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Weekly review

By Josh White

Date: Friday 30 Jul 2021

(Sharecast News) - The FTSE 100 ended the week 4.72 points higher, closing at 7,032.30 on Friday.
Equity view

Cineworld on Friday said it had secured $200m of incremental loans maturing in May 2024 from a group of existing lenders, as the cinema chain owner looked to take advantage of pent-up demand after the lifting of Covid restrictions. The company has also agreed covenant amendments on certain of its existing debt facilities, including reducing the minimum liquidity requirement and relaxing limitations on the use of cash.

British Airways and Iberia parent IAG posted a narrowing of its first-half operating losses on Friday and said capacity was set to grow, but did not provide any annual guidance due to Covid uncertainty. In the six months to the end of June 2021, operating losses narrowed to €2bn from €4bn in the same period a year ago, even as total revenue declined 58% to €2.2bn. IAG noted that in 2020, the impact from Covid was mainly limited to the period from March onwards.

Engineering firm IMI lifted full-year earnings guidance after a strong rise in interim profits. The company on Friday reported an 18% rise in pre-tax profits to £137m as revenue increased 5% to £907m. The interim dividend was lifted to 7.9p a share, up from 7.5%.

Property portal Rightmove reported a jump in interim pre-tax profit and revenue on Thursday amid strong demand from househunters. In the six months to the end of June, pre-tax profit rose to £114.7m from £61.6m in the same period a year ago, with revenue up 58% at £149.9m. Average revenue per advertiser increased 63% to £1,163 per month - Rightmove's highest ever ARPA.

BAE Systems increased its dividend and announced a £500m share buyback as the arms and aerospace company reported a 61% increase in first-half profit. Operating profit for the six months to the end of June rose to £1.3bn from £808m a year earlier as revenue increased to £9.34bn from £9.18bn. Sales at constant currency increased 6% to £10bn.

UK telecoms and broadcasting group BT reported better-than-expected first-quarter core earnings as trading improved across most of its businesses. The company reported adjusted earnings before interest, tax, depreciation and amortisation of £1.87bn, up 3% and against expectations of £1.81bn. Revenue for the three months to June 30 fell 3% to £5.07bn.

All of Royal Dutch Shell's key financial metrics headed in the right direction over the second quarter, with the company announcing a dividend increase and share buyback programme as a result. The oil major reported a 71% jump in adjusted earnings for the three months to June to reach $5.53bn (UBS: $5.52bn), with total revenues up by 8.7% to $60.5bn alongside.

Rentokil Initial said it expected market expectations for annual profit to increase after the pest control and hygiene company reported sharp rises in interim profit and its dividend. Ongoing operating profit rose 50.1% to £208.4m in the six months to the end of June as ongoing revenue increased 18.3% to £1.46bn. Rentokil increased its interim dividend by 38% to 2.09p a share.

Luxury car maker Aston Martin posted a narrowing of its first-half losses on Wednesday as revenues surged, thanks in part to its first sport utility vehicle, the DBX. In the six months to 30 June, pre-tax losses narrowed to £90.7m from £227.4m in the same period a year ago, while revenue jumped 242% to £498.8m. Meanwhile, total wholesale volumes rose 224% to 2,901.

British American Tobacco on Wednesday reported higher revenues driven by more people using its vaping products. On a constant currency basis, adjusted revenue at the maker of Lucky Strike cigarettes for the six months to June 30 rose 8.1% to £12.1bn, led by 41% growth in its new categories business, which includes vaping. Profits from operations rose 5.4% to £5.2bn.

Asset manager Sanne has acquired the European fund administration business of PraxisIFM Group for £54.0m. Sanne said on Wednesday that PraxisIFM's funds business was "one of the leading players" in the European listed funds administration sector, which had consistently delivered double-digit revenue growth in recent years.

Wizz Air posted a widening of its losses for the first quarter as it continues to be hit by pandemic restrictions, but struck an upbeat note on summer capacity. In the three months to 30 June, the airline's loss widened to €114m from €108m in the first quarter of last year, while the underlying net loss came in at €118.7m compared to €56.7m.

