BUSINESS LIVE: HSBC profits more than double; BP boosts dividend

Chris Beckett, head of equity research at Quilter Cheviot:

‘The results from Diageo today paint a bit of a mixed and complicated story for the drinks giant. We knew sales in China will have slowed as a result of lockdown, however, North America is also falling despite consumer spending holding up and the economy proving to be robust.

‘The post covid normalisation is happening later in the spirits industry than in other categories.

‘Sales are still growing, but this is all due to price increases, rather than volumes. This is okay, premium brands are doing well but some subsidiary brands are struggling and Diageo is being a little vague in when they expect improvement to happen.

‘The business talks about ‘gradual improvement’ over time, not giving any firm expectations. This will leave it with some questions to answer, and for a quality business like Diageo, we would expect it to turn the ship around in good time but with timeframes attached.

‘Interestingly, the business is moving its accountancy to dollars, away from pound sterling currently. This is highlights that it sees the US as its most important, and biggest, market, and it is a reflection of the global world we now live in.

‘This will impact UK investors as it now means the dividend payments to them will be impacted by currency moves. Further appreciation of sterling would have a significant impact.’

Mamta Valechha, equity research analyst at Quilter Cheviot:

‘Looking ahead, it is encouraging to see that momentum has continued into current trading, while cost inflation is starting to ease (7% vs. 11% in H1) which should help improve margins in the second half of the year.

‘Positively, key growth drivers also remain intact. Evening trade has seen increased traction with post-4pm sales growing the fastest, now making up 8% of total transactions. Transactions made on the app have also accelerated to almost 11%, which should drive higher customer purchase frequencies through the new Greggs loyalty scheme.

‘Greggs continues to roll out its store openings with 94 new shops, and has been investing in distribution centres to support growth. The redevelopment of the Birmingham site has already commenced, and the extension of the Amesbury DC is due to begin in H2. A fourth savoury production line is also due to start in Q4.

‘This morning’s results reiterate a positive outlook for Greggs, particularly given its unique growth opportunities, and its defensive position with a compelling value proposition showing positive signs, especially in this tough consumer landscape.’

Early in July, Helium One announced the acquisition of a drill rig.

The deal looks to be a game-changer for the company, and the market certainly thought so: shares in Helium One jumped by nearly 100 per cent (now 8.8p) on the news.

Cineworld Group has emerged from Chapter 11 bankruptcy after nearly 11 months, coming out with lower debt and a new slate of management and board.

The world’s second largest cinema chain operator behind AMC Entertainment has appointed former chair and CEO of Warner Bros Ann Sarnoff to its board, along with four other members to join new Chairman Eric Foss and CEO Eduardo Acuna.

The accounting watchdog has named its new boss. Richard Moriarty  will take over from Sir Jon Thompson at the Financial Reporting Council after five years running the Civil Aviation Authority.

But he inherits the role at a time when the FRC is undergoing a major transformation to prevent repeats of scandals such as the collapses of the outsourcer Carillion and retailer BHS.

Diageo beat full-year sales forecasts as customers continued to buy expensive scotch, whisky and tequila despite high prices.

The world’s largest spirits maker, which also makes Johnnie Walker whisky, Captain Morgan’s rum and Ketel One vodka, saw organic net sales growth of 6.5 per cent in the year to 30 June.

This marginally beat analyst forecasts for a 6.4 per cent increase.

John Moore, senior investment manager at RBC Brewin Dolphin:

‘As expected, bp’s results are similar to Shell’s last week – but there are strategic differences that are worth highlighting.

‘A declining oil price environment and, with that, a significant fall in profits are the headlines, but bp is still in a robust position when you look over a longer period.

‘The energy company has focused more than rivals on diversifying, and that is called out in today’s update with the completion of the acquisition of TravelCenters of America and its entry into the German offshore wind market. bp also has strong credentials in carbon capture, which offers potential yet to be realised.

‘The litmus test is share buybacks and bp has announced a further $1.5 billion, on top of a 10% dividend hike, indicating confidence from management despite the headline reduction to profits.’

Mike Ashley’s retail empire has once more increased its slice of Boohoo.

Frasers, the owner of Flannels and Sports Direct, boosted its stake in the fast fashion brand from 6.78 per cent to just over 7.8 per cent yesterday.

The group previously increased its holding in the online retailer, from 5 per cent to 6.78 per cent, last week.

Greggs profits jumped 14 per cent in the first half, with the bakery chain citing easing inflationary pressures and plans to open new stores.

Roisin Currie, chief executive, said:

‘Greggs strong performance continued in the first half of 2023 as we deliver on our strategic growth plan. With consumers remaining under pressure, we continue to offer exceptional value, which is reflected in our performance and growing market share.

‘In the period we continued to open further new shops, extended trading hours into the evening and saw increased participation in the Greggs App.

‘Our ambitious plans for growth are on track and our amazing teams are committed to realising the opportunity to become a significantly larger, multi-channel business.’

BP profits slumped 70 per cent year-on-year in the second quarter to $2.6billion, missing market forecasts of $3.5billion, reflecting lower fuel prices and weaker oil trading.

However, the energy giant has increased its dividend by 10 per cent to 7.27 cents per share, the fourth hike since halving it in the wake of the coronavirus pandemic three years ago. It will repurchase $1.5billion of its shares over the next three months.

Aston Martin has unveiled plans to raise another £210million of funding to help speed up efforts to cut down its debt pile.

The cash call is backed by the luxury car maker’s largest investors, including the Saudi Arabian sovereign wealth fund and Chinese rival Geely.

HSBC has raised its key performance target after first-half pre-tax profit surged more than two-fold to $21.7billion, boosted by rising interest rates worldwide and gains from the planned sale of its French unit.

Profits were up from $9.2billion at the same time last year and beat analysts’ expectations of $20.9billion.

The bank also announced fresh share buybacks of up to $2billion and a dividend of 10 cents a share.

HSBC raised its near-term return on tangible equity goal, a key performance target, to at least mid-teens for 2023 and 2024, from a previous target of at least 12 per cent from 2023 onwards. It reported return on tangible equity of 9.9 per cent for 2022.