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(Alliance News) - The following is a summary of top news stories Thursday.
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COMPANIES
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Lloyds Banking reported a "solid" 2021, driven by GBP16 billion growth in its mortgage book, and has laid out plans to return GBP2.0 billion to shareholders. In 2021, Lloyds recorded pretax profit of GBP6.90 billion, sharply higher than GBP1.23 billion in 2020, but behind market consensus of GBP7.21 billion. The big improvement in results is due to a reversal of credit impairments, as the bank booked a GBP1.34 billion release in 2021 compared to the GBP4.16 billion charge set aside in 2020. Net interest income dropped 13% to GBP9.37 billion from GBP10.75 billion, and was sharply lower than the GBP11.11 billion hoped for by analyst consensus. Total income surged 28% to GBP37.44 billion from GBP29.17 billion. The bank plans to implement a share buyback programme of up to GBP2.0 billion, given its strong capital position. Common equity tier 1 ratio - a key measure of a bank's financial strength - increased over the year to 17.3% from 16.2% in 2020. Lloyds also declared a 2021 total dividend 2.0 pence, up sharply from 0.57p in 2020.
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Rolls-Royce said Chief Executive Officer Warren East has decided to step down at the end of 2022, after nine years on the board and almost eight years as CEO of the jet engine maker. As a result, the board will now launch a "thorough and extensive" search for his successor. The announcement came as the London-based firm reported an improved financial performance in 2021, driven by cost reduction as the Civil Aerospace market continued to suffer from the virus pandemic. Pretax loss narrowed sharply to GBP294 million in 2021 from a GBP2.80 billion loss in 2020. This was on revenue of GBP11.22 billion, down 2.3% from GBP11.49 billion.
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BAE Systems reported robust results for 2021, prompting the aerospace and defence company to raise guidance for additional growth in 2022. The Farnborough, England-based company said sales rose 2.2% to GBP21.31 billion in 2021 from GBP20.86 billion in 2020. BAE posted pretax profit of GBP2.11 billion, up 31% from GBP1.60 billion. This was on revenue of GBP19.52 billion, up 1.5% from GBP19.28 billion. BAE Systems proposed a final dividend of 15.2 pence per share, taking the total payout for 2021 to 25.1p, up 5.9% from 23.7p paid out in 2020.
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German auto manufacturer Mercedes-Benz more than doubled its operating profit despite widespread supply bottlenecks, the group said in its first set of annual results since splitting with its truck subsidiary. Mercedes, which changed its name from Daimler at the beginning of the month, saw the key measure rise EUR19.2 billion from EUR8.6 billion euros in the previous year. The adjusted figure did not include the one-off bump of EUR9.2 billion to Mercedes's results from the spin-off of its subsidiary Daimler Trucks, which rolled onto the Frankfurt Stock Exchange at the end of last year. Including the windfall, the group's net profit increased almost six-fold to EUR23.4 billion from EUR4 billion in 2020, when the industry was battered by the outbreak of the coronavirus pandemic.
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Deutsche Telekom reported robust revenue and earnings growth in 2021, ahead of its guidance, on an increase in customer numbers. The Bonn, Germany-based telecommunications company reported revenue of EUR108.79 billion for 2021, representing an increase of 7.7% from EUR101.00 billion posted in 2020. Net profit in the year remained broadly flat at EUR4.18 billion from EUR4.16 billion the year before, with a marginal increase of 0.4%. Full-year adjusted earnings before interest, tax, depreciation and amortisation after leases amounted to EUR37.33 billion, up 6.6% from EUR35.02 billion in 2020.
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Safran said it is poised for growth in the coming year, after revenue dropped and its net loss widened in 2021. Paris-based aircraft equipment manufacturer brought in revenue of EUR15.26 billion, down 7.5% from EUR16.50 billion in 2020. Profit before tax was EUR268 million, halved from EUR570 million the year before. Profit from operations was down 6.8% year-on-year to EUR864 million from EUR927 million. Safran's net loss for the year had widened to EUR596 million from EUR357 million. Safran will propose a dividend for the year of EUR0.50, which would be an increase of 16% on the payout for 2020 of EUR0.43.
