsourcing trends and volumes were strong despite continued inflationary pressures and some macroeconomic uncertainty.”

The shares rose 75p to 2225p, which leaves the business valued at £38 billion.

Compass was suspended by the UN in 2005 after alleged bribes to win contracts. Some staff were dismissed.

The North American arm, the biggest, saw sales up 11.3%.

The CEO added: “The group's good cash generation and balance sheet gives us the flexibility to invest in capex, driving organic growth, and acquire high quality businesses, unlocking further growth and enhancing shareholder returns."

Market snapshot with FTSE 100 flat

Thursday 8 February 2024 09:31 , Daniel O'Boyle

The FTSE 100 is close to where it started the day, while the FTSE 250 is up.

Take a look at today’s market snapshot.

Sanderson design turns to supermarket deals as sales falls

Thursday 8 February 2024 08:51 , Daniel O'Boyle

Posh wallpaper and fabrics business Sanderson Design Group says it will focus more on licensing its designs out to high-street retailers, after it saw UK sales fall by 11% last year.

Revenue dipped by 3% to £108.5 million amid a “subdued consumer backdrop”, with the sharpest decline in the UK.

Sanderson highlighted its “higher margin” licensing deals, with Sainsbury’s and Next, as “an important strategic pillar” for the group. It said it would focus on that area and North America, where sales were up.

The shares fell by 10..4% to 113.4p.

Wallpaper company Sanderson has reported a sales dip (sanderson)

Unilever and BAT lead robust FTSE 100, AstraZeneca and SSE struggle

Thursday 8 February 2024 08:26 , Graeme Evans

Post-results dealings have triggered share price gains of 5% or 115p to 2434.5p for British American Tobacco and 3% or 108.5p to 4010p for Unilever.

AstraZeneca, which is London’s biggest company by market value, is down 2% or 218p to 10,272p. Renewable power firm SSE also fell 24p to 1629p despite sticking to full-year guidance within its third quarter trading update.

The FTSE 100 index is 17.71 points higher at 7646.46, with catering group Compass among other risers after its AGM trading update sent shares up 3% or 55p to 2205p.

The FTSE 250 index rose 0.3% or 61.81 points to 19,166.34, with Watches of Switzerland up 3.8p to 385.6p after its update.

BAT in £27 billion writedown on its US business

Thursday 8 February 2024 07:57 , Michael Hunter

The move away from cigarettes led BAT to take £27 billion write down in the value of its US business today, even as it reported an overall rise in sales from traditional tobacco products.

Tadeu Marroco, BAT CEO, said that the “non-cash impairment charge” was “mainly relating to our acquired US combustibles brands”, and came due to “the current macro-economic pressures impacting the US. combustibles industry, the growth of illicit single-use vapour products and uncertainty around a potential menthol ban in the US.”

The writedown, one of the biggest in corporate history, was first flagged by the firm in December. It appeared on the company’s annual accounts today.

The FTSE 100 company also said that vape and heated tobacco products are making up over 16% of its sales.

But the company behind the Rothmans and Dunhill brands also reported an increase in revenue from cigarette sales.

While overall revenue for 2023 fell 1.3% to £27.3 billion. Sales of its traditional, or “combustable” products rose 0.6% at constant exchange rates.

It also revealed that its non-combustible brands, including Vuse and Velo, now account for 16.5% of group revenue. It has a target for 50% of revenue to come from this part of the business by 2035.

Arm shares surge as AI demand boosts earnings

Thursday 8 February 2024 07:43 , Graeme Evans

Shares in Arm Holdings are set to open sharply higher in New York after the chip designer’s third quarter earnings beat hopes amid surging AI demand.

Arm hailed an “outstanding” performance as revenues of $824 million (£652.4 million) came in 14% higher year-on-year, leading to earnings per share above the company’s previous guidance with a figure of $0.29.

The Cambridge-based company said: “Arm’s licensing revenue was supported by increasing demand for new technology driven by all things AI.

“From the most complex AI cloud applications to the smallest edge devices, AI on Arm is everywhere.”

Shares closed last night at $77, having been $51 last September when Arm joined Nasdaq with a market valuation of $54.5 billion (£43.3 billion).

The stock jumped 20% after the closing bell as Arm’s results revealed a new estimate for full-year revenues of up to $3.2 billion (£2.5 billion) and earnings of $1.20-$1.24.

Astrazeneca revenues climb 6% despite drop in Covid drugs sales

Thursday 8 February 2024 07:38 , Simon Hunt

Sales in British pharma giant AstraZeneca rose as much as 6% to $45.8 billion after strong sales of its core drugs offset a $3.7 billion drop in sales Covid-related drugs.

The Cambridge-based business forecast sales growth of low double digits in 2024 as it reported a more than doubling of pre-tax profits in 2023 to top $8 billion.

