BUSINESS LIVE: Thames Water set for Ofwat monitor; WPP cuts guidance; Quilter profits soar

Glencore revealed it swung to a $233million loss in the first six months of 2024 after it recognised $1.7billion in ‘significant items,’ including $1billion of impairment charges.

The mining giant also announced it had axed a plan to spin off its coal business after receiving blowback from shareholders.

Russ Mould, investment director at AJ Bell, comments on the firm’s results:

The volatility in mining outfit and commodities trader Glencore’s results is to be expected given its exposure to inherently unpredictable metal and energy prices, but the company’s decision to retain its coal assets is one that may raise eyebrows.

The company and a large number of its investors, given this move has followed significant consultation with its shareholder base, clearly still see a place for coal in its portfolio of assets. The retention is being sold on the basis it will enhance cash generation and allow the business to invest in its energy transition assets.

However, whether this will pass muster with institutions which place a strong emphasis on ESG factors and with companies in transition industries looking to secure supply of necessary metals is an open question.

The Labour Government’s plan to reintroduced the 2030 ban on sales of new petrol and diesel cars and force Britain’s drivers to go electric faces a major hurdle, according to a report this week.

A major skills gap is being predicted for a workforce of mechanics trained to work on EVs – with some parts of the country already undersupplied.

The Walt Disney Company has returned to a profitable third quarter as its combined streaming business started making money for the first time, while the movie Inside Out 2 did well in cinemas.

For the period ending June 29, Disney earned $2.6billion (£2.05billion), or $1.43 (£1.12) per share.

A year earlier it lost $460million (£361.4million), or 25 cents per share.

Stripping out one-time gains, earnings were $1.39 (£1.09) per share, easily topping the $1.2 (94p) analysts polled by Zacks Investment Research expected.

Revenue for the firm based in Burbank, California, rose 4% to $23.2billion (£18.2billion), beating Wall Street’s estimate of $22.9billion (£18billion).

Operating income for the entertainment segment nearly tripled to $1.2billion (£942billion) thanks to better performances from its direct-to-consumer and content sales/licensing and Other segments.

Quilter shares rose on Wednesday after the group unveiled stronger net inflows into its funds range and beat half-year earnings forecasts.

The firm’s first-half profit reached a record £97million, while assets under management climbed to £113.8billion by the end of June, 7 per cent higher than at the end of 2023.

Mortgage rates continue to fall this week, as HSBC and Barclays become the latest lenders to cut the cost of home loans.

(PA) – Vodafone has said it will hand €500million (£430million) back to shareholders over the coming months, as part of a broader plan to boost investor returns.

The telecoms giant said the latest stage of its share buyback programme will last until November 29, and that it had hired Goldman Sachs to carry it out.

It comes after Vodafone committed to return two billion euros to shareholders in March, after selling its Spanish business earlier this year.

Shares rose 1.7% on the news.

Vodafone is midway through a turnaround plan which has included selling off its Italian and Spanish businesses and cutting thousands of jobs.

It said in May that it had returned to growth in its key markets, despite overall revenue and operating profit dropping last year.

Meanwhile, it is still waiting to find out if a £15billion planned merger with Three has the seal of approval from the UK’s competition regulator.

Ibstock has cut its dividend after the building materials group’s first-half profits were hit by subdued demand for bricks.

Leicestershire-based Ibstock’s pre-tax profits tumbled by 60 per cent to £112million in the opening six months of 2024, with turnover down by a fifth to £178million.

Shares in European pharma giant Novo Nordisk plunged on Tuesday after sales of weight-loss drugs Wegovy and Ozempic disappointed in the second quarter.

Titanic demand for the drugs and frenzied investor interest has driven Novo to become Europe’s most valuable company, with its shares up by roughly 230 per cent since June 2021.

The Bank of England finally cut interest rates last week, in what was dubbed a knife-edge decision.

So, does the 5 to 4 vote to lower base rate put us firmly in the way down or mean that we may have to wait some time for the next cut?

Shoppers are avoiding high streets across Britain after shops were smashed up and looted in the riots, retail bosses warned today as they held an emergency meeting.

Sainsbury’s, Greggs, Iceland, Lush, Specsavers and Shoe Zone stores have all been targeted amid a wave of attacks in recent days following the Southport stabbings.

