BUSINESS LIVE: Rolls-Royce profits double; Lloyds lifts investor payouts; WPP suffers 'challenging' 2023

Beazley shares rose sharply on Thursday after the group announced plans to dish out around $300million (£237million) extra to shareholders.

In a short stock market update, insurance and reinsurance group Beazley said it had enjoyed a ‘better than expected claims experience’ in the past year.

(PA) – Food and drink giant Nestle has revealed a slowdown in revenue growth after shoppers were deterred by price hikes.

The company behind Nespresso and KitKat also revealed it has eased back on recent pricing inflation after reduced costs in its supply chain.

The Swiss consumer group said on Thursday that it saw organic growth of 7.2% in 2023 compared with the previous year, although this was caused by a 7.5% increase in pricing over the year as volumes declined.

This revenue growth was below the expectations of market analysts.

Nestle said it expects organic growth to be slower for the current year, at around 4%, due to lower levels of price inflation.

However, the company said it will target improvement in profits and growing volumes for the year.

In Europe, the company reported organic sales growth of 8.2% for the year after a 10.6% jump in prices.

Nestle said it benefited from strong demand for Purina PetCare products, including Felix and Gourmet.

It also witnessed “high single-digit growth” in confectionery, with KitKat sales performing strongly.

Indivior shares skyrocketed on Tuesday morning after the pharmaceutical group said it was considering transferring its primary listing to New York.

The drugmaker believes the move would attract more American investors, who own nearly half its share capital, by elevating its profile among US capital markets for providing addiction treatments.

Nvidia revenues soared to $22.1billion in the fourth quarter as the chipmaking giant’s cashed-in on the tech industry’s artificial intelligence boom.

The California-headquartered firm, which enjoys a near monopoly as a provider of what has become one of the world’s most sought-after commodities, saw sales jump by a whopping 265 per cent from around $6.1billion in 2022.

Further cost cutting is on the cards at mining giant Anglo American, as the group licks its wounds from a heavy downturn in annual profit.

The company slashed its dividend in half and reported underlying earnings before nasties for 2023 of $9.96billion, down 31 per cent on the previous year. Revenues fell 13 per cent to $30.65billion.

Before 2023 gets too distant in the rear-view mirror, there’s time to look back at the best-selling electric cars of the last annum.

Official industry figures from the Society of Motor Manufacturers and Traders (SMMT) reveal a Tesla takes the top spot and with quite a margin.

Lloyds Banking Group has set aside £450million to cover the potential costs of a regulatory probe into motor finance commission arrangements.

Some analysts estimate the bank’s potential costs could reach £2billion, while others think the total could be considerably more.

Scams have been on my mind again recently, after a family member was almost swept up in the torrent of sophisticated attacks that Britons are subjected to daily.

In a nutshell, she was sent a text message that appeared to be from her bank – that is, the message appeared on her smartphone in the same thread of previous, genuine messages, including one about a fraud attempt the previous year that really was from the bank.

WPP experienced more ‘challenging’ trading conditions last year as technology sector clients cut back on spending.

As tech companies have shed employees and scaled back investment plans, the advertising industry has borne a subsequent knock-on effect.

Will Howlett, financials analyst at Quilter Cheviot:

‘Lloyds Banking Group reported mixed results for the fourth quarter and full year 2023, with some positive signs of capital return and resilience, but also some challenges from lower net interest income, higher operating costs, and regulatory uncertainty.

‘The bank announced a £2bn share buyback and a 15% increase in dividend, reflecting its strong capital position and confidence in its future prospects. However, it also took a £450m charge for the FCA’s investigation into motor finance, which could lead to further provisions in the future. The bank’s net interest margin fell to 2.98%, as it faced pressure from mortgage pricing and deposit migration, while its revenue declined by 10% in the fourth quarter.

‘The bank’s underlying pre-provision profit missed consensus expectations by 12%, while its underlying profit before tax was ahead, thanks to a large write back on impairments related to a single name client. The bank’s return on tangible equity for the full year was 15.8%, above the guidance of >14%.

