The Morning Call - Barclays revenue down 1%, but share price defiant

Highlights of the Day

Asian Markets

Asian shares were hit by profit-taking, after a strong week in the region and a selloff in U.S. tech stocks overnight.

U.S. Markets

A swoon in technology and transportation shares led Wall Street lower, with stocks hastening their declines in afternoon trading on a day full of corporate earnings reports

Today's News

BT said revenue rose 1% from a year ago to £5.8bn in the first quarter to 30th June, while pretax profit fell 42% to £418m year-on-year. Chief Executive Gavin Patterson, said BT has delivered “an encouraging performance” and that he is “confident” in the outlook for the company. “We’ve made good progress in our key areas of strategic focus: deliver great customer experience, invest for growth, and transform our costs. In particular, I’d highlight the growth achieved by our consumer facing businesses, helped by mobile,” said Patterson. In a separate statement, BT said it has appointed Marc Allera – current mobile phone operator EE chief executive – to lead a newly created Consumer business, bringing together BT’s Consumer and EE businesses. Mobile operator EE was acquired by BT last year.

IAG reported interim pretax profit of €706m compared to €688m a year ago. Underlying pretax profit rose to €783m from €609 million. The owner of British Airways, Iberia, Vueling and Aer Lingus said revenue rose slightly to €10.88m from €10.78 million a year before, but passenger revenue was broadly flat. At current fuel prices and exchange rates, IAG said it expects its operating profit for 2017 to show a double-digit percentage improvement year-on-year.

Barclays said pretax profit in the first half of 2017 was £2.34bn compared to £2.06bn a year ago, while revenue fell 1%. The bank said profit rose on other net gains versus losses seen in the prior year. Barclays said core pretax profit fell 25% year-on-year on PPI charges of £700m. The bank left its interim dividend unchanged at 1p per share. Barclays said the focus remains on cost efficiency, with full-year dividend expected to be 3p, as previously guided.

Institutional Shareholder Services has raised concerns about PricewaterhouseCoopers’ dual role as auditor to Vodafone Group and administrator to collapsed British mobile phone retailer Phones 4U. PwC has been drawing up plans to sue the company, and other mobile phone operators, over their decision to stop supplying Phones 4U prior to its demise in 2014. ISS, which advises investors on voting decisions ahead of company meetings, recommended support for PwC’s reappointment as Vodafone’s auditor ahead of their annual general meeting, it warned that the matter “will be kept under review”.

Anglo American De Beers diamond unit is open to buying new assets at the right price, following the blue-chip’s much-improved interim results. In its results released, Anglo American said it returned to profit in the first half of 2017, posting profit attributable to equity shareholders of $1.42bn compared to last year’s loss of $813m. The multi-commodity miner re-initiated its dividend payment at 48c per share, equal to 40% of underlying earnings, having previously scrapped the payout to focus on reducing debt. Chief financial officer of 85%-owned De Beers, Nimesh Patel, is open to expanding the diamond business following the downturn.

Amec Foster Wheeler said it has handed a £2.9m contract from the UK government to lead a “key” research programme that aims to use developments in digital technology to optimise the next generation of nuclear reactors. The energy services firm, formed from the merger of Amec and Foster Wheeler in 2014 and currently in the process of being bought by peer John Wood Group, will set up and run a UK Digital Reactor Design partnership that will use virtual engineering and high-performance computing to enhance the techniques used to design reactors and optimise their performance. The contract was awarded by the Department for Business, Energy & Industrial Strategy, which also sponsors Innovate UK, which recently awarded Amec Foster Wheeler a contract to carry out research into manufacturing and materials technologies for the civil nuclear sector.

Acacia Mining‘s Canadian parent company Barrick Gold Corporation has confirmed that it has begun talks with the Tanzanian government over its five-month-long dispute.
Acacia noted that Barrick management had said on a conference call that “discussions with the Government of Tanzania are just getting underway” with respect to the issues impacting Acacia’s operations in Tanzania. Earlier this week Acacia Mining was slapped with an astonishing $190bn tax bill from Tanzanian tax authorities in respect of what it said were unpaid tax and penalties from the London-listed company’s Bulyanhulu and Buzwagi mines in the country, which the London-listed company disputes.

Amazon beat revenue estimates but fell short on earnings in the second quarter, as it continued to invest in areas of growth. The company’s shares fell more than 3% in after-hours trading. EPS: 40 cents per share vs. $1.42 per share expected, Reuters analysts estimated; Revenue: $37.96bn vs. $37.18bn expected, Amazon Web Services (AWS) revenue: $4.1bn vs. $4.08bn expected.

Oil prices edged lower but were still near 8-week highs, buoyed by a decline in U.S. inventories and OPEC’s ongoing efforts to curb production.

Gold prices steadied after retreating from a more than six-week high hit in the previous session, with investors looking for cues on the health of the U.S. economy from second-quarter gross domestic product data due later in the session.

Companies Reporting this week

Companies Reporting this Week

Day	Companies
Today:	Clipper Logistics * Berendsen * Barclays * BT Group *

Early Market Movements

Market	Index	Change	% Change
UK 100	7411.8	-31.2	-0.4%
UK 250	19,755.5	-123.9	-0.6%
GER 30	12,142.7	-69.3	-0.6%
FRA 40	5,136.6	-50.4	-1.0%
U.S. 30	21,796.55	+85.54	+0.4%
U.S. 500	2475.4	-2.4	-0.1%
OIL (BRENT)	51.49	+0.00	+0.0%
GOLD	1,259.86	+0.71	+0.1%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
International Consolidated Airlines	612.5	+18.5	+3.1%
Morgan Advanced Materials	297.6	+5.7	+2.0%
Diageo	2425.5	+17	+0.7%
Acacia Mining	171.5	-7	-3.9%
BT Group	309.05	-7.1	-2.2%
Next	3852	-75	-1.9%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
Direct Line Group	Barclays	Outperform	430	371.5
Just Eat	Goldman Sachs	Conviction Buy	646.5	870
Polymetal International	Goldman Sachs	Buy	912.5	1100
Reckitt Benckiser	Liberum	Buy	7356	8700