The Morning Call - All eyes on number 11 as Hammond prepares to deliver budget

Highlights of the Day

Asian Markets

Asian stock markets are in positive territory following the fresh record closing highs overnight on Wall Street with investor sentiment boosted by upbeat corporate earnings results and higher commodity prices.

U.S. Markets

U.S. stocks jumped and the U.S.500 closed at a record high for the first time in about two weeks, led by gains in this year’s top-performing technology sector.

Today's News

Chancellor of the Exchequer Philip Hammond will use the Budget to promise to “invest to secure a bright future for Britain”, in a strong signal that he is ready to start bringing down the curtain on the age of austerity. In his keynote statement, Hammond is expected to respond to intense pressure for Government spending to boost industrial productivity and ease the housing crisis, as he promises to build “a Britain fit for the future”. But his room for manoeuvre has been limited by surprise figures showing that state borrowing jumped to £8bn last month, adding to pressure from the Office for Budget Responsibility’s expected downgrade of productivity projections. As part of the effort to boost the country’s skills to improve long-term productivity, Hammond will set out a £177m plan to give schools and sixth forms in England £600 for every additional student taking A-level maths or core maths qualifications. A £42m fund will also support £1,000 of training for every teacher in selected schools in areas that have “fallen behind”.

Countryside reports an excellent year of growth with a 28% uplift in completions and 32% increase in revenue. Completions for the year to the end of September increased to 3,389 from 2,657 and adjusted revenues rose to £1,028.8m from £777.0m. Adjusted operating profits increased by 34% to £164.1m and margins improved to 16.0% from 15.8%. Reported revenue was up 26% at £845.8m and reported operating profits rose by 48% to £128.9m. Group chief executive Ian Sutcliffe said: ‘With completions up 28%, 2017 has been another outstanding year of growth as our mixed-tenure model has met the demands of the housing market.

Euromoney Institutional Investor’s revenues rose by 6% to £428.4m in the year to the end of September. Adjusted operating and pre-tax profits of £107.1m and £106.5m were up by 6% and 4% respectively. On a statutory basis, operating profits rose by 17% to £43.4m and pre-tax profits were up 22% at £40.7m. The group declared a final dividend of 21.8p per share – up 33%. Chief executive Andrew Rashbass said: ‘The full-year results demonstrate good progress with our strategy: investing in strategic themes; creating a best-of-both-worlds operating model which combines Euromoney’s well-known entrepreneurial culture with the benefits of a more corporate approach; and active portfolio management.

Sage Group booked a substantial rise in annual profit, underpinned by rising subscriptions to its software products. Pre-tax profit rose 41.3% to £342m, as revenue increased by 19.2% to £1.72b. Sage declared a final dividend of 15.42p, up 9% on the previous year. “FY17 marks the completion of the transformation of Sage,” chief executive Stephen Kelly said. “For each of the past three years we have delivered management’s guidance for at least 6% organic revenue growth and 27% underlying operating margins, whilst fundamentally transforming Sage.” Turning to its outlook, Sage said it expected to post organic revenue growth in the 2018 financial year of 8%.

United Utilities nudged up its first-half dividend after revenue and underlying profits rose. The company declared an interim payout of 13.24p, up 2.2% from 12.95p in the previous year. Underlying pre-tax profit rose 5.7% to £160.1m, as revenue rose 2.7% to £876.0m. “As we turn our attention to the next price review for the period 2020 to 2025, we are engaging with customers across our region to understand their needs and preferences and to formulate plans that best satisfy those needs,” chief executive Steve Mogford said. “Affordability will be key, balanced against resilience to climate change and population growth in our region.”

Thomas Cook posted a rise in first-half profit after increased demand for holidays boosted revenue. Underlying operating profit rose 9.3% to £330m as revenue rose 9.0% on a like-for-like basis. The company declared an interim dividend of 0.6p, up from 0.5p a year earlier. “Looking to the year ahead, we can see real momentum in our group airline, and expect our Continental Europe and Northern Europe tour operator businesses to continue their good performance,” chief executive Peter Fankhauser said.

SSP Group reported a large rise in annual profits after it boosted revenue at its food and beverage outlets in airports and other travel locations. Underlying pre-profit jumped 38.3% £148.7m, while revenue grew by 19.5% to £2,379.1m, assisted by currency movements. Like-for-like sales grew by 3.1%, driven by air passenger traffic. The company declared a final dividend of 4.9p per share, bringing the full year dividend to 8.1p, an increase of 50%, which the company said partly reflected an increased in the payout ratio to 40%.

GlaxoSmithKline said the US Food and Drug Administration has approved Juluca as a one pill a day maintenance treatment for adults with the HIV-1 infection. Glaxo’s majority-owned subsidiary ViiV Healthcare, a specialist HIV company whose other stakeholders include Pfizer Inc and Shionogi Ltd, said Juluca has been approved as a treatment on a stable antiretroviral regimen for at least six months, with no history of treatment failure. FDA approval is based on two “pivotal” phase III trials which showed the two-drug regimen achieved non-inferior viral suppression after 48 weeks compared with three or four-drug treatment regimens.

Hammerson has sold its 64.5% share of the Place des Halles shopping centre in Strasbourg, France for a total net vendor price of £258m, slightly above June’s book value. Contracts have been exchanged with LaSalle Investment Management, the co-owner of the centre, and the sale is expected to occur before year end.

Gold bounced up slightly, as a weaker U.S. dollar gave bullion a boost and as investors awaited the minutes, due on Wednesday, of the Federal Reserve meeting held in November.

Oil Prices rose, as ongoing cuts of piped Canadian crude to the United States added to falling U.S. crude inventories, while expectations of a prolonged OPEC-led production cut also offered support.

Companies Reporting this week

Day	Companies
Today:	Euromoney Institutional Investor * Sage Group * SSP Group * Thomas Cook Group * Charles Stanley Group * United Utilities Group * Breedon Group
Tomorrow:	Mitchells & Butlers * CMC Markets * First Property Group * Severn Trent * Centrica

Early Market Movements

Market	Index	Change	% Change
UK 100	7,425.5	+14.2	+0.2%
UK 250	19,997.1	+33.1	+0.2%
GER 30	13,172.2	+4.7	+0.0%
FRA 40	5,361.8	-4.4	-0.1%
U.S. 30	23,590.83	+160.50	+0.7%
U.S. 500	2,599.0	+16.9	+0.7%
OIL (BRENT)	63.32	+0.75	+1.2%
GOLD	1,283.66	+3.05	+0.2%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
Qinetiq	214.45	+12.95	+6.4%
Reckitt Benckiser	6545	+144	+2.3%
Kingfisher	314.6	+6.1	+2.0%
Thomas Cook	107.4	-14.3	-11.8%
TUI AG	1298	-37	-2.8%
Babcock	686.5	-17	-2.4%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
Ferguson	HSBC	Buy	5345	6000
Easyjet	Deutsche Bank	Hold	1363	1450
ITV	Goldman Sachs	Buy	148.1	214
Reckitt Benckiser	JPMorgan	Overweight	6543	7500

Forthcoming Economic Data

Time/Date	Previous	Forecast	Outcome
1:30pm: U.K. Autumn Forecast Statement	–	–	–
2:30pm: U.S. Core Durable Goods Orders m/m	0.7%	0.4%	–
2:30pm: U.S. Unemployment Claims	249k	241k	–
2:30pm: U.S. Crude Oil Inventories	-18bn	-51bn	–
8:00pm: U.S. FOMC Meeting Minutes	–	–	–