1st Mar 2016 12:10
LONDON (Alliance News) - London shares were higher midday Tuesday despite weak manufacturing data from the UK and China, on a busy day of UK corporate news, which is seeing London Stock Exchange Group lead blue-chip gainers after attracting suitors from the US and Germany and Barclays sink after confirming it will reduce its African exposure and slash its dividend for the next two years.
The FTSE 100 index was up 0.8%, or 47.71 points, at 6,144.80 at midday.
The FTSE 250 was up 1.0% at 16,764.51 points, and the AIM All-Share was up 0.6% at 697.28. In mainland Europe, the French CAC 40 and the German DAX 30 were up 0.8% and 1.7%, respectively.
Shares in Barclays dove 11% after the bank confirmed it will sell down its 62.3% stake in its African subsidiary, amid a broader strategic update that will see the bank pay a reduced dividend in 2016 and 2017.
Jes Staley, the bank's new chief executive, said there is more work to do to restructure the bank in 2016. He set out plans to focus the group on two "sibling" divisions, which he identified as Barclays UK and Barclays Corporate & International, the latter of which includes its investment bank. The UK arm will become Barclays' UK ring-fenced bank by 2019, focused on retail banking.
Barclays maintained its dividend for 2015 at 6.5 pence per share, but said it will cut the payment to 3.0p in 2016 and 2017. Together with the selling down its stake in Barclays Africa Group, the reduced dividend will help bolster the group's common equity tier one ratio, a key measure of financial strength.
But it was Ashtead Group that was at the bottom of the blue-chip index, down 13%. The equipment rental company reported a marginal slowdown in revenue growth in the third quarter, though pretax profit remained much higher year-on-year. The group said its pretax profit for the three months to the end of January was GBP139.1 million, up 17% year-on-year from the GBP113.9 million it posted in 2014.
Berenberg said Ashtead's third quarter update was broadly in-line with its estimates but US arm Sunbelt disappointed. Sunbelt's rental revenue grew 14% to USD701 million, behind Berenberg's USD727 million forecast. Meanwhile, the business's earnings before interest, taxes, depreciation and amortisation grew 17% to USD317.0 million, but below Berenberg's USD379.0 million forecast.
Shares in Fresnillo were down 2.7%. The gold miner said its profit dropped in 2015 as lower gold prices placed its margin under pressure and offset a small rise in revenue. The group cut its capital expenditure budgets further in response to the current low-price environment.
Fresnillo said its pretax profit from continuing operations dropped to USD212.4 million in 2015 from USD251.1 million a year earlier as its margin was squeezed in the year thanks to lower gold prices, offsetting a small rise in revenue. The company's revenue in 2015 amounted to USD1.44 billion compared to USD1.41 billion in 2014, a touch under analyst expectations.
However, Fresnillo saw its margin fall considerably in the year as it reported a gross profit of only USD433.1 million in 2015 compared to USD521.1 million in 2014, representing a 17% fall.
Intercontinental Exchange, the owner of the New York Stock Exchange, said it may enter the bidding for London Stock Exchange, offering an alternative to an all-share merger with Deutsche Boerse already being discussed.
No approach has been made to the board of the LSE, according to US-based ICE, which confirmed a report by Bloomberg News that it was exploring a bid. According to that report, CME Group Inc also is assessing whether it could provide competition to Deutsche Boerse.
Later Tuesday, LSE confirmed it has received no takeover proposal from ICE, adding that discussions over a "merger of equals" with Deutsche Boerse "continue to progress".
Shares in LSE were at the top of the FTSE 100, up 8.2%.
Miner Anglo American's shares also were brightly green, up 5.4%. Anglo said the positive trend experienced in its rough diamond sales has continued, reporting a rise in sales value of its most recent sales cycle.
Anglo American conducts its diamond business through its investment in De Beers, in which it holds an 85% stake. Anglo American said De Beers' second sales cycle of 2016 had a sales value of USD610.0 million, which can be compared to the first sales cycle of 2016 which yielded a value of only USD545.0 million.
Direct Line Insurance Group was up 5.3% as the motor and home insurer reported higher profit and an increased dividend for 2015 ahead of consensus expectations, but Shore Capital and Nomura said the group's operating profit fell below their respective estimates.
Direct Line said pretax profit rose to GBP507.5 million in 2015, up from GBP456.8 million the prior year. Operating profit from continuing operations improved to GBP520.7 million from GBP506.0 million. Though the latter was ahead of consensus estimates of GBP493 million, it fell behind Shore's forecast of GBP557.0 million, while Nomura said it fell 1.0% shy of the broker's own expectations.
Direct Line lifted its total dividend for 2015 to 50.1 pence per share from 27.2p the prior year. The 2015 total dividend included a previously declared 27.5p first special payment following the sale of its international operations.
In the FTSE 250, Rotork shares were up 13% after the actuators manufacturer expressed confidence in its medium-term outlook and its cost-cutting measures, as it delivered an expected fall in pretax profit and revenue for 2015, hit by its exposure to the struggling oil and gas industry.
The company said its pretax profit for the year to the end of December fell 28% to GBP101.9 million from GBP141.2 million in 2014, while revenue dropped to GBP546.5 million from GBP157.2 million, a 21% fall. Rotork said the results were in line with the guidance provided in its trading updates in September and November and said orders from the oil market have remained weak.
Rotork is seeking to cut costs and said the actions taken so far will deliver higher-than-anticipated annual savings.
Greggs shares also were performing well, up 14% after the bakery and food-to-go retailer reported growth in profit in its recently-ended financial year as revenue was boosted by an increase in customer visits and average transaction values. The company said its pretax profit in the year ended January 2 grew to GBP73.0 million from GBP49.7 million the prior year, as revenue rose to GBP835.7 million from GBP806.1 million.
Greggs said market conditions continued to be favourable during 2015, with low inflation leading to further rises in real disposable consumer income. As a result, the business saw strong growth throughout the year, although customer footfall in some shopping locations was subdued in the final quarter.
Stock in New York were expected to open much higher, with the DJIA pointed up 0.8% and the S&P 500 and the Nasdaq 100 both seen up 0.9%.
This open in the US would follow the gains in Europe and the positive close in Asia, where stocks reacted to the Chinese required reserve ratio cut on Monday. The Japanese Nikkei 225 index closed up 0.4% Tuesday, the Shanghai Composite up 1.7%, and the Hang Seng up 1.6%.
Asian investors shrugged off poor manufacturing activity data from China. The Caixin manufacturing Purchasing Managers' Index fell unexpectedly to 48.0 in February from 48.4 in January, survey results from Markit showed. This was the lowest reading in five months and below economists forecast for the index to have remained unchanged at 48.4.
The official manufacturing PMI by the Chinese National Bureau of Statistics came in at 49.0 for February, missing forecasts for a score of 49.4, which would have been unchanged from the previous month. The NBS also said that its services PMI came in with a score of 52.7, down from 53.5 in the previous month.
There were also weak manufacturing data from the UK, with the sector expanding at the slowest pace since early 2013 in February, according to data from Markit. The Chartered Institute of Procurement & Supply/Markit Purchasing Managers' Index fell more than expected to 50.8 in February from 52.9 in January. This was the lowest reading since April 2013. It was forecast to drop to 52.3 in February.
Still in the economic calendar, Markit's US manufacturing PMI is due at 1445 GMT, while the Institute of Supply Management releases its US manufacturing PMI at 1500 GMT.
By Daniel Ruiz; [email protected]
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Related Shares:
BarclaysAnglo AmericanLSE.LGreggsDirect LineRotorkFresnilloAshtead Group