The UK has been gripped by rioting in the past week, mostly targeted at buildings linked to immigration – but what are your compensation rights if your home or car gets damaged too?

Violence has broken out across the country after three children were murdered in a stabbing in Southport on 29 July.

(PA) – The UK economy grew by more than expected during 2022, as revised official data showed the economy did better in the face of soaring inflation and post-pandemic recovery than previously thought.

The estimate for gross domestic product (GDP) rose from 4.3% to 4.8% in 2022, a larger than usual upgrade, according to the Office for National Statistics (ONS).

This was primarily driven by stronger growth in the transport, professional and business support services industries during the year.

Although it was partially offset by downgrades to growth in the manufacturing and healthcare sectors.

The revisions show economic growth was stronger during a year that the country faced double-digit inflation, which hit a peak of 11.1% in October 2022.

It was also a year marred by political instability and the mini-budget, delivered by former prime minister Liz Truss and chancellor Kwasi Kwarteng, which sent mortgage costs soaring.

Record sales of individual annuities helped Legal & General boost its bottom line in the first half and beat market expectations.

Legal & General reported a 1 per cent increase in first half core operating profit to £849million, beating analyst forecasts, as higher interest rates make fixed income pension products more attractive to savers.

The life insurer and asset manager, which is currently in the throes of a major overhaul led by new boss Antonio Simoes, sold £1.2billion of individual annuities in the period, more than double the previous year.

Abrdn clients poured money into funds once again as the asset manager remained silent on its search for a chief executive.

The FTSE 250 firm reported an ‘encouraging start’ to the first half of the year with net inflows of £800million.

Ofwat is set to impose an independent monitor on Thames Water after the debt riddled utility firm was stripped of two investment-grade credit ratings.

The monitor will supervise Thames Water and report back findings to Ofwat, ensuring the group improves its performance via series of commitments, the regulator said.

A week later, Standard & Poor’s reduced the group’s Class A debt rating to BB and its Class B debt rating to B, saying its liquidity had ‘deteriorated to a less-than-adequate position.’

The downgrades meant Britain’s biggest water supplier had officially breached its operating licence.

Hiscox has missed first-half profit expectations, as slower growth at the insurance firm’s US digital business weighed on its results.

The FTSE 250 Lloyds of London insurer reported a 7 per cent rise in pre-tax profit of $283.5million for the six months ended 30 June, compared with $290million in a company-compiled consensus.

Hiscox shares, which had rallied last month after takeover speculations, have slipped 1 per cent in early trade.

The group’s focus on investing in underwriting, however, has helped it increase its underwriting result to $241million despite a more active loss environment, CEO Aki Hussain said in a statement.

Legal & General has posted a 1 per cent rise in core operating profit to £849million for the first half, thanks to record retail volumes in annuities and US protection.

Senior equity analyst at Hargreaves Lansdown, Matt Britzman:

‘Record levels of retail annuity business helped push operating profit past expectations as people have been snapping up higher-rate annuity deals in anticipation of rates coming back down.

‘Legal & General is a leader in the market and managed to increase market share over the half and plump up its own results. The pension risk business (bulk annuity) was a little soft over the half, but a surge after the period ended was welcome news. This will remain a medium-term driver of growth as pension plans look to shift their liabilities to insurance giants like L&G.

‘There are a lot of strings to L&G’s bow, with bulk annuities at its core, and the market looks like it’ll stay healthy over the medium term. The next challenge is to deliver improved performance from the refreshed Asset Management division, which will carry some execution risk.

‘There’s plenty to like here; the balance sheet is strong, and total returns to shareholders are attractive with a growing dividend and ongoing buybacks too.’

London-listed stocks look set for a second consecutive day of gains after Monday’s sell-off, boosted by financial stocks and corporate earnings, as markets stabilise.

Banks have jumped 1.4 per cent and are among the top gainers after rising 0.4 per cent in the previous session,

The investment banking and brokerage sector is up 1.7 per cent, lifted by a 4.5 per cent advance in wealth manager Quilter after it beat half-year earnings forecasts and reported stronger net inflows of cash.