‘Lloyds also set out a new target of >15% for 2026 while lowering its CET1 target to 13.0% which frees up extra capital for potential distribution. The bank trades at 0.8x tangible book value and 6x PE, which we think is fair given its market position and outlook, but not compelling compared to other opportunities in the sector.’

Amazon founder Jeff Bezos has dumped another £1.9billion of shares – bringing the total value of stock sold this month to £6.7billion.

The tycoon, 60, who founded the group in 1994, has sold 14m Amazon shares this week alone, to add to the three tranches of shares he has sold for £4.8billion.

Banking giant HSBC suffered its biggest share sell-off since the pandemic as a writedown in China took a multi-billion pound chunk out of its record profits.

The slump knocked about £10billion off the value of the lender even as it reported a 78 per cent surge in annual pre-tax profits to £24billion.

British engineering group Rolls-Royce saw its profit more than double last year, amid a surge in defence orders.

Underlying operating profit came in at £1.6billion, well ahead of an analyst forecast of £1.4billion and its own guidance of between £1.2billion to £1.4billion, as revenues surged 22 per cent to £16.5billion. A year earlier, the group’s profit reached £652million.

It marks a stunning turnaround under the leadership of new boss Tufan Erginbilgic, who warned in January last year the company was a ‘burning platform’ that must transform to survive.

Vauxhall owner Stellantis will start making electric vans at its Luton plant next year.

In a major boost for the UK motor industry, the company will today outline plans to start production in spring 2025.

A top Bank of England official has warned that leaving interest rates at the current level risks ‘scarring’ the British economy.

Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:

‘WPP is being hit by lower technology spending in the US. The media, analytics and advertising giant is in the firing line for any slowdown in corporate spending or sentiment, as its products are often nice-to-have, rather than something that helps companies keep the lights on.

‘With that said, WPP has done an awful lot of the right things to position itself for the future. It’s throwing money at improving its offering, including AI capabilities. There will be some trepidation surrounding exactly when these hefty investments will bear meaningful fruit, but it’s a step in the right direction.

‘Ultimately, WPP is an economic bellwether, which will struggle to really thrive until corporate purse strings are a bit more fast-and-loose. The version of WPP waiting in the wings for that moment is in a much better position to capture demand.’

Aarin Chiekrie, equity analyst, Hargreaves Lansdown:

‘Rolls Royce’s full-year results capped off a stellar year for the FTSE 100’s top performer of 2023. Underlying operating profit and free cash flow came in well ahead of prior guidance, helping to fuel positive sentiment around this engine-maker.

‘Heading into the new year, the group continues to benefit from sector-wide tailwinds like a huge backlog of plane orders and pent-up consumer demand for travel, meaning there’s set to be more of the group’s market-leading engines on wings. Given that a large chunk of its revenue comes from servicing those engines, with business based on how long those engines spend in the air, investors should be pleased to see so-called engine flying hours (EFH) rise to 88% of 2019 levels last year. That figure’s set to soar to new heights this year, with the group expecting EFH to hit 100-110% of 2019 levels.

‘The group’s mid-term guidance, which lays out targets for 2027, now looks well within reach. By this point, annual operating profits are expected to climb to a £2.5-2.8bn range, with the main driver of this being much higher margins in its Civil Aerospace division. Now it’s back in positive free cash flow territory, Rolls has made good headway in pushing debt lower. That will strengthen the balance sheet and adds weight to market expectations for a reinstatement of the dividend later this year.’

Tycoon Mike Ashley accused Morgan Stanley of snobbery on the first day of a £40million legal battle in the High Court.

Frasers Group, which is controlled by Ashley and owns brands such as Sports Direct and House of Fraser, has taken the US investment bank to court in a row over its stake in fashion label Hugo Boss.

Frasers accused Morgan Stanley of making a ‘capricious’ and inappropriate move to force its business off the bank’s books in May 2021 having taken a ‘personal dislike’ to Ashley which was based on ‘class’.

Indivior has started consulting shareholders on potentially shifting its primary listing to the US and maintain a second listing in the UK, the drugmaker said this morning.