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Anglo American more than tripled its annual payout, as profit for 2021 more than doubled on the back of strong demand and a considerable rise in commodity prices. The miner posted underlying earnings before interest, tax, depreciation and amortisation of USD20.63 billion, more than doubled from USD9.80 billion in 2020. This was on revenue that grew 63% to USD41.55 billion from USD25.45 billion, restated from USD30.90 billion to account for a change in Anglo American's accounting policy from a gross presentation to a net basis. The revenue figure however fell short of consensus expectations of USD42.26 billion in revenue. Anglo American declared a final ordinary dividend of USD1.18 per share, and a special payout of 50 US cents. This brings the total payout for 2021 to USD4.99, up sharply from USD1.00 in 2020.
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Anheuser-Busch InBev reported a stronger performance for 2021, with double-digit growth in profit and revenue allowing the group to keep its annual payout. For the year, the Leuven, Belgium-based brewing company said normalised earnings before interest, tax, depreciation and amortisation rose 12% to USD19.21 billion from USD17.32 billion the year before. This was on revenue which grew 16% year-on-year to USD54.30 billion from USD46.88 billion, also managing to pass pre-virus levels, with a 3.8% rise from USD52.33 billion in 2019. Total volumes increased 9.6% to 581.68 million hectolitres from 530.64 million hectolitres. AB InBev declared a dividend of EUR0.50 per share, in line with the year before.
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WPP said it had a "exceptional recovery" from the pandemic in 2021, as it swung to profit from a GB2.79 billion loss the year before. The London-based marketing communications and advertising agency said revenue for 2021 was up 6.7% to GBP12.80 billion from GBP12.00 billion, or up 13% on a like-for-life basis. Revenue less pass-through costs was GBP10.40 billion, up 6.5% from GBP9.76 billion in 2020, or up 12% like-for-like. WPP swung to profit in the year, with reported pretax profit of GBP951 million, from a pretax loss of GBP2.79 billion. Headline profit before tax was GBP1.37 billion, up 31% from a GBP1.04 billion profit in 2020. WPP declared a final dividend of 18.7 pence, up 34% from the prior year, bringing the total to 31.2p, which was a 30% increase from 24.0p in 2020.
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Hong Kong's stock exchange operator posted profit of HKD12.5 billion, about USD1.6 billion, for 2021 but also registered its worst quarterly earnings in two years as China's crackdown on a host of business sectors hit trading and company debuts. Hong Kong Exchanges & Clearing said its 2021 profit rose by 9% from the year before, thanks to a record first quarter. "HKEX had a strong year in 2021, despite a turbulent macro backdrop and the ongoing pandemic," said Chief Executive Nicolas Aguzin. Aguzin said HKEX also broke records in cash market turnover and in its "stock connect" and "bond connect" programmes, which allow international investors to access Shenzhen and Shanghai markets. Buoyed by listings of major Chinese companies, Hong Kong's stock exchange started strong in 2021 but later underperformed, with profits dropping in the three subsequent quarters. HKEX saw net income of HKD2.67 billion in the last three months of 2021, representing an 8.6% drop year-on-year.
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Hikma Pharmaceuticals reported strong results for 2021 in what the generic drugmaker said was a year of solid growth and continued strategic momentum. Hikma posted revenue of USD2.55 billion, up 9.0% from USD2.34 billion in 2020, though pretax profit edged down 2.5% to USD544 million from USD558 million. Hikma declared a full-year dividend 54 US cents, up from 50 cents. It also launched a share buyback of up to USD300 million, saying this reflects its strong cash generation, balance sheet strength, and confidence in future growth prospects. Looking ahead, Hikma expects Injectables division revenue growth in the low to mid-single digits, with core operating margin in the range of 35% to 37%. Generics revenue growth is forecast in the range of 8% to 10% and core operating margin in the range of 24% to 25%.
