BUSINESS LIVE: BoE holds base rate; Shell ups dividend; BT earnings top £6bn

GSK has reached an out-of-court settlement in California on another lawsuit concerning its heartburn and stomach ulcer medicine Zantac.

The case initially planned to go to trial on 20 February but will now be dismissed, the company told shareholders in a short statement on Thursday.

Kevin Brown, savings specialist at Scottish Friendly comments on the Bank of England’s decision to freeze the base rate:

Holding the base rate at 5.25% is a signal that the Monetary Policy Committee won’t be deviating from its path of fiscal discipline just yet. Clearly the MPC believe it’s too early to turn the heat down on inflation especially as the wider economy isn’t quite in recessionary territory.

It remains a delicate balancing act though. Many investment market devotees believe a cut can’t be far off and that sentiment will be encouraging for mortgage holders. But for savers and retail investors it does start to beg the question what is the best home for their money as we move deeper into 2024?

The wider economic picture remains uncertain and rates on cash savings accounts remain high relative to recent years. However, if the base rate begins to tick down further there may be more people looking towards investment markets for the greatest potential to beat inflation.

The Bank of England’s Monetary Policy Committee has voted to keep base rate on hold at its current level of 5.25 per cent by a margin of 6-to-3.

Two members preferred to increase Bank Rate by 0.25 percentage points to 5.5 per cent.

While many FTSE 100 executives languish on measly millions, the sum at the centre of Musk’s legal spat tops $56billion, or around £44billion.

Rachel Reeves cosied up to business today as she ruled out hiking corporation tax if Labour comes to power.

The shadow chancellor used a speech in central London to make the commitment not to raise the burden on firms.

Phoenix Group shares jumped on Thursday after the insurer revealed it has achieved its cash generation targets two years early.

The FTSE 100 insurance group, which is behind brands like SunLife and Standard Life, said it delivered around £1.5billion worth of new business long-term cash generation last year.

BT Group is on track to post profits of more than £6.1billion for 2023 as higher prices helped lift its most recent quarterly results.

The telecoms giant reported adjusted turnover increased by a better-than-expected 3 per cent year-on-year to £5.3billion in the three months ending December.

Even ardent believers in long-term investing will have given serious thought to joining the dash to cash over the past 12 months or so.

As savings rates climbed above 6 per cent last, the prospect of such a guaranteed return proved tempting for many investors.

AG Barr has appointed former Saga boss Euan Sutherland, a veteran in the consumer goods industry, as its next chief executive.

Sutherland, 55, was most recently group chief executive of the over-50s holiday and insurance group Saga and previously held the top role at fashion retailer Superdry and The Co-op Group.

The boss of GSK said the pharma giant has no intention of leaving the London stock market despite recent defections from the exchange.

In a welcome vote of confidence in the City, Emma Walmsley said the group was ‘very happy where we are’.

Steve Matthews, investment director, liquidity, at Canada Life Asset Management:

‘We expect the committee to maintain the current policy stance, with an expected 8-1 vote in favour of no change.

‘Recent inflation and wage data suggests diminishing pressure to raise rates, and the central bank appears inclined to wait for a sustained movement towards the 2% inflation target before considering any rate cuts.

‘This cautious approach is expected to persist in the coming months, with a potential policy shift not anticipated before June, unless major economic shocks occur. ‘Despite market expectations of four rate cuts this year, the Bank of England will be mindful of a secondary inflation effect and the geopolitical tensions we are seeing across the globe. Taking this into consideration our forecast suggests a more conservative estimate of three cuts, bringing the rate down to 4.5%.’

Around £130bn was wiped off the value of two of the world’s biggest technology companies as they struggled to meet Wall Street’s sky- high expectations.

Google owner Alphabet’s shares dropped 6 per cent after investors were disappointed by weak advertising performance in the last quarter.

AG Barr’s trading update, Julie Palmer, partner at Begbies Traynor, said:

‘The soft drinks giant that’s known for its Irn-Bru clearly has the tonic that cash conscious consumers need when times are tough. Sales at AG Barr have soared over the last year and the company’s focus on rebuilding margins is starting to bear fruit.

‘The Irn-Bru maker’s acquisJitions of recognisable brands – most recently Rio and Boost – should see it continue to pour out success into the long term, despite the sobering prospect of ongoing cost pressures diluting margins.

‘That said, despite the upcoming increase to the national living wage and business rates threatening to shake up AG Barr’s balanced concoction of competitive prices and robust margins, the soft drinks stalwart appears well-positioned to weather these storms thanks to its diversified portfolio of brands and highly automated production line.

‘After more than two decades at the helm, CEO Roger White steps down later this year and the newcomer has some big shoes to fill at a time when businesses are battling a tricky economic backdrop.

‘Changes of the guard at the top always create some pause for thought but for the maker of Scotland’s ‘other’ national drink, there’s clearly momentum build across its stable of iconic brands which should position it well to continue to shake up an ever-evolving soft drinks market.’

