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FT Opening Quote: Rise in profits for JD Wetherspoon

Summary:
Rise in profits for JD Wetherspoon, Ofcom and BT agree on Openreach and Esure exceeds growth targets. FT Opening Quote is your early Square Mile briefing. You can sign up for the full newsletter here. Tim Martin just can’t help himself from making political statements in financial reports by his pub group JD Wetherspoon.This time, the company chairman has steered clear from commentary on the EU, of which he is conspicuously not a fan.But even while reporting a near 43 per cent rise in profits in the three months ending on January 22 compared to the same spell last year, to £51.4m, he has taken a swing at this week’s Budget. After a 3.3 per cent rise in like-for-like sales for the quarter, he has also warned of slower sales in the months ahead.Chancellor Philip Hammond promised a discount

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Rise in profits for JD Wetherspoon, Ofcom and BT agree on Openreach and Esure exceeds growth targets. FT Opening Quote is your early Square Mile briefing. You can sign up for the full newsletter here.

Tim Martin just can’t help himself from making political statements in financial reports by his pub group JD Wetherspoon.

This time, the company chairman has steered clear from commentary on the EU, of which he is conspicuously not a fan.

But even while reporting a near 43 per cent rise in profits in the three months ending on January 22 compared to the same spell last year, to £51.4m, he has taken a swing at this week’s Budget. After a 3.3 per cent rise in like-for-like sales for the quarter, he has also warned of slower sales in the months ahead.

Chancellor Philip Hammond promised a discount on business rates for pubs with a ratable value of less than £100,000. But Mr Martin says:

In fact, that sum is dwarfed by tax and regulatory increases.
Companies like Wetherspoon, on examination of the fine print of the budget, are not, in fact, eligible for the £1,000 per annum decrease in business rates, in any event.
The company has previously emphasised the far-higher taxes per meal or per pint that pubs pay compared to supermarkets.

In effect, this was a budget for dinner parties, no doubt the preference of the Chancellor and his predecessor – dinner parties will suffer far less from the taxes outlined above, whereas many people prefer to go to pubs, given the choice.

BT and Ofcom have reached agreement on the separation of the telecommunications company’s Openreach network division paving the way for the transfer 32,000 employees and their pension rights to the new company.

Openreach will have its own branding, not featuring the BT logo.

Openreach, which builds and maintains the tens of millions of copper and fibre lines that run from telephone exchanges to homes and businesses across the UK, will assume greater independence under its own board of directors. The chief executive will report to a Openreach chairman but will be accountable to the BT chief executive for certain legal and fiduciary duties.

Ofcom last year called for Openreach to be a “legally separate” company within BT. The disagreement centred on the transfer of liabilities, which concern it could undermine BT’s Crown guarantee, agreed on privatisation in 1984, which holds the government liable for pension obligations if the company were to be wound up.

Esure chief executive Stuart Vann declared the FTSE 250 insurance group is “in full growth mode” after beating targets for premium growth in 2016, driven by strong growth in its motor insurance business.

An 8.6 per cent increase in in-force policies helped gross written premiums and pre-tax profits to climb by 19 per cent each, to £655m and £72.7m respectively. The increase in premiums was ahead of the company’s already-increased expectations, and at the top end of analyst forecasts.

Underlying profit after tax, the company’s preferred measure of performance, increased 18 per cent to £80.5m, and the company said it confident of achieving similar rates of revenue and policy growth this year.

Esure’s positivity comes despite changes to the rules governing compensation for serious injuries, which have hit profits and dividend payouts at a number of its peers.

Finally, Matthew Vincent asks whether Morrisons is stealing John Lewis’s clothes.

Wm Morrison and John Lewis have long embodied opposite ends of the high street, nay, the country.

One is named after the founder of an egg and butter stall in Bradford Market; the other after the owner of a draper’s shop on Oxford Street. Ne’er t’twain shall meet — until perhaps now.

