Must read: FTSE 100, Shell, BT, ITV, Frasers

Our head of investment rounds up the morning's big news.

GLOBAL MARKETS

European markets have opened in the green following a strong session overnight in Asia. Centrica (LSE:CNA) has soared to the top of the FTSE 100 after reporting record profits.  

Last night the Federal Reserve hiked interest rates as expected to a 22-year high prompting a mixed market close stateside. Shares in Meta Platforms Inc Class A (NASDAQ:META) jumped around 7% after-hours following a strong increase in ad revenues and a better-than-expected revenue outlook.

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SHELL

Shell (LSE:SHEL) reported second-quarter profit of $5.1 billion, slumping 56% year-on-year versus the record $11.5 billion in the same period last year, and below analysts’ expectations for $5.8 billion. Its integrated gas business earnings tumbled to $2.5 billion versus $4.9 billion in the first quarter. Despite this, it is returning cash to shareholders by announcing a further share buyback programme of $3 billion, and confirmed plans to raise its dividend by 15% to $0.33 per share.   

In 2022, Shell recorded a record annual profit of $40 billion on the back of soaring energy prices following Russia’s invasion of Ukraine. After reaching 2022 highs last summer, underlying oil prices have been largely under pressure ever since, weighing on Shell’s refining margins, trading, and earnings. It is also facing higher depreciation charges and operating expenses. Looking ahead, the energy transition and focus on climate change is expected to lead to weaker fossil fuel demand and prices longer-term. That's despite the short-term rebound for oil, driven by voluntary output cuts from Saudi Arabia and Russia as well as a rebound in Chinese demand. 

After collapsing in 2020 at the height of the pandemic when the global economy ground to a halt, shares in Shell have been sharply rebounding off the lows, although the pace of gains has tempered, with shares up modestly so far in 2023. Despite this, the analyst community remains bullish towards the stock, with no sell recommendations and a majority of buy recommendations. Today Shell is under pressure, dragged down by lower earnings. 

ITV

ITV (LSE:ITV) reported first-half group adjusted EBITDA down 52% to £152 million, missing analysts’ expectations. Media and entertainment revenue fell 9% to £964 million, with total advertising revenues down 11%. However, ITV Studios was a bright spot with revenue up 8%, reaching £1 billion for the first time thanks to strong demand for ITV’s content and ITVX boosted digital revenues by 24%. It enjoyed strong international demand for programmes like Love Island, the Voice, and Come Dine with Me. 

ITV is struggling with the weak UK advertising market amid the macroeconomic headwinds which are weighing on corporates’ appetite to purchase ads. On top of that, it has been investing heavily in ITVX which has been increasing ITV’s costs. However, looking ahead, ITV is hopeful about attracting viewer eyeballs, particularly around the Women’s football World Cup, the Rugby World Cup and the return of Big Brother. After dropping its possible acquisition of All3Media earlier in the month, ITV said as part of its strategy it ‘will consider selective value-creating M&A’ suggesting there could be further deals in the pipeline.

Shares in ITV have struggled so far this year, falling significantly from the highs in February. Today shares are trading in the green, reflecting strength in ITV Studios and ITVX as well as a rosy outlook, despite weakness on the bottom line.

BT

BT Group (LSE:BT.A) reported a 5% jump in quarterly adjusted core earnings to £2 billion, matching analysts’ expectations. It also confirmed its full-year outlook. Adjusted revenue rose 4% on the first quarter, reaching £5.2 billion. BT said Openreach is now 44% of the way through its full fibre build and customer demand has continued to grow. 

Earlier this month, CEO Philip Jansen said he plans to step down within the next year, having steered the business through the pandemic and its fibre network rollout. He also spearheaded major job cuts at BT with plans, announced in May, to slash up to 55,000 roles as part of a major cost-cutting strategy. Despite this, shares in BT have struggled under his watch, almost halving in value since Jansen took to the helm in January 2019. 

Meanwhile, there have been reports that French billionaire Patrick Drahi is considering raising his stake in BT for a fourth time. Drahi already down 24.5% of the group via his telecoms business, Altice but he denies targeting a full blown takeover. 

BT has been struggling with the pressures of inflation and has been attempting to control costs to offset these headwinds. At the same time, it is in the middle of carrying out expensive fibre and 5G network investments and faces significant C-suite uncertainty following Jansen’s departure plans. Shares in BT initially opened higher but have since swung into the red as investors digest the finer details.

FRASERS

Frasers Group (LSE:FRAS) reported full-year revenue of £5.56 billion, ahead of expectations for £5.1 billion. Adjusted pre-tax profit reached £478.1 million, towards the top of its estimated range for between £450-500 million with annual profit soaring 40% year-on-year. Frasers expects adjusted pre-tax profit to come in between £500 million and £550 million this year in a sign of optimism about the year to next April. 

Meanwhile, the retailer has upped its stake in fashion e-commerce business ASOS (LSE:ASC) from 13.34% to 15.13%. Frasers’ vast array of sportswear, clothing and electric retailers has allowed the business to benefit from diversification and achieve impressive profit growth, despite the backdrop of sluggish economic growth and elevated inflation. 

Frasers appears to be building a stake in ASOS, potentially ultimately targeting a takeover. ASOS has suffered with heavy share price declines, down around 60% over the past 12 months, allowing Frasers to snap up a bigger stake at a discount. ASOS has been battling against falling sales after the Covid-era online shopping boom faded and amid stiff competition from cheaper fast fashion rivals. Frasers is a dab hand at acquiring struggling businesses having snapped up names such as House of Fraser, Misguided, Evans, Jack Wills and Sofa.com. 

Frasers is trying to position itself as a consumer platform for the world’s best brands to provide a ‘world-leading retail ecosystem’. 

Shares in Frasers are trading higher today, lifting its year-to-date gain to around 10%.