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Meta chief Mark Zuckerberg on Wednesday talked up his company's efforts to build the metaverse, an immersive virtual world he has billed as the Facebook parent's future. Doubts have swirled about whether the major metaverse investments will pay off for Meta, which changed its name from Facebook last year to highlight its shifting focus though critics claim it was to distract from negative media reports. The metaverse is a 3D virtual world where people will be able to interact using sensors, head gear and other gadgets. Meta's early metaverse platform, called Horizon Worlds, already allows people to socialize virtually while represented by avatars. "The kinds of experiences you'll have in the metaverse are beyond what's possible today," Zuckerberg said as he opened a conference aiming to offer a glimpse inside Meta's development labs. "That's going to require advances in a whole range of areas from hardware devices to software for building and exploring worlds."
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Shares in eBay tumbled after the company disappointing guidance for the year ahead. Shares in the San Jose, California-based firm were down 10% in pre-market trade in New York early Thursday. For the final quarter of 2021, the online auction operator posted revenue of USD2.61 billion, up 5.2% from USD2.48 billion a year before. This helped net income more than double to USD1.97 billion from USD845 million, with diluted earnings per share of USD3.25 improving from USD1.21. For the year as a whole, revenue rose 17% to USD10.42 billion from USD8.89 billion and diluted EPS surged to USD20.54 from USD7.89. From just continuing operations, diluted EPS for 2021 fell to USD0.38 from USD3.46. However, revenue is seen stalling in the year ahead. eBay guided to a revenue range of USD10.3 billion to USD10.5 billion for 2022, which at the midpoint of USD10.40 billion would mark a dip from 2021's level.
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MARKETS
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Oil was trading above USD104 a barrel and gold above USD1,955 an ounce, while shares involved in Russia and travel were plunging, as the financial world reacted to Russia's invasion of Ukraine. "Europe will suffer a hit from higher energy costs, the euro has further downside, but yen strength is likely to be short-lived," summarized Kit Juckes of Societe Generale. He noted the yen is getting a "knee-jerk" benefit as a safe haven, but Japan is dependent on oil imports. Turning to the euro, Juckes said: "This is going to hit European growth in the short term. These developments may not change the debate about cutting ECB asset purchases but they change the longer-term monetary policy outlook in Europe, far more than in the US."
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CAC 40: down 4.5% at 6,476.69
DAX 40: down 4.6 at 13,960.19
FTSE 100: down 3.0% at 7,276.70
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Hang Seng: closed down 3.2% at 22,901.56
Nikkei 225: closed down 1.8% at 25,970.82
S&P/ASX 200: closed down 3.0% at 6,990.60
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DJIA: called down 2.1%
S&P 500: called down 2.1%
Nasdaq Composite: called down 2.8%
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EUR: down at USD1.1208 (USD1.1313)
GBP: down at USD1.3435 (USD1.3554)
USD: down at JPY114.74 (JPY115.06)
Gold: up at USD1,955.33 per ounce (USD1,906.84)
Oil (Brent): up at USD104.27 a barrel (USD97.90)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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The Russian army said Moscow-backed separatist forces in eastern Ukraine are advancing and have gained territory after the Kremlin launched an attack on the country. Military spokesperson Igor Konashenkov told state television that forces of the Donetsk People's Republic gained "up to three kilometres" in territory and those of the Lugansk People's Republic "advanced one and a half kilometres". He added that Russia had "high precision weapons" and that Ukrainian civilians had "nothing to fear". Russia's ground forces invaded Ukraine from several directions on Thursday, encircling the country within hours of President Vladimir Putin announcing his decision to launch an assault. Heavy Russian tanks and other equipment crossed the frontier in a string of northern regions as well as from the Kremlin-annexed peninsula of Crimea in the south. They were also advancing into the Western-backed government's territory along the eastern front, where a separatist insurgency has claimed more than 14,000 lives since 2014.
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Ukrainian President Volodymyr Zelensky broke off Kyiv's diplomatic relations with Moscow in response to Russia's invasion. It marked the first rupture in ties since Russia and Ukraine became independent countries after the Soviet Union's collapse in 1991. "We broke off diplomatic relations with Russia," Zelensky said in a video message. Ukraine and Russia maintained ties throughout a complex history of relations that included two pro-Western revolutions in Kyiv in 2004 and 2014 that the Kremlin strongly opposed.