Because not only has Morrisons taken to women’s attire — albeit jackets of the bomber, not the Barbour, variety — it is also outdoing its Waitrose-owning rival in financial performance.

On Thursday, Morrisons reported rises in both like-for-like sales and operating profit for the first time in four years, while John Lewis said that operating profit, ignoring one-off benefits, had fallen, leading to a fourth year of lower payouts for partners.

Indeed, in their treatment of stakeholders, the retailers now appear to be wearing each other’s clothes.

Read the full Lombard column here

Beyond the Square Mile

Asia Pacific equities were set to end the week on a high note. The S&P/ASX 200 index in Sydney was up 0.6 per cent and Tokyo’s Topix rose 1.2 per cent, while the Hang Seng in Hong Kong was 0.2 per cent higher. The Shanghai Composite index was flat while the Shenzhen Composite index gained 0.3 per cent.

In South Korea, the benchmark Kospi rose 0.2 per cent after Park Geun-hye was stripped of her presidency and formally ousted following a corruption scandal.

The euro continued its rise after European Central bank president Mario Draghi declared victory against deflation on Wednesday, gaining 0.2 per cent to $1.0601.

The dollar index tracking the currency against a basket of peers was flat at 101.89.

Oil prices rose on Friday. Brent Crude was up 0.7 per cent at $52.56 a barrel after falling for a second consecutive day on concerns over data showing record US stockpiles. US benchmark West Texas Intermediate struggled to recover after settling on Thursday below $50 a barrel for the first time since December, with the benchmark trading up 0.8 per cent at $49.68 a barrel.

Gold fell 0.3 per cent to $1,197.68 an ounce.

Intraday

In the US, the S&P 500 is expected to rise by the same amount when trading begins in New York.

Also in the US, the February jobs report will be released today. The economy is expected to have added more than 200,000 jobs last month.

Corporate earnings reports out on Friday include JD Wetherspoon and Esure.

The economic calendar for Friday is as follows (all times London):

07.00: Norway consumer price inflation
07.00: Germany imports, exports and trade balance
07.45: France industrial production
08.00: Denmark consumer price inflation
08.00: Spain retail sales
09.30: UK industrial and manufacturing production, imports, exports and trade balance
15.00: UK NIESR GDP estimate

The markets at 07:56

Asian markets
Nikkei 225 up +286.03 (+1.48%) at 19,605
Topix up +19.33 (+1.24%) at 1,574
Hang Seng up +67.58 (+0.29%) at 23,569

US markets
S&P 500 up +1.89 (+0.08%) at 2,365
DJIA up +2.46 (+0.01%) at 20,858
Nasdaq unchanged 0.00 (0.00%) at 5,839

European markets
Eurofirst 300 up +1.48 (+0.10%) at 1,471
FTSE100 down -19.65 (-0.27%) at 7,315
CAC 40 up +21.03 (+0.42%) at 4,982
Dax up +11.08 (+0.09%) at 11,978

Currencies
€/$ 1.06 (1.06)
$/¥ 115.42 (114.91)
£/$ 1.22 (1.22)
€/£ 0.8703 (0.8692)

Commodities ($)
Brent Crude (ICE) up +0.14 at 52.33
Light Crude (Nymex) up +0.16 at 49.44
100 Oz Gold (Comex) unchanged 0.00 at 1,202
Copper (Comex) up 0.00 at 2.57

10-year government bond yields (%)
US 2.61%
Germany 0.44%

CDS (closing levels)
Markit iTraxx SovX Western Europe -0.47bps at 19.05bp
Markit iTraxx Europe -0.45bps at 71.36bp
Markit iTraxx Xover -1.38bps at 283.68bp
Markit CDX IG +0.57bps at 64.34bp

Sources: FT, Bloomberg, Markit

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Siona Jenkins
Former Cairene; FT Middle east news editor. Views my own.

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