Article / 09 March 2015 at 11:07 GMT

Week Ahead: ITV delivers stunning 2014 performance

Chief Executive / Prime Wealth Group
United Kingdom
  • Standard Chartered’s full-year results as nasty as expected
  • easyJet shows continued progress in increasing capacity utilization
  • FTSE100 to start rising again next week 

By Patrick Butler

In a Nutshell:  Despite excellent numbers from many of the companies reporting last week, the FTSE100 remained almost unchanged overall (down 0.5% over the five business days). 

It is worth remembering that the index has climbed well over 5% this year and prices do not move up in a straight line. The bull-market remains unbroken. 

ITV announced stunningly good figures for the full year, as we anticipated. Operating profit rose 19% to GBP 651 million. 

The dividend was increased by 33% and a special pay-out of 6.25 pence a share will also be paid. The good news for investors is that revenue from sales of productions and advertising continue to grow fast. We anticipate this financial year will see profit rise from this year’s GBP 605 mn to the GBP 760 to 800 mn range.

Standard Chartered’s full-year results – as we predicted – were nasty. Unlike Investors Chronicle, which tipped the share last year and so far has seen a 19% fall, Prime has been advising customers to hold back, because we believe there is still bad news to come. 

In the very short term, there were gains to be made last week as, following worse-than-expected results (profit before tax down to $4.24 billion after $6.06 bn a year earlier) the shares rallied by 5%. 

The rally was sparked by assurances that no dilutive rights issue will be required to rebuild capital but appears fragile to us, because we believe that the incoming CEO, Bill Winters, still has more “kitchen-sinking” to do. For the moment, we are holding back on a BUY recommendation. The time, though, to reconsider this stance may not be far off.

The insurance company Aviva’s shares rose 7.14% after it reported a 6% rise in operating and a 30% increase in its final dividend. We continue to like Aviva and other insurance companies positioned to take advantage of the improving economic backdrop, the rise in value of their own financial investments and the huge inflows of money into managed fund products.

On March 5 easyJet made its latest trading statement, which showed continued progress in increasing capacity utilization.

For the month of February 2015 compared to February 2014 the load factor was up 0.2% and passengers, up 6.1%.

For the rolling 12 months ended Feb 2015 compared to the previous period the load factor was up 1.4% and passengers up 6.5%.


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This coming week, we expect the market to start pushing up again. QE in Europe and Japan, interest rate reductions in China and India, corporate results which in the main exceeded expectations and no immediate sign of a US interest rate rise all speak for further price improvement. 

So, too, does the prospect of a give-away UK budget in the week after next – on Wednesday 18 March, to be precise – the last in the current parliament. It is rumoured that Chancellor George Osborne is set to raise the threshold under which no income tax must be paid by individuals, putting GBP150 to GBP200 extra in the average voter’s pocket.

Companies which will be reporting this week include the following, on which our clients will be able to find reports and BUY/SELL recommendations on “Prime Insight” 24 hours or so pre-announcement. (For a fuller list, see the diary below.)

On Monday, WPP, the advertising and media multinational, reports its final results. At this stage of the cycle, WPP could well surprise on the upside. We currently rate the company a BUY.
On Tuesday, Close Brothers delivers its interim results. Close is predominantly a lending business to small- and medium-sized enterprises. Onto this is bolted wealth management and brokerage. Prudential, which Prime recently recommended as a short-term buy, and Inchcape, one of our three tips for the month of March, both report full-year figures on Tuesday, as do Ocado and esure.

Hikma Pharmaceuticals, one of our January tips (and a star performer to date) announces its final results on Wednesday; so, too, do Michael Page, and Foxtons.

On Thursday, two major retailers report on the past year: Morrison and Home Retail Group, owner of Argos and Homebase. It will be interesting to see whether our analysis sees signs of a recovery at Morrison after the 2014 annus horribilis.

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ITV's flagship soap opera Coronation Street averaged 8.4 mn UK viewers in 2014. Photo: istock
 
Finally, Wetherspoon, the pub chain, delivers its interim results on Friday.
On the economic front, we expect to see figures reflecting a recovery in European industrial production on Thursday, in line with our assessment that, for the moment at least, the old continent’s growth is picking up, albeit modestly. 

The Eurogroup meeting, scheduled for Monday, is likely to require further measures by the Greeks to bring their budget under control, rejecting Greek finance minister Yanis Varafoukis’ current seven-point plan as not far-reaching enough. Last week the country made a partial repayment on an IMF loan (EUR 310 mn of a EUR 1.5bn debt falling due later this month. 

Given that the Greeks want to stay in the euro, they have no choice but to fulfill the terms of the Troika (whether or not direct negotiations are conducted). The only way to cut the Gordian knot would be to exit the common currency. Alexis (Tsipris) is, however, no Alexander.


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— Edited by Oliver Morrison

Patrick Butler is chief executive of the Prime Wealth Group

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