London-listed stocks are tracking lower this morning, tracking overnight losses on Wall Street, as investors scale back bets of a US interest rate cut in March.

But shares in BT Group and Shell help limit losses on the FTSE 100.

Shell has climbed 1 per cent after the energy major increased its dividend by 4 per cent and extended its share repurchases despite reporting a drop in 2023 profit.

BT has gained 4.1 per cent after Britain’s biggest broadband and mobile operator said it was on track to grow revenue and profit this year after reporting a better-than-expected third-quarter revenue.

Both the FTSE indexes closed out January with their worst monthly performance since October 2023, as investors reined in bets of aggressive interest rate cuts this year.

Wall Street closed sharply lower on Wednesday after the US Federal Reserve held interest rates steady while dashing hopes for a cut as soon as March.

Irn-Bru maker AG Barr has appointed former Saga boss Euan Sutherland, a veteran in the consumer goods industry, as its next chief executive officer, effective from 1 May.

Sutherland, 55, was most recently group CEO of the over-50s holiday and insurance group Saga and had previously held the top role at fashion retailer Superdry and The Co-op Group.

AG Barr had said last August that CEO Roger White would step down within a year.

Separately, the beverage firm forecast an about 14 per cent rise in annual profit at £49.5million, slightly ahead of market view, partly helped by strength in its speciality coffee business and price hikes.

Chair Mark Allen said:

‘It has been a great pleasure working with Roger, who has successfully led the business for over two decades and delivered significant value to shareholders, stakeholders and employees. We wish him well in the future.

‘On behalf of the Board, I am delighted that Euan is joining A.G. BARR. He has substantial experience across several consumer-facing businesses and will be a strong addition to the Board.

‘He is well placed to lead A.G. BARR through the next exciting phase of its development and to ensure the continued long term success of the business.’

Global investors pulled £8billion from woke ESG funds last year amid a backlash over greenwashing and the ‘vague’ promises they offer.

Figures from industry group Calastone show the three-year boom in the funds focused on environmental, social and governance issues was now over.

Stuart Lamont, investment manager at RBC Brewin Dolphin:

‘Shell had flagged much of the headline news ahead of today’s results, so the impact of impairment charges comes as no surprise.

‘Stronger liquefied natural gas trading and wider operational performance has offset this to a degree and helped the company beat expectations for the full year.

‘Debt ticking up will be a slight concern in the current environment, but this should be brought down by future divestments. Shell remains well-rated by analysts and another share buyback and increasing dividend are good news for shareholders.

‘Longer-term, there will be more questions about its plans to transition to net zero, which receive little mention in this latest update.’

BT is on track to post profits of more than £6.1billion for 2023 after Britain’s biggest broadband provider posted a better-than-expected 3 per cent rise in third-quarter revenue and a broadly in-line 1 per cent rise in core earnings.

Chief Executive Allison Kirkby, who replaced Philip Jansen last month, said BT had delivered another quarter of revenue and earnings growth, while rapidly building and upgrading customers to its full-fibre broadband and 5G networks.

‘As I assume the role of chief executive, we remain committed to our purpose and our strategic focus,’ she said.

Tata Steel bosses have been lambasted over their handling of the loss of 2,800 jobs at the Port Talbot steel plant.

Labour MP Stephen Kinnock, whose constituency includes the steelworks, accused it of ‘bluffing’ the Government with the closure of its site in South Wales to secure a better deal.

Shell has posted a 2023 profit of $28billion, down 30 per cent from the previous year’s record as oil and gas prices cooled, and increased its dividend by 4 per cent.

Shell’s fourth-quarter adjust earnings, its definition of net profit, reached $7.3billion, with strong liquefied natural gas trading results offsetting weaker refining and oil trading results.

The quarterly earnings, which exceeded analysts’ expectations of a $6billion profit, compared with record quarterly earning of $9.8billion a year earlier and $6.2billion in the third quarter of 2023.

The new boss of Morrisons has vowed to win back shoppers from Aldi after the floundering grocer’s private equity takeover.

Morrisons has lost customers to the discounter, and conceded its status as Britain’s fourth-biggest grocer to Aldi two years ago.

But Rami Baitieh said yesterday he would ‘start a new chapter’. In his first financial update since taking the reins in November, he said he was confident of a ‘bright future’.

Ben Laidler, global markets strategist at eToro:

‘The Bank of England (BoE) has been the most hawkish of major central banks and this has made Sterling one of the best recent currency performers.

‘With UK inflation still double its 2% target, economic growth has been better-than-feared, and the government set for more tax cuts at its March budget.

‘But enough inflation-fighting progress has been made for the BoE to begin opening the door to lower interest rates starting this summer, with four cuts likely in the second half.

‘This would lag behind the US Fed and Europe’s ECB but be welcome, and borrowers have already started to benefit from the fall in bond yields.’