Vodafone redials its Indian impairment numbers. FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.

Hailing from the country that gave India cricket, Victorian railway architecture and a penchant for bureaucracy, Vodafone might have expected a little goodwill on the subcontinent. Instead, India has given the British mobile phone operator a price war, a €3.7bn impairment charge and a €6.1bn loss for the full year.

Thanks to the decision of India’s richest man, Mukesh Ambani, to make phone calls and data free on his new Jio network – at a cost of £16.2bn last year – Vodafone and other rivals have found themselves having to take a huge hit just to compete in the market. Vodafone’s impairment comes after it was forced to slash tariffs just to keep customers, and scrap a plan to spin off its Indian arm in a stock market listing. It later struck an £18bn deal to merge its Indian business with Idea Cellular, but the damage was done.

Still, it could have been worse. In the first half of the 2017 financial year, Vodafone recorded a non-cash impairment of €5bn net of tax, relating to its Indian business. But when it checked the number, after its merger with Idea Cellular, the impairment charge was reduced to €3.7bn.

At a group level, revenue for the year decreased by 4.4 per cent to €47.6bn, mainly due to foreign exchange movements. Organic service revenue was up 1.9 per cent – or 2.7 per cent excluding the impact of regulatory cuts to certain charges.

Adjusted earnings, excluding the impairment, were flat at €14.1bn, but 2018 guidance is for earnings growth of 4-8 per cent, or €14-€14.5bn.

Chief executive Vittorio Colao tried to focus on the positive:

Our focus on excellence in customer experience has enabled further improvements in our overall commercial and financial performance during the year. Sustained investment in network quality has provided the platform to offer more generous plans to our mobile customers in Europe… Additionally, the proposed merger of Vodafone India and Idea Cellular will create a new champion for Digital India, while capturing synergies with an estimated net present value of US$10bn.

As the airline that gave Europe low-cost flights, extra charges for anything resembling a “frill”, and secret cabin crew hand gestures for ‘Yay, there’s yet another Stag Party on the flight to Tallinn” (can you guess what it might be?), Easyjet might expect Europe to be less than hospitable. And so it has proved – but for very different reasons. Euro strength against a Brexit-weakened pound and a price war in Europe’s short-haul travel market have hit the low-cost carrier.

Despite a record 33.8m passengers in the first six months of the 2017 financial year – an increase of 9 per cent at a record load load factor of 90.2 per cent – Easyjet said currency effects and a late Easter sent its half year losses soaring. Its pre-tax loss came in at £238m, up from £18m last year.

Chief executive Carolyn McCall said:

The first half loss is in line with market expectations and reflects the movement of Easter into the second half as well as currency effects which together had an estimated impact of circa £127m on the bottom line. Our expectations for the full year are in line with current consensus market expectations.

As the company that gave the world lumpy Bird’s custard and Batchelor’s noodles, it is hard to imagine Premier Foods having to pay much of a premium for its ingredients. But such is the weakness of the pound and the strength of commodity price inflation that the group warned shareholders in January of a 10pc dent to full-year profit. It blamed the rising cost of wheat, sugar, palm oil and butter, as well as fewer supermarket multi-buy promotions.

This morning, it said underlying full-year sales dipped 2.4 per cent to £790.4m, but underlying pre-tax profit fell 11.8 per cent to £74.2m. That was slightly better than analysts’ consensus estimates, according to Bloomberg, which had suggested adjusted profit would fall to £52.2m.

Premier described the period as “a challenging one for the industry” due to the return of food inflation and changing retailer promotional strategies. It preferred to note an increased market share for six of its eight largest brands, and international sales growth of 18 per cent.

But its recipe for 2018 tells its own story: a cost cutting programme to deliver £20m of savings over the next two years, and an emphasis on debt reduction.

And, finally, Ei – the group that gave the world beer, crisps and the name Enterprise Inns, before deciding to ditch one third of these – has found the world continues to appreciated the other two.

Ei rebranded from Enterprise in February, to reflect its strategy of becoming “a portfolio of businesses comprising a variety of operating models and trading styles designed to optimise the value derived from the asset base.” In other words, by 2020 it won’t just manage pubs. It will own about 1,000 rented properties. But it will still have 2,400 inns on a leased and tenanted basis.

