The Morning Call - AB Foods down despite soaring profits

Highlights of the Day

Asian Markets

Asian shares rallied to their highest in a decade and Japan’s Nikkei climbed to its best close since 1992.

U.S. Markets

U.S. equities hit record highs as sentiment on Wall Street was lifted by news of corporate dealmaking.

Today's News

Glencore has become caught up in the ‘Paradise Papers’ scandal, after it loaned an Israeli businessman £45.0 million to negotiate favourable mining rights in the Democratic Republic of the Congo. Glencore loaned “notorious middle man” Dan Gertler, who had a close relationship with senior figures in the country’s government, the money in 2008 to get a new mining deal for mining company Katanga, in which Glencore had an 8.5% stake. Campaigners say the arrangements DR Congo hundreds of millions of dollars, according to Reuters.

Old Mutual raised its stake in Purplebricks Group and now holds a 12.59% interest through 34.2 million shares. Old Mutual had held a stake of 11.10% before the transaction. Purplebricks released an update that said it remains on course to meet management expectations for the full year. In September, the online estate agency had said that for the full year ending April 30, 2018, the UK is still on track to deliver revenue of around £80m while Australia should generate a total of £12m, as previously guided. In the financial year to the end of April, UK revenue totalled £43.2m while Australia contributed £3.5m during the nine-month contribution.

Walt Disney and Rupert Murdoch’s 21st Century Fox shares surged on Monday after reports that Fox has discussed selling “most” of its business, including its Sky stake, to Disney. Fox leaders want to focus on sports and news, according to CNBC, which first reported the story. The two sides aren’t talking anymore, said the person, who asked not to be identified discussing private information. Fox shares surged as much as 8.9 percent, and Disney rose as much as 2.4 percent after CNBC first reported on the discussions. Both companies declined to comment.

BT Group said that unless businesses were clear by the beginning of 2018 about the terms of a transitional period after Britain leaves the European Union they would need to plan for a damaging “hard Brexit”, Reuters reported. The most important thing was to “get some certainty” on a transition period, Chief Executive Gavin Patterson told an audience of business leaders at the CBI’s annual conference, according to the news agency.

The world’s most profitable firm has a secretive new structure that would enable it to continue avoiding billions in taxes, the Paradise Papers show. They reveal how Apple sidestepped a 2013 crackdown on its controversial Irish tax practices by actively shopping around for a tax haven. It then moved the firm holding most of its untaxed offshore cash, now $252bn, to the Channel Island of Jersey. Apple said the new structure had not lowered its taxes.

AB Foods, which owns the Primark fashion chain as well as agriculture, ingredients and sugar businesses, said pretax profit in the year to September 16 soared to £1.58bn from £1.04bn the year before, driven by revenue climbing to £15.36bn from £13.40bn. The company raised its full year dividend 12% to 41.0 pence. Primark sales rose 19% year-on-year and climbed 12% at constant currency, but the company warned the unit’s operating margin tightened to 10.4% from 11.6% because of the strength of the US dollar on input costs.

Imperial Brands said annual pretax profit in the year to the end of September surged to £1.86bn from just £907m the year before, as revenue rose to £30.24bn from £27.63bn. Lower net finance costs also supported the rise in profit, dropping to £450m from £1.35bn. Foreign exchange gains, compared to heavy losses the year before, helped reduce finance spend.

Gold inched up to its highest level in more than two years amid Saudi Arabia’s corruption shake-up and tightening markets.

Oil Prices largely held on to gains after posting the biggest rise in six weeks a day earlier, buoyed by moves by Saudi Arabia’s crown prince to tighten his grip on power.

Companies Reporting this week

Day	Companies
Today:	Associated British Foods * Imperial Brands * Up Global Sourcing Holdings * Carclo First Derivatives * Convatec Group * Direct Line Insurance Group * Hiscox Limited (DI)
Tomorrow:	BowLeven * Tracsis * JZ Capital Partners Ltd * Marks & Spencer Group * Schroder Real Estate Investment Trust Ltd * Sophos Group * SSE * Wizz Air Holdings * Workspace Group * Bank Pekao SA GDS (Reg S) * OneSavings Bank
Thurday:	Gattaca * Auto Trader Group * Burberry Group * Dairy Crest Group * Flybe Group * Halfords Group * National Grid * Prime People * Renewi * Sainsbury (J) Wincanton * Aldermore Group * Arrow Global Group * AstraZeneca * Coca-Cola HBC AG (CDI) * Inmarsat
Friday:	Castings * Volex * Grupo Clarin SA GDR (Reg S)

Early Market Movements

Market	Index	Change	% Change
UK 100	7,570.0	+7.7	+0.1%
UK 250	20,427.8	-4.8	-0.0%
GER 30	13,520.1	+51.3	+0.4%
FRA 40	5,520.8	+13.5	+0.3%
U.S. 30	23,548.42	+9.23	+0.0%
U.S. 500	2,591.1	+3.3	+0.1%
OIL (BRENT)	64.29	+0.02	+0.0%
GOLD	1,279.47	-2.48	-0.2%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
DCC	7445	+155	+2.1%
Admiral Group	1884	+20	+1.1%
William Hill	268.35	+7.55	+2.9%
Associated British Foods	3279	-64	-1.9%
Provident Financial	901.75	-13.25	-1.5%
G4S	267.6	-12	-4.3%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
BT	Credit Suisse	Neutral	252.2	280
Marks and Spencer	HSBC	Buy	327	400
Royal Dutch Shell A	HSBC	Buy	2470.5	2600
Howden Joinery Group	JPMorgan	Neutral	472.7	460