John Moore, senior investment manager at RBC Brewin Dolphin:

‘It’s another steady set of results from Lloyds, with profits in line with forecasts for the quarter and full year.

‘The bank, like many of its UK peers, is on a path of cost control and robust trading, underpinning its ability to return capital to shareholders. The £450million set aside to cover a regulatory probe into historic car finance issues is the one fly in the ointment in an otherwise relatively upbeat update.

‘Longer term, there are strategic questions for Lloyds to consider – such as its plans for Scottish Widows – but for now the bank is in a good position and performing well.’

WPP’ key revenue metric rose 0.3 per cent in the final quarter, as weak spending by US tech, healthcare and retail clients held back growth in Britain and India.

The British advertising group, which owns Ogilvy and GroupM, reported a 0.9 per cent like-for-like rise in 2023 revenue less pass-through costs to £11.86billion, in line with its guidance.

The group hit forecasts despite weakness in the fourth quarter in the US, where the key metric dropped by 4.5 per cent, a deterioration on the 4.1 per cent drop recorded in the previous quarter.

‘While 2023 was more challenging than we expected due to cuts in spending by technology clients, we delivered a resilient performance for the year,’ chief executive Mark Read said.

‘We are optimistic about the strategic opportunities ahead of us and are confident that we can deliver accelerated and increasingly profitable growth over the medium term.’

Lloyds Banking Group profits surged 57 per cent in 2023, as the lender shrugged off Britain’s faltering economy and a charge for potential costs from a regulatory review into motor finance.

Pre-tax profits hit £7.5billion for the 12-month period, up from £4.8billion in 2022 and slightly above the £7.4billion forecasrt by analysts.

The group – which also spans the Halifax, Bank of Scotland and Scottish Widows brands – announced a final dividend of 1.84p and a share buyback of £2billion.

‘In 2023 the Group remained focused on proactively supporting people and businesses through persistent cost-of-living pressures, whilst financing their ambitions and growth. This has come alongside strong progress on our strategy and delivering increased shareholder returns, guided as always by our core purpose of Helping Britain Prosper.

‘The Group delivered a robust financial performance, meeting our 2023 guidance, driven by income growth, cost discipline and strong asset quality. This performance enabled strong capital generation and increased shareholder distributions.

‘2023 was a critical year in building towards the ambitious strategy we announced two years ago, as we look to grow our business and deepen relationships with our customers. As demonstrated in our recent strategic seminars, we have made significant progress and are on track to meet our 2024 and 2026 strategic outcomes, helping us build towards higher and more sustainable returns.

‘Our strategy is purpose-driven. Building a more sustainable and inclusive future is central to this, including our commitment to supporting the environmental transition, social housing and broader purpose-aligned objectives. We are excited about the opportunities that lie ahead as we continue to deliver for all of our stakeholders.’

On 6 March, Chancellor Jeremy Hunt will unveil his Spring Budget.

In what may well turn out to be an election year, the Government will be keen to attract voters with policies that will protect the pounds in their pockets.

That means that tax cuts are likely to be on the table. However, Hunt already announced several tax reductions in last year’s Autumn Statement – and weaker public finances mean his power to slash them further may be limited.

Rolls-Royce profits more than doubled last year to £1.6billion, beating market forecasts, on the back of booming demand for the British engineering giant’s aircraft engines.

The performance beat analyst forecasts of £1.4billion and Rolls’ own guidance of £1.2billion to £1.4billion, having surged from the £652million it made in 2022.

Rolls has forecast underlying operating profit growth of at least 6 per cent for 2024, predicting a range of between £1.7billion to £2billion, compared to the current consensus forecast of £1.7billion.

It reflects solid growth under chief executive Tufan Erginbilgic, the former BP executive who took the helm a year ago.

‘Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives. This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.

‘We are managing the business differently and our significant performance improvement in the year reflects the hard work and focused actions of all our teams. We are also continuing to invest to drive future sustainable growth. Our strong delivery in 2023 gives us confidence in our 2024 guidance and is a significant step towards our mid-term targets. We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.’