BUSINESS LIVE: Thames Water set for Ofwat monitor; WPP cuts guidance; Quilter profits rise

Hiscox missed first-half profit expectations as slower growth at the insurance company’s US digital division weighed on results.

The FTSE 250 Lloyds of London insurer reported a 7 percent rise in pre-tax profit to $283.5 million for the six months ended June 30, compared with $290 million in the company’s consensus estimate.

Shares in Hiscox, which rose last month on takeover rumors, fell 1 percent in early trading.

However, the group’s focus on investments in underwriting helped its underwriting result rise to $241 million despite a more active loss environment, CEO Aki Hussain said in a statement.

Legal & General has reported a 1 percent rise in core operating profit to £849 million for the first half of the year, driven by record volumes in annuities and US protection.

Hargreaves Lansdown Senior Equity Analyst, Matt Britzman:

‘Record volumes in the sale of annuities to individuals ensured that operating profit exceeded expectations, as people bought annuities with a higher rate in anticipation of the rates falling again.

‘Legal & General is a market leader, growing market share in the half of the month and boosting its own results. The pension risk business (bulk annuity) was a bit weak in the half of the month, but a rebound after the end of the period was welcome news. This will remain a growth driver in the medium term as pension funds look to shift their liabilities to insurance giants such as L&G.

‘L&G has a lot of strings to its bow, with bulk annuities at its core, and the market looks set to remain healthy in the medium term. The next challenge is to deliver better performance from the revamped Asset Management division, which carries some execution risk.

‘There is plenty of positive to report here; the balance sheet is strong and the total shareholder return is attractive, with a growing dividend and continued share buybacks.’

London-listed stocks look set to post a second straight day of gains after Monday’s sell-off, boosted by financial stocks and corporate earnings as markets stabilise.

Banks rose 1.4 percent, among the biggest gainers, after rising 0.4 percent in the previous session.

The investment banking and brokerage sector rose 1.7 percent, helped by a 4.5 percent increase at asset manager Quilter, which beat half-year profit expectations and reported stronger net cash inflows.

Inter-dealer broker TP ICAP rose 10 percent after a rise in half-year pre-tax profit, further supporting the sector. The stock tops the FTSE 250 index.

The number of homebuilders rose 1.3 percent after data showed house prices in the country rose by the most in six months in July.

Precious metals miners, on the other hand, posted a 0.1 percent decline, although gold prices remained steady after falling in the previous session.

WPP fell 1.3 percent after the advertising group cut its annual revenue growth forecast and agreed to sell its majority stake in FGS Global to KKR for $775 million.

Bottler Coca-Cola HBC fell 2.3 percent despite higher annual operating profit and revenue expectations and higher first-half revenue.

Private equity firms are anxiously awaiting the government’s first budget after Rachel Reeves did not rule out a rise in capital gains tax.

Last week the Chancellor of the Exchequer warned that tough decisions were needed to plug a £22bn budget black hole that came to light after Labour won last month’s election.

The UK is enjoying a ‘golden age’ of live music, thanks in part to international tourists flocking to see artists like Taylor Swift.

That’s according to Stephen Freeman, the man behind the food and drink in the major stadiums in the United Kingdom, including Wembley and Murrayfield.

Buy-now-pay-later online platform Klarna is considering selling shares in preparation for a possible IPO in New York.

The Swedish lender has asked investment bank Goldman Sachs for advice on a secondary share sale, in which investors sell their shares to another party.

Asset manager Quilter, a listed FTSE 250 company, beat earnings and inflow expectations in the first half of the year as more wealthy clients turned to the firm’s funds.

Quilter reported net inflows of £1.5bn for the first six months of the year, up from around £200m the year before, and total assets of £113.8bn, all of which beat analysts’ forecasts for the company.

The company also reported a 28 percent rise in adjusted pre-tax profit to £97 million and declared an interim dividend of 1.7p per share.

‘As inflation in the UK eases, consumer disposable income has improved, leading to the first signs of increasing discretionary savings.

‘We expect that the number of new orders in the sector will be higher in 2024 than in 2023.

‘Interest rates remained favourable in the first half of the year, which helped maintain returns on equity investments. Together with strong cost management, this led to a 28% increase in adjusted profit in the first half of the year.

‘While expected lower interest rates in the second half of the year will reduce investment income, we also expect lower rates to support market levels and clients to focus more on long-term savings. Both factors are conducive to new business streams and revenue growth.’

Lenders in the UK market need to improve their crisis plans to prepare for a possible collapse, the Bank of England said yesterday.

The findings were part of the central bank’s investigation into whether banks could close “safely” without disrupting the financial system or having to bail out taxpayers.

Barclays, HSBC, Lloyds and Standard Chartered, among others, were told to be better prepared for a possible bankruptcy.

WPP has agreed to sell its controlling stake in FGS Global to minority shareholder KKR for $775 million. The money will be used to pay down the British advertising group’s mountain of debt.

The move, which implies an enterprise value of $1.7 billion for the financial PR agency, came after the group cut its 2024 forecast after organic growth slowed again in the first half of the year.

Mark Read, CEO of WPP, said:

‘The sale of FGS is an excellent outcome for WPP. Together with FGS management, we have built a world-leading strategic communications and advisory group, creating significant value for all stakeholders.

‘We have achieved an attractive price, which will allow WPP to crystallise the significant value created more quickly.

‘This also provides WPP with greater financial and management flexibility as we continue to grow our core businesses, including Burson and Ogilvy Public Relations, which provide our clients with access to world-class public relations services.’

Ofwat has appointed an independent regulator to oversee Thames Water and report its findings to the regulator after two credit downgrades left the debt-ridden utility in breach of its operating licence.

This follows separate actions by credit rating agencies S&P and Moody’s, who stripped Thames Water’s bonds of their investment grade rating.

Ofwat said the independent regulator would ensure Thames Water can improve its performance, with the country’s largest supplier subject to a range of commitments.

Ofwat boss David Black added:

‘We are clear that Thames Water must remedy the breach of its licence, improve its operational performance and secure investor support to restore the creditworthiness that the company no longer has.

‘These enforceable commitments include appointing an independent monitor within the company, who will report on developments to drive meaningful change in performance and ensure that the board is expanded with the right expertise.

“We continue to monitor progress closely and will not hesitate to take further action if necessary.”