And this morning Ei said like-for-like net income in the six months to March 31 had risen 1.6 per cent in its leased and tenanted pub business – although net income growth in its commercial property arm slowed to 1.1 per cent from 6.3 per cent, reflecting changes in the estate composition.

Its property portfolio now stands at 304 commercial properties, with an improved average annualised rental income per property of £66,000, up from £59,000. Selling a package of 18 commercial properties in March generated £20m of net proceeds – a 15 per cent premium to book value.

However, statutory profit after tax fell to £10m from £33m last time, due to finance costs of £30m from a refinancing of corporate bonds.

Chief executive Simon Townsend said:

We are confident that we will continue to deliver positive like-for-like net income growth in our leased, tenanted and commercial estates for the full year.

Beyond the Square Mile

Asian stock markets were faltering after initial gains. Sydney’s S&P/ASX 200 and Tokyo’s Topix were up just 0.2 per cent, while the Hang Seng was off 0.3 per cent in Hong Kong. In China, the Shanghai Composite index was off 0.3 per cent as financials shed 0.8 per cent.

The dollar index — a measure of the US currency’s strength against a basket of leading rivals — dropping 0.1 per cent to 98.806.

The Australian dollar was flat at $0.741, while the Japanese yen firmed 0.3 per cent to ¥113.51 against the dollar.

Monday’s rally in crude oil prices continued in Asia, pushing both major markers above key levels after Russia and Saudi Arabia this week backed the extension of oil output cuts.

Brent crude, the global benchmark, was up 0.3 per cent at $51.95 a barrel, bringing it 2.2 per cent higher for the week. West Texas Intermediate, the US marker, was up 0.3 per cent at $49.06 a barrel. It has gained 2.4 per cent since Friday’s close.

Gold was up 0.2 per cent at $1,233 an ounce.

Intraday

In the US, the S&P 500 is expected to dip 0.1 per cent when trading starts in New York.

Corporate earnings reports out today include Crest Nicholson, Enterprise Inns, easyJet, Premier Foods, Manchester United and Vodafone.

The economic calendar for Tuesday is the following (all times London):

07.00: Norway, Finland and Romania Q1 GDP
07.45: France consumer price index (final)
08.00: Czech Republic, Slovakia and Hungary Q1 GDP
08.30: Netherlands Q1 GDP; Riksbank opinion on on inflation target
09.00: Italy Q1 GDP
09.30: UK consumer and producer price indices, housing price index
10.00: eurozone Q1 GDP

The markets at 07:47

Asian markets
Nikkei 225 up +49.97 (+0.25%) at 19,920
Topix up +4.23 (+0.27%) at 1,584
Hang Seng down -31.38 (-0.12%) at 25,340

US markets
S&P 500 up +11.42 (+0.48%) at 2,402
DJIA up +85.33 (+0.41%) at 20,982
Nasdaq up +28.44 (+0.46%) at 6,150

European markets
Eurofirst 300 up +1.48 (+0.10%) at 1,557
FTSE100 up +18.98 (+0.26%) at 7,454
CAC 40 up +11.98 (+0.22%) at 5,417
Dax up +36.63 (+0.29%) at 12,807

Currencies
€/$ 1.10 (1.10)
$/¥ 113.36 (113.77)
£/$ 1.29 (1.29)
€/£ 0.8511 (0.851)

Commodities ($)
Brent Crude (ICE) up +0.24 at 52.06
Light Crude (Nymex) up +0.25 at 49.10
100 Oz Gold (Comex) up +2.10 at 1,231
Copper (Comex) down -0.02 at 2.52

10-year government bond yields (%)
US 2.33%
Germany 0.42%

CDS (closing levels)
Markit iTraxx SovX Western Europe at 19.9bp
Markit iTraxx Europe -0.81bps at 62.41bp
Markit iTraxx Xover -4.61bps at 253.04bp
Markit CDX IG -0.99bps at 61.67bp

Sources: FT, Bloomberg, Markit

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