21st Dec 2016 08:35
LONDON (Alliance News) - Stock prices in London were flat on Wednesday morning, as financial markets wind down for the Christmas holidays, but FTSE 250-listed QinetiQ Group provided one highlight, becoming the biggest mid-cap gainer after acquiring the Target Systems division of fellow FTSE 250 constituent Meggitt.
The defence outsourcer will pay GBP57.5 million in cash to buy Meggitt Target Systems, which comprises the Meggitt Defence Systems and Meggitt Holdings Canada subsidiaries. QinetiQ said the acquisition will accelerate the growth of its international business, adding new customer relationships in Europe, Asia and North America, and will boost the company's testing and evaluation services offering.
Meggitt Target Systems makes unmanned aerial navel and land-based target systems for testing and evaluation work, operational training and rehearsal. It is expected to make GBP28.0 million in revenue and GBP5.5 million in operating profit in 2016.
Meggitt also confirmed the sale of the division and said it was in line with its strategy of focusing on high-growth markets where it has a leading position.
QinetiQ was up 6.2%, while Meggitt was up 0.2%.
The FTSE 100 was 1.40 points lower at 7,042.56. The FTSE 250 was up 0.1% at 17,795.23, while the AIM All-Share was marginally higher at 826.67.
The BATS UK 100 was flat at 11,901.51, the BATS 250 was up 0.1% at 16,175.34, and the BATS Small Companies was slightly higher at 10,532.02.
In mainland Europe, the CAC 40 index in Paris was down 0.2% and the DAX 30 in Frankfurt was flat.
In Asia on Wednesday, the Japanese Nikkei 225 index ended down 0.3%. In China, the Shanghai Composite closed up 1.1%, while the Hang Seng index in Hong Kong rose 0.4%.
Despite the apparent calm in financial markets, investors will keep an eye on Italy's troubled Monte dei Paschi di Siena bank, with Italian Finance Minister Pier Carlo Padoan speaking to the Italian parliament at 1400 GMT.
"Whilst an undertone of traditional year-end bullishness remains, the outstanding issue of a Monte dei Paschi's rescue, be it via bailout or recapitalisation, remains a hindrance on extension of the current Santa rally," said Accendo Markets analyst Michael van Dulken.
The Italian government on Monday announced a request to parliament to raise the public debt by EUR20 billion to fund the possible rescue of MPS and other stricken banks. MPS, Italy's third biggest bank by assets, came bottom in recent European banking stress tests. It needs to raise EUR5 billion by the end of December to make up for large-scale write downs on a mountain of bad loans.
Earlier, MPS started a last-ditch attempt to raise money on its own via a recapitalisation. Retail and institutional investors were given from Monday to Thursday to express an interest in buying new shares in the bank, which would bolster its finances.
The recapitalisation is expected to dilute the value of existing shares. Shares in MPS on the Milan stock exchange have been suffering, down 5.7% early Wednesday, their fifth consecutive day lower. The FTSE MIB in Milan was up 0.1%.
In the economic calendar for Wednesday, UK public sector net borrowing is at 0930 GMT. Analysts at Lloyds Bank forecast borrowing of GBP11.8 billion in November, compared to GBP13.1 billion a year ago.
"In the Autumn Statement, the Chancellor [Philip Hammond] revised up the borrowing forecast for this year by around GBP13 billion to GBP68.2 billion. Still, this would be an improvement of GBP7.8 billion relative to the previous fiscal year," said Lloyds analyst Nikesh Sawjani.
"For this to be met, an average monthly improvement of just over GBP1.5 billion over the remaining five months of the fiscal year would be required," noted the analyst.
Later in the day, US MBA mortgage applications are at 1200 GMT, existing US home sales at 1500 GMT, as is eurozone consumer confidence, and the US Energy Information Administration's crude oil stocks are at 1530 GMT.
Elsewhere on the London Stock Exchange, FTSE 100-listed Carnival shares were down 3.6%, with shares in the cruise operator reversing their 0.4% gain on Tuesday. Carnival reported Tuesday growth in net income and revenue in its recently ended financial year, helping it to achieve its most profitable year yet, and said advance bookings for the first part of the new financial year are well ahead of the prior year.
By Daniel Ruiz; [email protected]
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