10th Dec 2015 08:30
LONDON (Alliance News) - London shares opened mostly lower Thursday, with Glencore leading blue-chip gainers after it announced plans to accelerate the reduction of its debt, while several insurers were in the red after downgrades from RBC Capital, ahead of the Bank of England rate decision at 1200 GMT.
The FTSE 100 100 index was flat at 6,126.76 points, the FTSE 250 down 0.1% at 17,119.79, and the AIM All-Share down 0.1% at 733.60. In Europe, the French CAC 40 and the German DAX 30 were down 0.8% and 0.7%, respectively.
Glencore was up 6.2% at the open after it 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.
The multi-commodities miner and trading house 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. Glencore said its new net debt target for the end of 2016 is USD18.0 billion to USD19.0 billion, from its 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.
Shares in TUI Group were up 3.0% after the travel company said 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.
The company, which had been a separate unit in the UK until late last year, when it merged with its German parent, 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.
This outperformance for the group came despite the terrorist attack in Tunisia in June, which severely hit travel companies, along with other geopolitical challenges faced earlier in the year.
Centrica was up 3.0% at the open, after it said earnings remain on track for 2015 despite a challenging backdrop and price cuts at British Gas, as the company continues to cut its expenditure.
The UK energy and service company said it is on track to meet full-year expectations despite commodity price falls, lower margins at its power generation business, and a second price reduction at its British Gas unit. Centrica said it is on track to deliver over GBP2.00 billion of adjusted operating cashflow for the full year and said its cost cutting is either on track or ahead of expectations.
Insurers and investment managers Old Mutual, down 6.1%, St James's Place, down 2.5%, Prudential down 2.1% and Lancashire Holdings, down 2.3%, were hit by downgrades from RBC Capital. The broker cut Lancashire Holdings and Old Mutual to Underperform from Sector Perform, while it downgraded Prudential and St James's Place to Sector Perform from Outperform.
Sports Direct International was down 6.5%. The company 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, while it also briefly responded to claims made about the treatment of its warehouse staff.
The FTSE 100-listed sports clothing and equipment retailer said its pretax profit for the 26 weeks to October 25 was GBP187.3 million, up 25% from the GBP149.7 million it made a year earlier, mainly due to the group booking a big gain on its investment income. The company also saw its gross margin improve, up to 44.9% from 44.0% a year earlier.
On Wednesday, the company faced accusations made by The Guardian that temporary staff working at its large warehouse operation in Derbyshire are effectively being paid below the minimum wage and working under very difficult conditions.
Based on reports from two undercover journalists, the paper said warehouse staff at the group are required to go through a series of searches at the end of each shift, for which they are not paid, yet can have their pay docked for clocking in only a minute late.
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. It noted that no warehouse workers are on so-called 'zero hour' contracts.
Whitbread also was among the worst performers in the FTSE 100, down 3.1%. The owner of Premier Inn hotels and the Costa Coffee chain said its total and like-for-like sales grew in the third quarter, albeit at a slightly slower pace than in the first half, with good performances from its core hotels and coffee chain businesses.
The group said its total sales grew 10.4% in the 13 weeks to November 26, its financial third quarter, with like-for-like sales growing 3.5%. For the 39 weeks to the same date, total sales were up 11.1%, while like-for-like sales grew 3.6%.
Premier Inn continued to perform well, with total sales up 11% in the third quarter and like-for-like sales rising 4.7%, while Costa delivered 14% total sales growth and 2.5% like-for-like growth. Premier Inn was helped by a rise in rooms available, with robust sales growth both in London and its regional operations, while Costa continued to benefit from new outlets in the UK and its increasing international presence.
At 1200 GMT, focus will shift to the Bank of England and its interest rate decision.
As the US and European central banks head in opposite directions on monetary policy, analysts expect the BoE to remain in the middle, making no changes to monetary policy at its regular meeting. That would mean holding interest rates at 0.5%, the same level they have been at since 2009, and the asset purchase programme at GBP375.0 billion
However, some observers think the BoE will try to "rein in" market expectations that there will be no UK interest rate increase until 2017, as a hike still could come in 2016.
"The main interest may lie around any commentary on recent movements in market interest rates, notably the market-implied timing of a tightening in Bank Rate," said Lloyds Bank. "Having been pulled in somewhat after the ECB's policy loosening last week, one hike is fully priced around the turn of the year, later than on our central view of August 2016."
Analysts also expect the well-known hawk Ian McCafferty to be again the only Monetary Policy Committee member voting for a rate hike, leaving the 8-1 vote also unchanged.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 1.3%. In China, the Shanghai Composite and the Hang Seng index in Hong Kong ended both down 0.5%.
In New York on Wednesday, the DJIA finished down 0.4%, the S&P 500 down 0.8% and the Nasdaq Composite down 1.5%.
In the economic calendar, alongside the BoE decision, the UK goods trade balance is due at 0930 GMT. In the US, initial and continuing jobless claims are due at 1300 GMT, while US import and export price indices are due at 1330 GMT.
By Daniel Ruiz; [email protected]
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
PrudentialOld Mutual PLCCentricaSt James's PlaceWhitbreadLancashire HoldingsSports DirectGlencore