Market report

Virgin Money | Compass | China Covid concerns


5pm: London off lows

Despite renewed concerns over the impact of Covid cases in China, the FTSE 100 closed off its lows just 8.67 points lower at 7,376.85.

7am: Virgin Money

Virgin Money

Virgin Money posted a 43% surge in annual pre-tax profit to £595m from £417m. Underlying profit came in at £789m, just 1% lower on last year’s £801m.

It posted impairment losses of £52m compared with a £131m impairment charge in 2021.

The board has recommended a final dividend of 7.5p (2021:1p).

It has set aside £52 million to cover potential bad loans to reflect the deteriorating outlook, but said there were limited signs of credit concerns so far.

CEO David Duffy said: “While we have solid credit quality across our lending, we are aware that some customers will have to make difficult decisions in this environment, and we are proactively offering them help and support.”

“While not directly exposed to Ukraine, we have seen second-order impacts on the broader UK economy from higher costs, higher interest rates and potential pressure on our customers and asset quality.

“At present, credit quality indicators remain benign but we remain cautious on the outlook, and stand ready to support customers further if needed. Against this backdrop, impairment charges were muted as provisions taken for Covid-19 impacts were unwound.”

The Glasgow and Newcastle focused bank has announced a £50m share buyback extension to the £75m it announced in June.

AJ Investment director Russ Mould said: “Virgin Money offered a reminder that higher interest rates aren’t necessarily bad news for everyone as it announced big cash returns to shareholders off the back of a robust set of results.

“Combined with a beaten down valuation and it is no surprise shares in Virgin Money were in heavy demand today.

“The better-than-expected dividend and buyback from Virgin Money are good news on their own but are also crucial for what they say about management’s confidence in the outlook for the business. 

“Virgin Money has significant exposure to the mortgage market, although looking at its loan book it seems to have done a decent job of managing its risks. So far impairments are coming in lower than expected and Virgin Money is sitting on a comfortable cash buffer, way in excess of regulatory thresholds.”

7am: Compass

Catering group Compass said continuing operational complexities and inflationary pressures among clients are driving increased outsourcing, in resulting growth opportunities.

Underlying operating profit at the catering firm increased by 88% on a constant-currency basis to £1.59 billion. Statutory operating profit was £1.5bn (2021: £545m), an increase of 175% reflecting the higher revenue and margin recovery. 

The board has proposed a final dividend of 22.1p which, including the interim dividend of 9.4p, gives a total dividend for 2022 of 31.5p. 

It expects underlying operating profit growth to be above 20% on a constant-currency basis, to be delivered through organic revenue growth of around 15%, weighted towards the first half of the year.

6am: CBI immigration call

CBI chief Tony Danker will today call for a relaxation of the immigration rules to solve Britain’s labour shortages and boost economic growth.

Full story here

Global markets

Reports of new Covid-19 fatalities in China are expected to be a further concern that the government could make a U-turn on its decision to ease the strict Covid zero rules.

The Hang Seng fell more than 2% today, after a more than 26% rebound in the first two weeks of November.

Wall Street closes on Thursday for the Thanksgiving Day holiday in the US. Equity markets will re-open for a half-day on Friday. Trading volumes are expected to be low as a result.

The FTSE 100 index ended 38.98 points, 0.5%, higher at 7,385.52 on Friday and was expected open lower.

The pound was quoted at $1.1827, down from $1.1929 late Friday.

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