17th Oct 2019 08:28
(Alliance News) - The FTSE 100 started Thursday's session in the green as the pound weakened on news that a key Tory ally will not back UK Prime Minister Boris Johnson's last-minute Brexit plan in its current form.
At the top of the FTSE 100 in early trade was Rentokil Initial, with Unilever not too far behind, on encouraging sets of third-quarter results. Domino's Pizza Group topped the FTSE 250 amid news it will exit its international operations, while Grafton Group sank on a profit warning.
The FTSE 100 stock index was 8.76 points higher, up 0.1%, at 7,176.71 early Thursday. The FTSE 250 was down 92.51 points, or 0.5%, at 20,095.45 and the AIM All-Share flat at 879.59.
The Cboe UK 100 index was up 0.1% at 12,170.38. The Cboe UK 250 was down 0.6% at 18,048.90 and the Cboe UK Small Companies flat at 11,061.93.
In mainland Europe, the CAC 40 in Paris and DAX 30 in Frankfurt were down 0.3% and up 0.1% respectively in early trade.
"As we said a few days ago, traders are really living and breathing every single [Brexit] headline," said Naeem Aslam at ThinkMarkets.
"Further evidence of this statement can be seen by looking at the current Brexit landscape and the sterling-dollar's price action. The currency tumbled as the UK's prime minister's political allies refused to support the current framework around the Brexit agreement," he said.
Sterling was quoted at USD1.2771 early Thursday, down compared to USD1.2834 at the London equities close on Wednesday.
Johnson was dealt a major blow shortly before the crunch EU summit after Democratic Unionist Party leader Arlene Foster said she could not yet back his Brexit plans.
The prime minister is hoping to bring back a deal from the Brussels meeting of European leaders while winning the backing of the DUP, which also wields influence over some Tory Brexiteers.
But Foster and her deputy, Nigel Dodds, released a joint statement hours before the summit was due to begin on Thursday, highlighting three major obstacles.
The DUP is digging in over the prospect of a customs border between Northern Ireland and the rest of the UK, as well as the issues of consent regarding the suspended Stormont Assembly. Another major issue in the PM's proposals are whether EU VAT rates would apply in Northern Ireland.
Johnson has been in close and continued contact with the pair as he tries to shore up their support ahead of Saturday's key deadline to prevent a delay to Brexit. But his chances of ending the deadlock are in doubt over the sticking points highlighted by the key Tory allies.
Johnson needs to get a deal approved before the weekend if he is to avoid a major clash over asking for an extension to the current October 31 deadline.
In early trade in London, hygiene and pest control firm Rentokil Initial was the top performer in the FTSE 100, up 2.7%.
Revenue for the third quarter amounted to GBP727.2 million, up 13% year-on-year at actual exchange rates and 9.6% on a constant currency basis. Ongoing revenue was up 9.8% at constant rates, with 5.5% of this organic, a sharp acceleration from the 4.2% reported in the first half of 2019.
Ongoing revenue is the performance of Rentokil's continuing operations after stripping out disposed or closed businesses.
"I am pleased with our Q3 results and our group organic growth of 5.5% is our highest level of quarterly organic growth in over a decade. Pest Control has performed well, growing organically by 5.9%, and Hygiene has demonstrated further momentum, growing organically by 4.8%," said Chief Executive Andy Ransom.
Shares in Unilever were up 1.2% after the consumer goods giant said it continues to expect annual underlying sales growth in the lower half of its 3% to 5% range.
Underlying sales growth for the third quarter of 2019 was 2.9%, and 3.4% for the nine months to the end of September.
Emerging markets underlying sales growth was 5.1%, comprising volume growth of 2.2% and price growth of 2.8%. Developed Markets underlying sales growth dipped 0.1%.
"We have maintained momentum in the quarter, with a good balance between volume and price. Emerging markets and Home Care have been the key growth drivers. We will step-up competitive top line performance through innovation and portfolio evolution to serve the faster growing geographies and channels," said Chief Executive Alan Jope.
"For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow," he added.
Books and stationery seller WH Smith, up 2.1% in opening trade, unveiled plans to expand further across the Atlantic with the purchase of US travel retailer Marshall Retail for USD400 million, about GBP312 million.
WH Smith intends to raise GBP155 million, representing 7% of the FTSE 250 company's existing share capital, via an accelerated bookbuild to part fund the deal. The bookbuild is being run by Barclays and JP Morgan. It also will expand its debt facilities.
The transaction will broadly double the size of WH Smith's international travel business, the firm explained, with an annual cost synergy run-rate of USD11 million expected by the third full year following completion.
Marshall Retail currently operates 170 stores in North America, with 59 of these inside airports. The firm is expected to deliver revenue of USD204 million and earnings before interest, tax, depreciation and amortisation of USD31.5 million in 2019.
This acquisition comes almost exactly a year after WH Smith announced the purchase of US-based travel retailer InMotion Entertainment for USD198 million.
The integration of InMotion is now complete, WH Smith said on Thursday, and its performance has been ahead of initial expectations. Digital and travel accessories retailer InMotion operates from 116 stores across 43 airports in the US.
Turning to the London-listed firm's annual results, revenue for the year to August 31 rose to GBP1.40 billion from GBP1.26 billion, while pretax profit edged up to GBP135 million from GBP134 million. Travel total revenue was up 22%, or 8% higher when stripping out InMotion, and 3% higher on a like-for-like basis.
WH Smith's travel operations once again outperformed its high street estate, with the High Street unit reporting revenue down 2% with like-for-like sales down 2%. However, there was a good gross margin performance in the arm and costs were "tightly controlled".
"WH Smith continues to be a tale of two businesses. Despite the challenging retail backdrop, the group is delivering strong growth at its travel division, where its 1,019 units delivered a 22% rise in sales. This compared to flat sales on the high street, only supported by healthy stationery sales," commented Donald Brown, senior investment manager at Brewin Dolphin,
Domino's Pizza Group was 3.7% higher after it said it has decided to exit its struggling International unit as it reported a "solid" third-quarter performance in the UK & Ireland.
UK & Ireland system sales for the 13 weeks to September 29 amounted to GBP288.2 million, up 3.9% year-on-year. International sales, however, slipped 2.7% to GBP25.3 million.
For the group as a whole, system sales were up 3.4% to GBP313.5 million.
Domino's said its review of its International business has concluded, and it will exit the markets - which include Switzerland, Iceland, Norway and Sweden - in an orderly manner.
"Although the financial results have stabilised, the performance of our international business remains disappointing. Over the past six weeks we have completed a review with external consultants, assessing each of our four international markets and the future prospects for our businesses. We have concluded that, whilst they represent attractive markets, we are not the best owners of these businesses," explained David Wild, chief executive.
At the bottom of the FTSE 250 was Grafton Group, down 9.8% after warning 2019 profit will be lower than market forecasts.
For the three months ended September, reported revenue expanded 4.5%, with like-for-like revenue 0.9% higher on the year prior. The Dublin-based firm explained that after an "encouraging" start, "trading towards the end of the quarter and more recently has been impacted by a softening in activity".
For 2019, Grafton now expects operating profit to be between 4% and 8% lower than the GBP206.4 million post-IFRS and GBP193.5 million pre-IFRS consensus market estimates.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite closed down 0.1%, while the Hang Seng index in Hong Kong is up 0.4% in late trade.
In the economic calendar on Thursday, there are UK retail sales at 0930 BST while eurozone construction output is at 1000 BST and US industrial production at 1415 BST.
By Lucy Heming; [email protected]
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