Daily Business Live: Wed
Virgin Money slumps; GDP; Brewin Dolphin; Babcock review
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4.30pm: Markets unmoved by Spending Review
The Chancellor’s Spending Review barely troubled the markets which had priced in most of the announcements. The FTSE 100, which fell about 40 points when the Chancellor stood up and ending the session 41.01 points lower at 6,391.09 (-0.64%).
10am: Scottish GDP rises for fifth month
Scotland’s GDP increased by 1.6% in September, according to the Chief Statistician. This is the fifth consecutive month of increasing GDP, but output remains 7.6% below the level in February prior to the direct impacts of the COVID-19 pandemic
In September there has been growth in all of the main sectors of the economy, but at a slower rate than seen over the summer months. Output in the services sector is estimated to have increased by 1.6% compared to August, production sector output increased by 1.4%, and construction sector output increased by 2.7%.
Using the experimental monthly statistics for Quarter 3 as a whole (July to September), GDP is provisionally estimated to have increased by 14.7%, after falling by a total of 22.0% across Quarters 1 and 2 of 2020.
8.30am: Market buoyant
The FTSE 100 extended its gains, rising almost 31 points to 6,462.94, buoyed by positive vaccine news, president-elect Joe Biden’s choices for top posts, and stronger-than-expected US economic data.
7am: Virgin profits down 77%
Virgin Money UK reported a 77% drop in annual underlying pre-tax profit to £124 million (2019: £539m) as it took a £501m impairment charge against an expected surge in bad loans.
The UK’s sixth-largest lender said that given the unprecedented nature of COVID-19, “the exact economic outlook for the UK is clearly evolving and remains hard to predict with any high degree of certainty at present.
“It is therefore not appropriate at this stage to give firm medium-term guidance and so the Group’s previous FY22 targets are withdrawn pending more certainty in the economic environment.”
Chief executive David Duffy said: “While we are yet to see any material impacts of the pandemic on the credit quality of our loan book, our results reflect a cautious and conservative approach.
“Although the Covid-19 vaccine news is a strong cause of hope for the future, the economic benefits are still some way off.”
Calnex upbeat on 5G growth
Scottish telco Calnex Solutions said it had seen strong demand across all three areas of its business during the first half to 30 September.
Brewin Dolphin ‘well positioned’
Wealth manager Brewin Dolphin reported a steady performance but cut its dividend.
The company maintained its total discretionary fund inflows at £2.8bn (FY 2019: £2.8bn).
Total funds increased to £47.6bn (H1 2020: £41.4bn, FY 2019: £45.0bn), up 15% since 31 March.
Excluding funds from acquisitions of £2.7bn, total funds were broadly flat year on year.
Income for the period increased by 6.6% to £361.4m (FY 2019: £339.1m) and includes £19.8m from recent acquisitions. Income was higher in the second half of the year due to higher commission and fee income due to higher market levels. Financial planning income grew 20.4% (up from 12.2% last year) to £33.1m.
Profit before tax and adjusted items increased 4.3% to £78.2m (FY 2019: £75.0m).
Statutory profit before tax came in at £62.1m, 0.8% lower than FY 2019 (£62.6m).
It is recommending a final dividend 9.9p per share, taking the total to 14.3p per share (2019 final dividend: 12.p per share, total 16.4p).
Robin Beer, chief executive, said: “Looking ahead to FY 2021, we’re prioritising our digital agenda, so we can innovate and explore ways to improve client and adviser user experiences.”
Babcock review under way
New chief executive David Lockwood said there are areas of the business that “need to be addressed” and he will be reporting next May on a review of the defence and engineering group.
Announcing a 43% fall in underlying operating profit (down 39% excl. disposals and FX) to £143.1 million, he said: “Demand for our critical services has remained resilient overall… the additional costs incurred and inefficiencies created have impacted our profitability.
“Our operating profit performance in the first half reflects this COVID-19 impact as well as disposals, the impact of government insourcing of Magnox and Dounreay, and weak trading in civil aviation.
“In my first three months at Babcock I have spent time seeing many parts of the business. Our strengths are clear. We have many high-quality businesses, with a deep understanding of our customers, operating in markets where demand for our expertise is strong. At the same time, there are areas that need to be addressed if we are to achieve our full potential. The most important aspect will be delivering sustainable free cash flow.
“In the coming months, we will be reviewing our strategic priorities, execution and delivery. I look forward to reporting back on this in May. In the meantime, we remain focused on delivering for our customers, employees and shareholders and continue to look to the future with confidence.”
Port of Leith investment
The Port of Leith, owned by Forth Ports, is making a seven figure privately funded investment at the port to bring to the market an additional 25 hectares of land linked to over 3km of deep water quaysides.
This investment will see the skyline of the port changed, with the final stages of the demolition of the Imperial Grain Silo being completed.
The FTSE 100 is expected to open higher following a record session for US markets that saw the Dow Jones break through the 30,000 milestone for the first time.
Spread-better IG expects the FTSE 100 to start around 25 points higher after rising 98 points to 6,432 in Tuesday’s session.
The Dow Jones Industrial Average rose 1.54% to close at 30,046. The S&P 500 also set a record, closing 1.62% higher, while the Nasdaq climbed 1.31%.
Optimism is being fuelled by Joe Biden’s preparation for government and better economic news that is building on Covid-19 vaccines.
Asia picked up the good news baton with Japan’s Nikkei 225 up 0.54% while Hong Kong’s Hang Seng rose 0.4%.