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Proposed new EU sanctions will block Russian banks' access from European financial markets, among other things, European Commission President Ursula von der Leyen said. The measures also include freezing Russian assets in the European Union and banning important Russian economic sectors from accessing key technologies and markets. The EU is Russia's biggest trading partner, according to the commission. EU leaders could approve the measures at an emergency summit later on Thursday. The bloc imposed a first set of sanctions on Wednesday, following Putin's recognition of independence for the breakaway provinces of Luhansk and Donetsk. Earlier on Thursday, von der Leyen and European Council President Charles Michel vowed to impose "massive and severe" sanctions on Russia, in a joint statement.
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China said it is monitoring the situation in Ukraine and called for "restraint" on all sides. "China is closely watching the latest situation, and we call on all parties to maintain restraint and prevent the situation from getting out of control," foreign ministry spokeswoman Hua Chunying said at a regular press briefing.
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US President Joe Biden has denounced Russia's move as an "unprovoked and unjustified attack", declaring "the world will hold Russia accountable". Biden said in a statement: "The prayers of the entire world are with the people of Ukraine tonight as they suffer an unprovoked and unjustified attack by Russian military forces. President Putin has chosen a premeditated war that will bring a catastrophic loss of life and human suffering. Russia alone is responsible for the death and destruction this attack will bring, and the US and its Allies and partners will respond in a united and decisive way. The world will hold Russia accountable."
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The US is expected to sanction Nord Stream 2 AG, the operator of the shelved Russia-to-Germany pipeline, after Biden said he had cleared the way for such a move on Tuesday. "I have directed my administration to impose sanctions on Nord Stream 2 AG and its corporate officers," Biden announced in a written statement. "These steps are another piece of our initial tranche of sanctions in response to Russia's actions in Ukraine." The Nord Stream 2 pipeline has emerged as a key bargaining chip in the crisis with Russia over Ukraine, but Washington had previously held off on sanctioning the company due to the project's ties with ally Germany. However, Germany earlier announced that the pipeline, completed but not yet in operation, would be put on ice.
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UK Prime Minister Boris Johnson said Putin has "chosen a path of bloodshed and destruction" with his attack on Ukraine and that the UK and its allies would respond "decisively". It came as Ukraine's president declared martial law and Russia's military said it had targeted Ukrainian air bases and other military assets and had not targeted populated areas. Johnson said he is "appalled by the horrific events" seen in the wake of Putin's decision to conduct a military operation in Ukraine.
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Italy will end its Covid-19 state of emergency at the end of March and slowly lift rules imposed during the pandemic, Prime Minister Mario Draghi said Wednesday. The aim was to "reopen everything, as soon as possible", after more than two years of a health crisis, he added. The pandemic hit Italy hard in early 2020 and has so far killed more than 153,000 people. The country recorded more than 220,000 daily positive cases in early January, but numbers have since dropped significantly, with the health ministry reporting just under 50,000 on Wednesday. The eurozone's third largest economy has been struggling to recover from financially crippling lockdowns. "The government is aware that the strength of the recovery depends first and foremost on the ability to overcome the emergencies of the moment," Draghi said in a speech in Florence.
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Hong Kong's government invoked emergency powers on Thursday to allow doctors, nurses and other personnel from the Chinese mainland to help combat a spiralling coronavirus outbreak. The densely populated metropolis is in the throes of its worst-ever Covid wave, registering thousands of cases every day, overwhelming hospitals and government efforts to isolate all infected people in dedicated units. Hong Kong authorities have followed a zero-Covid strategy similar to mainland China that kept infections mostly at bay throughout the pandemic. But they were caught flat-footed when the highly infectious Omicron variant broke through those defences, and have since increasingly called on the Chinese mainland for help. Chinese mainland medics are not currently allowed to operate in Hong Kong without passing local exams and meeting licensing regulations.
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By Tom Waite; thomaslwaite@alliancenews.com
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