Sterling's Strength Seen as Puzzling But Expected to Remain Supported

Sterling's Strength Seen as Puzzling But Expected to Remain Supported

0936 GMT - Sterling's recent solid performance is puzzling given a grim fundamental outlook of weak U.K. economic growth and higher inflation, Bank of America says. However, U.K. data have been better than expected and persistently higher inflation has kept the Bank of England hawkish about raising interest rates, supporting sterling, BofA analysts say in a note. "Our Economics team expects the BOE to hike three more times by 25 basis points to 5.25%," they say. "Also, we have more clarity of the post-Brexit regime, better relations with the EU, and significant reduction of related tail risks." BofA now sees EUR/GBP trading at 0.85 through the end of 2024, down from its previous forecast of 0.91. EUR/GBP falls 0.1% to 0.8556. ([e-mail])

COMPANIES NEWS:

ITV Confirms It Is Considering All3Media Acquisition

ITV confirmed Friday that it was actively exploring the possible acquisition of U.K. film production company, All3Media

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Currys Mulls Sale of Greek Business Kotsovolos

Currys said Friday it had started a strategic review of Greek business Kotsovolos, and that this could lead to its sale.

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Tesco 1Q Group Retail LFL Sales Rose 8.2%, Backs FY 2024 Guidance

Tesco on Friday said its like-for-like group retail sales grew 8.2% in the first quarter of fiscal 2024 boosted by volumes and inflation, and reiterated its guidance for the full year.

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Mears Sees 2023 Profits Materially Ahead of Market Views

Mears Group said Friday that the board expects 2023 profits to be materially ahead of current market expectations.

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Travis Perkins Lowers Full-Year Profit Guidance on Challenging Market Conditions

Travis Perkins said Friday that is has lowered its full-year profit guidance due to lower volumes in both the new build housing and private domestic repair, maintenance and improvement markets.

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CT Automotive 2022 Pretax Loss Widened; Confident on Meeting 2023 Views

CT Automotive Group on Friday said its pretax loss widened in 2022 but that it has seen an encouraging start to 2023 as operating conditions stabilize.

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Invinity Energy Systems Expects Narrower 2022 Pretax Loss Than Anticipated

Invinity Energy Systems said Friday that it expects to report a materially narrower pretax loss and gross margin loss than anticipated for 2022.

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ASA International Executive Director Aminur Rashid to Retire

ASA International Group said Friday that Executive Director Aminur Rashid will retire as of June 30 to spend time with his family.

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Peel Hunt Swung to Pretax Loss in FY 2023 on Market Turmoil

Peel Hunt on Friday said it swung to a pretax loss in fiscal 2023, hit by low market activity and subdued investor sentiment, and said it has seen signs of activity picking up as well as a gradual improvement in its M&A pipeline since the start of the new fiscal year.

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Dukemount Capital 1H Pretax Loss Narrows, Needs Extra Funds To Operate Beyond 12 Months

Dukemount Capital on Friday said its pretax loss for the first half of fiscal 2023 narrowed and that it will need extra funding to continue operating beyond the next 12 months.

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IAG Launches Buyback Program of Up to EUR35 Mln

International Consolidated Airlines Group said Friday it had agreed to launch a buyback program of up to 35 million euros ($38.3 million) for share awards to executives and employees under its share-based incentive plans.

MARKET TALK:

Tesco FY 2024 Guidance Shows Optimism Despite Margins Pressures

0958 GMT - Tesco's FY 2024 guidance shows that the British grocer is optimistic in delivering the same level of adjusted operating profit as FY 2023, despite pressures on margins, CMC Markets chief market analyst Michael Hewson say in a note. The group expects to deliver this while keeping retail free cash flow in a range of between GBP1.4 billion to GBP1.8 billion, Hewson says. All the while, the backdrop has seen the company deal with soaring costs with food price inflation trending at levels close to 20%, causing FY 2023 profits to fall by 50% as Tesco absorbed the increases, he says. ([e-mail])

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Travis Perkins Suffers as Consumers Tighten Belts