The sales growth was led by a 36% jump in its diabetes drug Farxiga, which is now responsible for around an eighth of total sales. But some uncertainty hangs over the future of sales of the drug amid a legal dispute with rival Sun Pharmaceuticals, who Astra claim infringed its patent. A trial date has yet to be set.

CEO Pascal Soriot said: We expect another year of strong growth in 2024, driven by continued adoption of our medicines across geographies. Our differentiated and growing portfolio of approved medicines, global reach and rich R&D pipeline give us confidence that we will continue to deliver industry-leading growth."

 

Unilever calls its own competitiveness 'disappointing' as consumers stick with non-premium brands

Thursday 8 February 2024 07:32 , Michael Hunter

Unilever, the consumer goods company behind blockbuster brands from Dove soap to Hellmann’s mayonnaise, hit out at its own performance today as it unveiled a fall in sales.

It called its own competitiveness “disappointing”, pointing to struggles to win market share as consumers shift to non-branded goods.

The FTSE 100 multinational’s 2023 turnover slipped 0.8% to €59.6 billion (£51.1 billion). Underlying operating profit rose 2.6% to €9.9 billion.

Hein Schumacher, its CEO, said:

“Today's results show an improving financial performance, with the return to volume growth and margins rebuilding. However, our competitiveness remains disappointing and overall performance needs to improve. We are working to address this by improving our execution to unlock Unilever's full potential.”

The fourth most valuable company in the UK published a “Growth Action Plan” to boost its performance in October.

Schumacher said today that “We are at the early stages of this work and there is much to do but we are moving with speed and urgency to transform Unilever”.

It said the percentage of its businesses winning market share was “disappointing” at 37%, adding:

“This poor performance reflects share losses to private label in Europe, consumer shifts to super-premium segments in North America ... Our competitiveness is not good enough and we are moving quickly to address it.”

Watches of Switzerland revenue falls as luxury slowdown grows

Thursday 8 February 2024 07:22 , Daniel O'Boyle

Revenue at Watches of Switzerland declined in the three months to 18 January, after a tough Christmas in the UK.

The retailer of brands like Rolex, Tag Heuer and Jaeger-LeCoultre had previously warned that sales in the UK had been weak in December. UK & Europe revenue was down 7% to £222 million.

The business said: “ Challenging macroeconomic conditions in the UK impacted consumer spending in the luxury retail sector, impacting luxury watches and particularly non-branded jewellery where we saw unusually high levels of promotional activity.”

Globally, revenue was £397 million, down 1%.

After cutting its guidance three weeks ago, Watches of Switzerland confirmed that outlook today.

The retailer added: “We are encouraged by the UK Office for Budget Responsibility's review of VAT free shopping for tourists; we have not included its reintroduction into our guidance.”

(Rolex)

Tech stocks lead latest Wall Street advance, China consumer prices fall

Thursday 8 February 2024 07:14 , Graeme Evans

The bounce for Wall Street markets continued last night as the S&P 500 index rose 0.8% to within five points of breaking the 5000 mark for the first time.

The Nasdaq Composite closed 1% higher and the Dow Jones Industrial Average rallied 0.4%, with top performers including semiconductor giant Nvidia and Facebook owner Meta Platforms after gains of around 3%.

The positive mood continued after the closing bell as the earnings guidance of UK-based chip designer Arm Holdings triggered a 20% rise for shares.

The developments contrasted with Europe’s performance after a fall of 0.7% for the FTSE 100 index. London’s top flight is forecast by IG Index to edge about seven points higher to 7637 at the start of today’s session.

In Asia, the Hang Seng index is 1% lower after China consumer prices fell 0.8% year-on-year in January, extending the run of declines to four months.

Recap: Yesterday's top stories

Thursday 8 February 2024 06:45 , Simon Hunt

Good morning from the Standard City desk.

Rupert Soames’s grandfather Winston Churchill had a phrase that neatly summed up his approach to leadership: Action This Day.

It epitomised the wartime prime minister’s determination to cut through inertia, negativity and bureaucracy to make the important things happen.

The new president of the CBI will need a lot of that if he is to save what was once Britain’s foremost business lobby group, now struggling to repair its reputation.

Fortunately, Soames’s impressive CV and ebullient personality suggest that he has inherited a fair dose of the energy and optimism that is essential for any leader coming into an organisation hoping to save it after what he rightly described as a “near death experience”.

The decision of PwC to return is a promising start. But it remains a long and arduous road ahead if the CBI is ever to regain its place at the top table with government.

Soames, the Eton and Oxford educated former Bullingdon Club member from the most famous of Tory dynasties, will probably have to rebuild the CBI working with Keir Starmer and Rachel Reeves on the other side of an autumn election. It could be a key relationship if Britain’s economy is to pick up pace again.


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