Virgin Money UK released £19m of credit provisions in the third quarter and upgraded its margin guidance for the year as the bank traded in line with expectations. The FTSE 250 lender said the release was prompted by the improving economic outlook and that if that trend continued it could release further provisions with its annual results.

Croda International said it expected annual profit to be well ahead of expectations as the speciality chemicals company reported record results for the first half. Pretax profit rose 41% to £204.1m in the six months to the end of June from a year earlier as sales surged 39% to £934m. Adjusted pretax profit rose 51% to £229.5m and by 35% from two years earlier.

Gambling technology group Playtech said first-half trading was in line with expectations with its online business offsetting longer-than-expected closures at its Italian retail operations. The company said the Covid-19 pandemic continued to pose challenges and the macroeconomic outlook remains uncertain with the possibility of further unexpected lockdowns.

Convenience foods manufacturer Greencore lifted annual profits guidance after a strong third quarter as Covid lockdown measures were relaxed. The company on Tuesday said it now expected a fiscal 2021 adjusted operating profit of between £36m -£40m against previous guidance of higher than 2020's £32.5m.

UK food producer Cranswick on Monday reported a rise in first quarter driven by strong retail demand and increased poultry sales. The company said revenue in the 13 weeks to 26 June 2021 was up 9.6% year on year, with corresponding volumes up 7.7%. Revenue growth also reflected the gradual but sustained recovery of the food to go and food service channel. Full year guidance was maintained.

AstraZeneca said on Monday that 'Ultomiris', or ravulizumab, has been recommended for marketing authorisation in the European Union for expanded use, to include children and adolescents with paroxysmal nocturnal haemoglobinuria (PNH). The FTSE 100 pharmaceuticals giant said the European Medicines Agency based its positive opinion on interim results from the phase 3 clinical trial in children and adolescents with PNH, which were recently presented during the European Hematology Association 2021 Virtual Congress.

Anglo American Platinum reported a sharp rise in first-half earnings on the back of soaring commodity prices. The precious metals miner, majority owned by Anglo American, said headline earnings of 46.4 billion rand (£2.26bn) in the six months to June 30, up from ZAR 6.9bn a year ago.

Cruiseline operator Carnival has kicked off the sailing Alaska season with both its Nieuw Amsterdam and Majestic Princess vessels setting sail over the weekend. Carnival said the Holland America Line's Nieuw Amsterdam ship had set off from Seattle on 24 July, while Princess Cruises' vessel had departed the Pacific North West set on 25 July.

Economic news

UK mortgage borrowing hit a record £17.9bn in June as homebuyers raced to complete purchases before the stamp duty holiday started to taper off, Bank of England figures showed. The net figure was well ahead of the previous record of £11.5bn set in March. There was no large increase in the number of mortgage approvals in recent months, suggesting a shorter time between a lender approving a mortgage and completion.

UK commercial vehicle production rose for the fourth month running in June but output was constrained by a shortage of components and workers caused by the pandemic. The industry produced 5,808 vehicles, up 39.6% from a year earlier when the UK was in its first, most severe lockdown, the SMMT trade body said. Production in the first half of 2021 was 20.9% lower than the average over the previous five years, affected by the lockdown in the first three months of 2020 and more recent disruption.

The proportion of UK shops sitting empty rose in the second quarter after retailers were buffeted by lockdowns and falling sales during the pandemic, trade figures showed. The vacancy rate for retail premises increased to 14.5% from 14.1% the previous quarter and was 2.1 points higher than at the same point in 2020, the British Retail Consortium/Local Data Company survey showed.

House price growth eased slightly in July as the stamp duty holiday came to an end, according to a survey released on Wednesday by Nationwide. House prices rose 10.5% on the year, down from June's 17-year high of 13.4%. On the month, house prices fell 0.5% in July following a 0.7% increase the month before. The average price of a home was £244,229, down from £245,432 in June.

Fully-vaccinated travellers from so-called 'amber' countries in the European Union, as well as the United States, could soon join jabbed British travellers in avoiding quarantine when they arrive in the United Kingdom. Westminster's Covid operations committee was meeting on Wednesday morning, with the BBC reporting that a decision was expected "shortly", according to Foreign Secretary Dominic Raab.