0947 GMT - Travis Perkins' 2023 profit warning has caused ripples across housing-related companies on the stock market, AJ Bell says. The U.K. building-materials retailer benefited during a house-renovation craze driven by lockdowns, but interest rates have risen so much so fast that many home owners can't afford home improvement projects, AJ Bell investment director Russ Mould writes. "There continues to be a shortage of housing in the U.K., but more important to Travis Perkins now is the ability and willingness for the consumer to spend money," Mould says. A more resilient economy is helpful, but pressures on family finances might not ease for a while, which means the builders' merchant needs to be more realistic on earnings expectations, he adds. Shares are down 5.5% at 819 pence. ([e-mail])

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ITV's Risk Profile Could Benefit From All3Media Acquisition

0947 GMT - ITV's potential acquisition of production company All3Media, which reports say could be GBP1 billion transaction, would be significant, even without knowing how it would be structured or financed, Citi analysts Thomas A. Singlehurst and Praveen Shetty say in a note. It would make ITV a majority content-production business with content-production revenue of around GBP2.3 billion out of a total pro forma group revenue of around GBP4.5 billion, the analysts say. Because content-production revenue streams are seen as more secure than traditional advertising-funded broadcasting, this would be important as it would reduce ITV's perceived risk profile, they say. Citi rates the stock buy with a 105-pence target price. ([e-mail])

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BAE Systems Platforms & Services Unit Offers Potential

0943 GMT - BAE Systems's European Hägglunds military vehicle business and Bofors artillery and gun operations stood out at the defense company's capital-markets day, Jefferies says. The brokerage says it's comfortable with its above-consensus estimates following the event, which focused on land products within its platforms & services division. P&S exhibits strong top-line potential, with Hägglunds sales to triple by 2026 and P&S margins set to expand beyond FY23, Jefferies says. "The war in Ukraine has also favorably impacted the pace of decision-making, as seen with the Slovakia and Czech Republic CV90 orders," Jefferies analysts say. ([e-mail])

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BOE Overtightening Risk Falls, More Rate Rises Expected

0942 GMT - The risk of the Bank of England overtightening has dropped and more rate rises are expected after recently released U.K. inflation and wage data came in stronger than expected, Bank of America analysts say in a note. "With stronger than expected data the risks of overtightening from the BOE look nonexistent to us," they say. Following the release of the data, markets see the BOE further away from the terminal rate than three months ago, the analysts say. The data justifies a 50 basis points rate increase at the June 22 meeting, but the BOE is likely to take a gradual approach and raise rates by 25 bps, BofA says. ([e-mail])

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Tesco's Focus on Value Seen Protecting Market Share

0916 GMT - Tesco's 1Q performance benefited from a robust increase in both sales and revenue, while the group's market share remained at 27.1% thanks to the British grocer's focus on value and ability to shave prices, Interactive Investor head of markets Richard Hunter says in a note. However, investor debate around the company continues to focus on inflation as cost of living issues are likely to stay for a while, he says. "Tesco has noted some encouraging signs that inflation is starting to ease and, in the meantime, the group remains the one to beat," Hunter says. ([e-mail])

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UK 2-Year Gilt Yields Rise to Near-Record High

0903 GMT - U.K. 2-year gilt yields are approaching a record high at 4.921% as expectations of an interest rate rise by the Bank of England are pushed by recent labor market and inflation data, say Bank of America analysts in a note. "The data prints so far justify more than a 25 basis points rate rise at the June 22 meeting in our view," they say. "Given strong wage and price momentum we see risks that the more hawkish members of the committee vote for a 50bp hike," the analysts say. ([e-mail])

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Jadestone's First Gas Delivery for Akatara Is Key, Jefferies Says

0845 GMT - Jadestone's timing of first gas for its Akatara gas field is now the main focus after recent fundraise and operational progress, Jefferies analysts Mark Wilson and Ruben Dewa write. The Asia-Pacific oil-and-gas company's $50 million equity-raise bridged the expected liquidity, while Jadestone's main asset Montara, offshore Australia, has returned to production. "While the raise eases balance sheet concerns, first gas timing for Akatara is now a crucial deliverable, in our view," they say. Jefferies expects significant year-on-year growth in 2024 once Akatara comes on stream in 1H, forecasting 19.8 thousand barrels of oil equivalent per day against 14.1 thousand boe/d estimated for 2023. The U.S. Bank lowers its price target for Jadestone's stock to 50.0 pence from 85.0 pence, but keeps a buy rating. ([e-mail])

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Aggressive BOE Rate-Rise Bets Lift Sterling

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06-16-23 0636ET