4th Apr 2019 12:05
LONDON (Alliance News) - UK stocks continued to struggle on Thursday, with the FTSE 100 index having to contend with a number of ex-dividend stocks and a lack of anything new on US-China trade talks.Travel and insurance firm Saga was bogging down the mid-cap FTSE 250 index, as investors showed displeasure with a swing to annual loss, dividend cut, and profit warning for the year ahead.The FTSE 100 was down 40.61 points, or 0.6%, at 7,377.67 Thursday midday. The FTSE 250 was down 106.03 points, or 0.5%, at 19,457.41. The AIM All-Share was flat at 921.26.The Cboe UK 100 index was down 0.5% at 12,519.41. The Cboe UK 250 was down 0.2% at 17,476.79, while the Cboe UK Small Companies was largely unchanged at 11,189.32."Faced with a dearth of news, equities have drifted lower this morning, with losses on the FTSE 100 coming off the back of the steady move higher over the past week," said IG chief market analyst Chris Beauchamp. "What is really needed to drive this market higher is a good trade talk headline, and for the moment it does look like things are moving in the direction of a deal.""That is more than can be said for Brexit, which remains mired in debate," the analyst added. Legislation spearheaded by Labour's Yvette Cooper requiring the UK prime minister to seek a delay to Brexit rather than risk the UK crashing out on April 12 was passed by a razor-thin majority of 1 late Wednesday - with 313 votes for and 312 votes against.The legislation will now be fast-tracked through the House of Lords.Meanwhile, further discussions will take place on Thursday between members of UK Prime Minister Theresa May's and opposition Labour leader Jeremy Corbyn's teams. Stocks in the US are pointed to a similarly subdued start on Thursday, with the Dow Jones and S&P 500 both seen down 0.1% while the Nasdaq Composite is pointed 0.2% lower.The economic events calendar on Thursday has accounts from the European Central Bank's last monetary policy meeting at 1230 BST and US jobless claims at 1330 BST.In London, ex-dividend stocks were taking a chunk out of the FTSE 100, with Direct Line Insurance, Lloyds Banking and housebuilder Taylor Wimpey down 7.3%, 3.6% and 2.6% respectively. Micro Focus International was among the blue-chip losers as well, down 3.0% after Citigroup cut the enterprise software firm to Sell from Neutral, believing the stock has "run ahead of fundamentals".In the mid-cap FTSE 250 index, safely the worst performer was Saga, slumping 32% after it confronted investors with a dividend cut, profit warning and plans for a "fundamental" business shift. For the year ended January 31, Saga swung a GBP134.6 million pretax loss from a profit of GBP180.9 million a year ago, due to a significant impairment charge. On an adjusted basis, excluding the impairment charge, group pretax profit fell 5.4% year-on-year to GBP180.3 million from GBP190.6 million. In an attempt to return the company to growth, Saga said it is planning a "fundamental shift in strategy" in order to address the long-term challenges facing the business.This shift will include the company refocusing on its "heritage as a direct-to-consumer brand", providing differentiated products and services that customers cannot get elsewhere. A new approach to the Insurance business, focused on growing direct channels with the launch of a three-year fixed-price proposition, also forms part of Saga's growth strategy, it said.The changes to strategy, however, will hurt Saga's adjusted pretax profit in its recently commenced financial year, with the company guiding for underlying pretax profit in a range of GBP105 million to GBP120 million, which would be down from the GBP180.3 million just achieved.Piling on the bad news, Saga slashed its final dividend to 1p from 6p paid out a year ago, bringing the total for the year to 4p, less than half the 9p paid out the year before. UDG Healthcare was the best performing London mid-cap, up 3.6% after Barclays raised the stock to Overweight from Equal Weight. Electrocomponents was up 2.7% after the company said it remains on track to deliver a rise in annual adjusted pretax profit in line with expectations, based on solid revenue growth.The FTSE 250-listed electronics and industrial products distributor reported like-for-like revenue growth of 8% for the financial year to the end of March, following a strong performance in all regions. The fourth quarter alone saw the same 8% like-for-like growth.Electrocomponents said it has continued to outperform underlying market growth, and expects a stable gross margin in its base business for the year.Peppa Pig television show maker Entertainment One was up 2.5% as it anticipated an annual performance in line with expectations and guided for earnings increase.Entertainment One is a content production studio. It was behind children's cartoon Peppa Pig as well as 2019 Oscar winner Green Book and TV series the Walking Dead.In the Family & Brands division - the division which houses the cartoon pig - Entertainment One said it expects to report revenue and adjusted earnings before interest, taxes, depreciation and amortisation for the year ended March up by more than 25% on last year's revenue of GBP138.6 million and adjusted Ebitda of GBP82.3 million.In mainland Europe, Frankfurt-listed Commerzbank was up 2.3% after the Financial Times reported Italy's UniCredit is preparing a multi-billion euro takeover offer for the bank should merger talks with fellow German lender Deutsche Bank collapse. Milan-listed Unicredit was down 1.6%.The Italian bank's renewed interest in Commerzbank comes amid signs that plans to merge the German bank with Deutsche Bank are facing several major hurdles, people briefed on the discussions told the newspaper.Michael Hewson, chief market analyst at CMC Markets, commented: "This is the sort of deal that would make more sense than trying to merge two struggling German banks, however it is still likely to face a significant number of obstacles.""The bigger question is whether this is a wise move given the concerns about the Italian banking sector, the low profitability of the German banking sector, and the prospect that interest rates are likely to remain anchored to the floor for years to come," he added.In European equities at midday, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 0.3% and flat, respectively, at midday.
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