Inter-dealer broker TP ICAP has surged 10 per cent after a rise in its half-year pre-tax profit, further supporting the sector. The stock tops the FTSE 250 index.

Homebuilders have advanced 1.3 per cent after data showed that housing prices in the country rose by the most in six months in July.

On the other hand, precious metal miners haev inched 0.1 per cent lower, although gold prices hold steady after a decline in the previous session.

WPP is down 1.3 per cent after the ad group cut its annual revenue growth forecast and agreed to sell its controlling stake in FGS Global to KKR for $775million.

Bottler Coca-Cola HBC is down 2.3 per cent despite boosting its annual operating profit and revenue forecast and a higher first-half revenue.

Private equity firms are nervously awaiting the Government’s first Budget after Rachel Reeves has refused to rule out a capital gains tax hike.

Last week, the Chancellor warned that difficult decisions were required to plug a £22billion budget black hole that was discovered after Labour won the Election last month.

The UK is in a ‘golden era’ of live music – in part thanks to international tourists flocking to see artists such as Taylor Swift.

That is according to Stephen Freeman, the man behind the food and drink at huge UK venues, including Wembley and Murrayfield stadiums.

Buy-now-pay-later giant Klarna is considering selling shares ahead of a potential blockbuster New York listing.

The Swedish lender has asked investment bank Goldman Sachs to advise on a secondary share sale, where investors sell their stock to another party.

FTSE 250 wealth manager Quilter beat earnings and inflows forecasts in the first half, as more wealthy clients flocked to the firm’s funds.

Quilter posted net inflows of £1.5billion over the first six months of the year – up from around £200million the prior year – and total assets of £113.8billion, all beating analyst forecasts compiled by the company.

The company also reported a 28 per cent jump in adjusted pre-tax profit to £97million and announced an interim dividend of 1.7p per share.

‘With UK inflation easing, consumers’ disposable income has improved, leading to early signs of incremental discretionary saving.

‘We expect new business levels across the industry in 2024 to be higher than in 2023.

‘Interest rates also remained supportive in the first half, sustaining the investment return generated on shareholder funds which, together with strong cost management, led to a 28% increase in first half adjusted profit.

‘While expected lower interest rates in the second half will reduce investment income, we would also expect lower rates to support market levels and increase client focus on long-term saving, both of which are supportive for new business flows and revenue growth.’

High Street lenders must improve their crisis plans to prepare for a potential collapse, the Bank of England said yesterday.

The findings were part of the central bank’s investigation into whether banks could ‘safely’ shut down without disrupting the financial system or forcing a taxpayer bailout.

Barclays, HSBC, Lloyds and Standard Chartered were among those told that they need to be more prepared for a potential failure.

WPP has agreed to sell its controlling stake in FGS Global to minority shareholder KKR for $775million, with the cash earmarked to pay down the British ad group’s debt pile/

The move, which implues an enterprise value for the financial PR agency of $1.7billion, came as the group downgraded its 2024 guidance after organic growth suffered again in the first half.

Mark Read, CEO of WPP, said:

‘The sale of FGS represents an excellent outcome for WPP. Together with the management of FGS we have built a world-leading strategic communications and advisory group, creating considerable value for all stakeholders.

‘We have achieved an attractive price, enabling WPP to accelerate the crystallisation of the significant value created.

‘This also provides WPP with greater financial and management flexibility as we continue to grow our core business including Burson and Ogilvy Public Relations which give our clients access to world-class public relations services.’

Ofwat has imposed an independent monitor to supervise Thames Water and report back findings to the regulator, after two bond rating downgrades led the debt riddled utility to breach its operating licence.

It follows separate moves from credit ratings agencies S&P and Moody’s, which stripped Thames Water bonds of their investment grade rating.

Ofwat said the independent monitor would help ensure Thames Water improves its performance, with the country’s biggest supplier subject to a series of commitments.

Ofwat boss David Black added:

‘We are clear that Thames Water needs to remedy its licence breach, turnaround its operational performance and secure backing from investors to restore its loss of investment grade credit rating.

‘These enforceable commitments will include our putting an independent Monitor into the business, to report back to us on what is happening to drive meaningful change in performance, and to ensure appropriate expertise is added to their Board.

‘We will continue to monitor progress very closely and will not hesitate to take any further action if necessary.’