The Morning Call - Next sharply down as it predicts drop in 4th quarter sales

Highlights of the Day

Asian Markets

Asian shares were higher on optimism about global economic growth following gains on Wall Street.

U.S. Markets

A jump in shares of several consumer companies, along with further gains for tech stocks, helped Wall Street end October on a positive note.

Today's News

Eight people died Tuesday after a man driving a motor vehicle ploughed into pedestrians and cyclists on the western side of Manhattan in what New York Mayor Bill de Blasio called a “cowardly act of terror.” The driver was driving a rental pickup truck from a Home Depot store. The rampage ended when he crashed into a school bus near the Tribeca bridge, injuring two adults and two children. They are among 11 people with serious, but not life-threatening, injuries, according to emergency services.

Paddy Power Betfair updated its annual earnings guidance after boosting revenue in the third quarter. Third-quarter revenue rose 9% to £440m, helping boost underlying Ebitda by 7% to £121m. The company said it now expected to post full-year underlying Ebtida between £450m and £465m. “Q3 was an encouraging quarter for Paddy Power Betfair, with good stakes growth despite the absence of a major football tournament,” outgoing chief executive Breon Corcoran said.

Smurfit Kappa Group reported a 9% fall in third-quarter profit after higher input costs offset rising revenue. Pre-tax profit fell to €170m, from €187 a year earlier, after revenue grew by 4%. The company was able to push through some price increases, improving its Ebitda margin to 15.1% compared to 13.9% in the second quarter. “We expect to deliver a full year Ebitda in line with current market expectations and will enter 2018 with optimism and good momentum,” chief executive Tony Smurfit said.

Nearly half a million businesses across the UK are in a state of ‘significant’ financial distress, even before the effects of a potential interest rate hike are felt, according to Begbies Traynor’s latest Red Flag research. The research showed that 448,011 businesses were experiencing ‘significant’ levels of financial distress at the end of the third quarter, up 27% on a year ago. It said almost 250,000 of these companies (Q3 2107: 248,619) ended the period with negative net worth, representing a sizeable population of so called “zombie” companies that had managed to survive thanks to the prolonged low interest rate environment and flexible labour market.

UK house prices increased at a faster pace in October, data from Nationwide Building Society showed Wednesday. House prices increased 2.5% year-on-year, following September’s revised 2.3% rise. On a monthly basis, house price inflation halved to 0.2% from 0.4% in September. Nonetheless, this was the second consecutive rise in prices. Annual house price growth remains within the 2% to 4% range that has prevailing since March, Robert Gardner, Nationwide’s chief economist, said.

SEGRO has acquired a fully let 390,000 square foot big box warehouse in the Midlands region from Legal & General’s LGIM Real Assets, it announced on Wednesday, in exchange for Kingsland Business Park, which is a multi-let industrial estate in Basingstoke, and a balancing cash payment.

Next has once again seen growth in online sales offset a decline in its shops, with total full price sales up 1.3% during the third quarter. The fashion retailer’s sales from its website were up 13.2% in the three months to October, but its in-store sales fell by 7.7% over the period. This continued the trend from the first six months of the year where the online rise offset a loss in its shops. In a statement, Next predicted a fourth quarter fall in sales of 0.3%.

Gold edged lower as the dollar firmed with investors awaiting hints on a U.S rate hike following the Federal Reserve’s two-day policy meeting.

Oil Prices were near two-year highs as OPEC has significantly improved compliance with its pledged supply cuts and Russia is also seen keeping to the deal.

Companies Reporting this week

Day	Companies
Today:	Standard Chartered * Next * Paddy Power Betfair
Tomorrow:	BT * Morrisons * Tate & Lyle * Randgold Resources * Royal Dutch Shell
Friday:	Smith and Nephew

Early Market Movements

Market	Index	Change	% Change
UK 100	7,531.0	+38.0	+0.5%
UK 250	20,335.9	+108.1	+0.5%
GER 30	13,348.8	+119.19	+0.9%
FRA 40	5,523.2	+19.9	+0.4%
U.S. 30	23,377.24	+28.50	+0.1%
U.S. 500	2,575.3	+2.4	+0.1%
OIL (BRENT)	61.32	+0.38	+0.6%
GOLD	1,275.69	+4.24	+0.3%

UK Risers & Fallers (8:15am)

Company	Price	Change	% Change
Indivior	411.35	+39.75	+10.7%
Paddy Power Betfair	8000	+295	+3.8%
Antofagasta	979.5	+25	+2.6%
Next	4565	-356	-7.2%
Debenhams	42	-1.75	-4%
Marks and Spencer	330.8	-13.3	-3.9%

Latest Broker Views

Company	Broker	Recommendation	Price	Target
BP	Citigroup	Neutral	515.6	480
WPP	UBS	Buy	1340	1840
Reckitt Benckiser	UBS	Neutral	6725	7000
Croda International	Liberum	Hold	4211	4300

Forthcoming Economic Data

Time/Date	Previous	Forecast	Outcome
10:30am: U.K. Manufacturing PMI	55.9	55.8	–
1:15pm: U.S. ADP Non-Farm Employment Change	135k	202k	–
3:00pm: U.S. ISM Manufacturing PMI	60.8	59.5	–
3:30pm: U.S. Crude Oil Inventories	0.9m	-1.5m	–
7:00pm: U.S. FOMC Statement	–	–	–