Stocks absorb OECD report | WH Smith chair | Wizz Air loss
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5pm: FTSE 100 cushioned from downbeat OECD report
The FTSE 100‘s overseas earners, miners and commodity stocks helped cushion the index from a bigger blow from a downbeat OECD forecast, as it closed marginally lower at 7,593.00, down 5.93 points.
Shares in BP and Shell closed up 1.1% and 1% respectively. In the FTSE 250, while proposed merger partners Capricorn Energy and Tullow Oil added 7.7% and 5%.
Topping the blue-chip index was Melrose Industries, jumping 11% as it announced the launch of a £500 million buyback.
Industrial software firm Aveva rallied 11%, despite swinging to an annual loss. However, adjusted earnings rose and the firm raised its dividend (see below).
Among the mid-caps, Wizz Air plummeted 9.5% after withholding financial guidance in light of macroeconomic volatility.
11.30am: No growth in 2023
Stocks were lower as the OECD said Britain will be the worst performing major economy next year apart from sanctions-hit Russia.
The OECD said the UK was being hit by a combination of higher interest rates, higher taxes, reduced trade and rising energy prices. Full story here
The FTSE 100 was trading 37 points lower at 7,562.26.
9.30am: Market stalls, Wizz Air optimism
The FTSE 100 was heading nowhere fast on Wednesday, said AJ Bell investment director Russ Mould. The index was trading at 10 points lower at 7,589.10.
“The UK market appears to have stalled, just as many rail travellers will if the nationwide strike planned for later this month goes ahead,” said Mould.
“Investors are nervously eyeing US inflation figures due on Friday, with India’s central bank having just raised rates by more than expected as it looks to curb the inflationary threat.”
On Wizz Air‘s annual figures, showing an increased loss (see below), Mould said CEO, Jozsef Varadi, “has a reputation for being an eternal optimist, hungry to make the airline a much larger player in the global aviation sector.
“Despite saying the business is on track for a record summer, Varadi can’t escape the fact the airline industry is on the verge of a meltdown thanks to a lack of staff in airports.
“There is no way of glossing over the issue that a growing number of people are likely to be ditching plans to fly this summer as they don’t want the hassle of flight delays, cancellations and long queues.
“There is also the issue that air fares are going up and more people have less money in their pocket each month after paying the bills, so they might not be able to afford to travel.
“Add in disruption with air traffic control and you’ve got a chaotic backdrop which means airlines could experience a third consecutive summer of misery. That explains why Wizz Air is not providing further financial guidance for its current year.
“Despite this negative situation, Wizz Air continues to expand as a business, adding more aircraft, new bases and new routes. It’s giving Ryanair a run for its money in terms of finding new ways to get customers to pay for things beyond a ticket. This so-called ‘ancillary revenue’ now accounts for more than half of group revenue.”
7am: Ex-RBS exec to chair WH Smith
WH Smith has appointed Annette Court as a non-executive director and chair-designate. She will join the Board on 1 September and on 1 December will succeed Henry Staunton who has been chair for nine years.
Ms Court is currently chair of Admiral Group and a non-executive director of Sage Group. She was previously the CEO of Europe General Insurance for Zurich Financial Services and was a member of the group executive committee from 2007 to 2010.
She was also the CEO of Direct Line Group (formerly RBS Insurance) from 2001 to 2006 and a member of the RBS group executive management committee. She has also been a member of the board of the Association of British Insurers (ABI).
7am: Wizz Air loss increases
Wizz Air said passenger numbers and asset utilisation for the year to the end of March remained well below pre-Covid levels resulting in a reported net loss of €642.5m for F22, an increase of €66.4m compared to the previous year’s loss. However, the reported loss in the fourth quarter was ahead of guidance driven by an improving trading environment.
Planned capacity growth for the first two quarters of FY23 is over 30% and 40%, respectively.
József Váradi, Wizz Air group chief executive, said: “The industry is witnessing supply-chain issues across airports , including in our network. Shortages of staff in air traffic control, security and other parts of the supply-chain are impacting airlines , our employees and our customers directly.
“We are deploying extra resources to minimise disruptions and urge all other stakeholders to do the same, having customers’ best interests always in mind.
“We see strong consumer demand for summer, but expect an operating loss for the first quarter of F23. The airline industry remains exposed to externalities such as air traffic control disruption and continuing operational issues within the airports sector, adding to a volatile macro environment.
“As a result, at this point, we are not providing further financial guidance for the year.”
7am: Aveva loss
Industrial software firm Aveva said the loss from operations before tax for the year to the end of March was £6.5m (FY21: profit of £36.6m) with the loss being primarily due to the amortisation of intangible assets of £226.1m (FY21: £95.7m).
Adjusted operating profit grew 7.7% on an organic constant currency basis to £365.1 million (FY21: 354.7m).
Revenue was £1.24 billion, an increase of 3.3% (FY21: £1.2bn).
The company is proposing a final dividend of 24.5p, representing an increase of 4.3% (FY21: 23.5p).
The company provides software to control and monitor oil rigs and nuclear power stations as well as sensors to ensure the smooth supply of energy for the national grid. However, it is moving away from selling software on-premises and accelerating the shift to cloud-based subscriptions.
It is targeting 15-20% growth in recurring revenues over the next four years.
Crude oil has surged to three-month highs as the world’s largest importer, China, eased lockdown restrictions in Beijing and Shanghai and is expected to raise demand at a time of limited supply due to the Ukraine war.
Goldman Sachs said the structural supply deficit in the global oil market has not been resolved and will mean crude oil prices rallying further in the second half of the year.
Morgan Stanley and Goldman Sachs have re-iterated their forecast of $150 and $140 bbl respectively for later this year. At this level, the price of petrol at UK pumps is likely to reach a £2 per litre norm.
Morgan Stanley noted that to replace Russian diesel imports with domestic output, total European crude throughput will have to ramp up from the current 10.9 million bpd to 12.1 million bpd, above installed capacity of only 11.9 million bpd.
In equity markets, the Dow Jones Industrial Average added 0.8%, whilst the S&P 500 advanced 0.95% and the Nasdaq gained 0.94%.
Japan’s Nikkei added 0.89%, Hong Kong’s Hang Seng was up 1.6%, while the Shanghai Composite dipped 0.26%.