UK retail sales rose strongly in July but stocks fell to a record low and are set to dip further amid supply problems, a CBI survey showed. Sales rose at a rate well above the long-run average in the year to July and orders grew at their fastest pace since December 2010 as the economy picked up, the business lobby group said. Sales are expected to grow again in August with order growth slowing slightly.

Savills lifted its 2021 house price forecast on Tuesday, citing the extension of the stamp duty holiday. The property group now expects house prices to rise by 9%, up from a previous estimate of 4%, which was made before Chancellor Rishi Sunak extended the stamp duty holiday to the end of June. The forecast is based on the "incredibly strong" first half, which saw values rise by 5.6% on average, according to Nationwide.

Shop prices fell more sharply in July as food and fashion retailers battled for household spending but cost pressures are mounting for the UK's retailers, a survey showed. Store prices fell 1.2% from a year earlier compared with a decline of 0.7% a month earlier, according to the British Retail Consortium/NielsenIQ index.

So-called 'Freedom Day' in England saw a rise in retail footfall across the UK last week, fresh data revealed on Monday, with the hot weather seeing some destinations enjoying a larger share of that increase. According to retail analysts Springboard, overall retail footfall rose by 3.3% week-on-week with increases across all three destination types, although a 4.1% increase in shopping centres compared to 3.3% in high streets suggested shoppers were seeking a respite from the heatwave in covered, climate-controlled environments.

A top Bank of England official pushed back on calls for the monetary authority to dial back on stimulus, arguing that inflationary pressures in the UK were transitory, while the pandemic remained a threat. In remarks prepared for a speech at the London School of Economics, Gertjan Vlieghe said: "For all these reasons, I think it will remain appropriate to keep the current monetary stimulus in place for several quarters at least, and probably longer."

International events

The eurozone economy grew more than expected in the second quarter as Covid restrictions were eased, according to preliminary data released on Friday by Eurostat. The economy expanded by 2% on the quarter and by 13.7% on the year. Economists had been expecting 1.5% growth on the quarter and 13.2% on the year. In the first quarter, GDP shrank 0.3%.

Americans continued splashing out last month as income growth surprised to the upside. Price pressures meanwhile leveled off unexpectedly.

America's financial markets' watchdog has halted registrations for Chinese corporates seeking to list on US stock markets. Citing people familiar with the matter, Reuters reported that the Securities Exchange Commission wants to put in place new guidance on disclosures to investors of the risks around a possible fresh regulatory crackdown by Chinese authorities.

Americans were a bit less cheerful in July amid complaints about higher prices for homes, vehicles and household durables. The University of Michigan's consumer confidence index fell from a level of 85.5 at the end of June to 81.2 at the end of July.

Qatar's sovereign wealth fund will take a minority stake in Airtel Africa's mobile money unit. The $200.0m investment by the Qatar Investment Authority values that unit AMC BV at $2.65bn on a cash and debt free basis.

US economic growth accelerated less than expected in the second quarter, although it did reclaim its pre-pandemic level. The US economy accelerated less than expected in the second quarter, although it did reclaim its pre-pandemic level.

The US jobs market improved a tad during the preceding week, the latest high-frequency data showed. According to the Department of Labor, over the week ending on 24 July initial unemployment claims fell by 24,000 to 400,000.

The US central bank dropped a small hint that policymakers had come a bit further down the path towards announcing the start of tapering its purchases of government debt. In its latest policy statement, the Federal Open Market Committee, the central bank's rate-setting body, said that more progress had been made towards meeting their dual mandate for maximum employment and stable inflation.

Tesla delivered better-than-expected profits and margins for its second quarter on the back of record sales of its vehicles. The electric carmaker's performance was especially noteworthy given the ongoing shortage of semiconductors globally and port congestions.

The International Monetary Fund's chief economist called on world governments to improve low-and-middle income countries' access to vaccines in order to avoid downside risks. According to Gita Gopinath, multilateral action to ensure rapid, worldwide access to Covid-19 shots would save countless lives, prevent new variants from emerging and add trillions of dollars to global economic growth.

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