10th Dec 2015 12:04
LONDON (Alliance News) - UK equities were struggling to get out of the red midday Thursday, underperforming the rest of Europe, while Sports Direct International shares plunged after its underlying results missed expectations.
Meanwhile, the Bank of England kept UK interest rates on hold at 0.5% by an 8-1 vote of the Monetary Policy Committee, as expected.
The FTSE 100 index was down 0.4% at 6,102.29 index, the FTSE 250 down 0.4% at 17,078.57 and the AIM All-Share down 0.2% at 732.94.
European shares were faring better, with the CAC 40 in Paris flat and the DAX 30 in Frankfurt down just 0.1%.
Ahead of the open on Wall Street, futures were indicating a higher open. The Dow 30 was pointed up 0.2%, while the S&P 500 and Nasdaq 100 were both pointed up 0.3%.
Connor Campbell, financial analyst at Spreadex, said the FTSE 100 index was "caught between mixed miners and falling oil stocks, with a few earnings-inspired losses and weak trade data thrown in for good measure".
Sports Direct shares were by far the worst performer in the FTSE 100, down 13% at 581.98 pence, having seen its lowest share price in over a year Thursday at 567.00p. The sports clothing and equipment retailer posted a 25% rise in interim pretax profit despite revenue only ticking up slightly, mainly due to a big increase in investment income and a better gross margin.
However, underlying pretax profit rose just 3.6% to GBP166.4 million from GBP160.6 million, falling short of market expectations of GBP180 million or higher.
In addition, a report in The Guardian said temporary staff working at Sports Direct's large warehouse operation in Derbyshire are effectively being paid below the minimum wage and working under difficult conditions. Though not directly referencing the article, Sports Direct said it had streamlined security operations at the warehouse in order to cut down waiting times for staff leaving the warehouse and said it complies with all legal working requirements.
Old Mutual, down 9.5%, and Investec, down 8.4%, were both sharply lower, after the shock dismissal of South African Finance Minister Nhlanhla Nene sent the rand to record lows.
Although listed in London, with Old Mutual in the FTSE 100 index and Investec in the FTSE 250, both companies derive a great deal of their earnings from South Africa, where they have considerable banking activities.
In addition, ratings agency Standard & Poor's moved to negative from stable on the outlook of eight South African financial institutions, including Old Mutual's majority-owned Nedbank and Investec Bank Ltd, on Wednesday. Investec shares also have gone ex-dividend.
Royal Dutch Shell was amongst the worst blue-chip performers as the oil price continued near recent seven year lows. At midday, Brent oil was trading at USD40.18 a barrel, having fallen to a new near seven-year low of USD39.56 a barrel after the London close on Wednesday. Shell 'B' shares were down 1.7%, while 'A' shares were down 1.5%.
On the other end of the blue-chip index, Glencore shares were rallying, up 12%. The miner and trading house outlined plans to accelerate its debt-reduction and capital-preservation measures and to cut its capital expenditure for this year and the next amid the weak commodities market.
Glencore said it will increase its debt reduction and capital preservation measures target to USD13.0 billion, from a previous target of USD10.2 billion, with USD8.7 billion of this either already achieved or locked-in. The new net debt target for the end of 2016 is USD18.0 billion to USD19.0 billion, from the company's previous target of the low twenties of billions.
The group has also further reduced its capital expenditure targets for 2015, down to USD5.7 billion from USD6.0 billion, and for 2016, where the cut is more severe, down to USD3.8 billion from USD5.0 billion.
Travel company TUI was another notable top gainer, trading up 3.8% after it outperformed its expectations in its first year post the merger of the London-listed firm with its German parent company, with revenue and the company's earnings both increasing.
TUI said its earnings before interest, taxation and amortisation increased to EUR865.0 million for the year to the end of September, up from EUR777.0 million a year earlier. Revenue for the year increased to EUR20.0 billion from EUR18.6 billion, with very strong performances from its tourism business, particularly hotels and resorts and cruises, and a robust year for its specialist travel arm.
The company said it will pay a full-year dividend of 56.00 euro cents per share, up from 33.00 cents a year earlier and 10% higher than the dividend guidance it gave at the time of its merger.
In the FTSE 250, Micro Focus International was outperforming the rest of the index, up 11%. The software company reported a rise in pretax profit for its first half following its acquisition of The Attachmate Group last November, and announced a shake-up of its board as it plans to separate its chairman and chief executive officer roles over the next one to two years.
Micro Focus acquired Attachmate for USD2.5 billion towards the end of last year, and saw a big boost in revenue as a result of the acquisition.
For the half year to end-October the company reported a pretax profit of USD98.8 million, up from USD57.1 million, as revenue nearly tripled to USD604.5 million from USD208.3 million.
Ocado Group was one of the biggest fallers in the midcap index, down 6.0%. The online grocery delivery service said its sales rose in the fourth quarter and for its recently-ended financial year, though its average order size shrunk in the final weeks.
Ocado said its total group sales for the 16 weeks to November 29 was GBP381.6 million, up from GBP331.9 million a year earlier, with gross retail sales rising 13% and its average orders per week up to 205,000, a 16% year-on-year rise.
On the economic front, the UK visible trade deficit widened to a three-month high in October on rising imports, the Office for National Statistics reported.
The visible trade deficit increased more-than-expected to GBP11.8 billion from GBP8.8 billion in September. This was the highest shortfall since July, when it totalled GBP12.2 billion. It was forecast to rise to GBP9.6 billion. The trade in goods widening was mainly the result of a large increase in imports of goods, up GBP2.3 billion to GBP35.4 billion. Meanwhile, exports of goods decreased by GBP0.7 billion to GBP23.5 billion.
Still ahead in the economic calendar, US initial and continuing jobless claims are due at 1300 GMT, while US import and export price indices are due at 1330 GMT. Jens Weidmann, president of the Deutsche Bundesbank will speak at 1800 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
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