1st Feb 2021 07:50
(Alliance News) - Stock prices in London are seen opening higher on Monday, tracking gains in Asian equity markets, as investors look ahead to a busy week of company earnings.
In early company news, fund supermarket Hargreaves Landown raised its dividend posting after strong interim results. Online fashion retailer ASOS acquired four retail brands from Arcadia for GBP265 million, while sportswear retailer JD Sports Fashion expanded its presence in the US.
IG futures indicate the FTSE 100 index is to open 19.24 points higher at 6,426.70. The blue-chip index closed down 118.69 points or 1.8%, at 6,407.46 Friday.
Hargreaves Lansdown reported a rise in interim earnings and pointed to a younger demographic within its client base.
For the half year ended December 31, net new business rose 40% to GBP3.2 billion from GBP2.31 billion at the same time in 2019. Pretax profit was up 10% to GBP188.4 million from GBP171.1 million.
Total assets under administration as at December 31 was GBP120.6 million, up 15% from GBP105.2 billion at the same time in 2019. The stockbroker said it added 1.5 million active clients, which was an increase of 84,000 since June 30.
Hargreaves declared an interim dividend of 11.9 pence per share, up 6% from 11.2p.
"As our client numbers continue to grow, we are finding that younger people are taking a greater interest in investing for the future, with the average age of our clients continuing to fall. COVID-19 has underpinned the importance of financial resilience and Hargreaves Lansdown is well placed to support clients with their saving and investment needs across their lifetimes," said Chief Executive Officer Chris Hill.
ASOS has acquired the assets of Topshop, Topman, Miss Selfridge and HIIT from Arcadia, the fallen retail empire of Philip Green, for GBP265 million. This is fully funded from existing cash reserves, ASOS said. HIIT was a sub-brand of menswear retailer Burton, which ASOS has chosen not to acquire.
The online fashion retailer said acquisition represents a "compelling strategic opportunity" to become "the number one destination for fashion loving 20-somethings worldwide". ASOS said they are strong brands that would resonate with its key customer base, with brand equity strongest in the UK and an established presence in both the US and Germany, two of the company's key markets.
"We anticipate incremental sales in FY22 to be broadly flat to FY20 acquired brand sales as we focus on driving growth on our ASOS platform and through select strategic retail partnerships. The acquisition is expected to be margin accretive, with strong operating leverage given the relatively low incremental costs of operation once integrated onto the ASOS platform. We expect the transaction to deliver a double-digit return on capital (post tax) in the first full year," ASOS said.
In other M&A news, JD Sports Fashion said it has entered into a deal to acquire Maryland, US-based DTLR Villa for USD495 million. DTLR Villa is a footwear and apparel retailer which operates from 247 stores across 19 states, principally in the north and east of the US.
JD Sports said the acquisition of DTLR will enhance its presence in the north and east region of the US and complements its existing JD and Finish Line brands alongside the recent acquisition of Shoe Palace based on the west coast.
"This is another exciting milestone in the group's development in the United States. Like Shoe Palace, DTLR pride themselves on the deep connection they have with their consumers and the active role they play in the communities that they serve. As such, we intend to retain the DTLR Villa fascia and its proposition,"said Chair Peter Cowgill.
In other M&A news early Monday, BP said it will sell its 20% interest in Block 61, Oman to PTT Exploration and Production Public Co for GBP2.6 billion. PTT Exploration is Thailand's national petroleum exploration and production company.
BP owned a 60% stake in Block 61, while Makarim Gas Development Ltd has 30% stake and Petronas unit PC Oman Ventures Ltd owns 10%.
Following completion of the sale - which is expected to occur in 2021 - BP will remain operator of the block, with a 40% stake. The consideration for the sale comprises USD2.45 billion payable on completion and USD140 million payable dependent on pre-agreed future conditions.‎
Ryanair Holdings posted a sharp third-quarter swing to loss on Monday and the airline again hit out at "unlawful state aid" of European flag carriers as the aviation industry remains mostly grounded by Covid-19.
The budget carrier's traffic around the Christmas and New Year period was "severely impacted" by travel restrictions as many governments in Europe imposed curbs on UK arrivals to stem the spread of a more contagious variant of Covid-19.
In its financial third quarter ended December 31, Ryanair's revenue plunged 82% year-on-year to EUR341.2 million from EUR1.91 billion. The carrier swung to a EUR362.5 million pretax loss, from a EUR81.6 million profit a year earlier. It also posted a EUR306 million third-quarter net loss, swinging from a EUR88 million profit.
The restrictions and flight bans saw third-quarter traffic plunge by 78% to just 8.1 million passengers from 35.9 million a year earlier. In December alone, traffic was down 83%.
Ryanair said it expected traffic for the financial year ending in March of between 26 million and 30 million, reduced from its previous guidance of "below 35 million".
The Japanese Nikkei 225 index closed up 1.6%. In China, the Shanghai Composite ended up 0.6%, while the Hang Seng index in Hong Kong is up 2.4%. The S&P/ASX 200 in Sydney closed up 0.8%.
Manufacturing activity in China slowed at the start of 2021, with slower increases in output and new orders and with stock shortages and shipping delays hindering supplier performance, data from Caixin and IHS Markit showed.
The Caixin China headline seasonally adjusted purchasing managers' index decreased to 51.5 in January from 53.0 in December, but remained above the neutral mark of 50, reflecting continued growth.
Official data also showed factory activity in China slowed slightly in January, as the country rushed to stamp out a recent coronavirus wave in northern China.
The PMI index, a key gauge of manufacturing activity, came in at 51.3 points, as the world's second-largest economy tightened Covid-19 precautions ahead of the Lunar New Year. The figure was slightly below December's reading of 51.9, although still above the 50-point mark separating growth from contraction.
China's non-manufacturing PMI saw a larger drop to 52.4 points, from 55.7 last month, taking a bigger hit from the domestic virus resurgence.
Closer to the UK, manufacturing activity in Ireland slowed to a three-month low in January, as new lockdown measures and trading arrangements in the UK led to a sharp fall in outputs and new orders, survey results from IHS Markit showed.
The AIB Ireland manufacturing purchasing managers index was 51.8 points in January, compared to 57.2 in December, the lowest figure since October 2020, when the PMI was 50.3. However, any index score above 50 still indicates growth.
Early Monday, investor sentiment was boosted by progress on vaccines. AstraZeneca is increasing its coronavirus vaccine deliveries to the EU by 30%, European Commission Chief Ursula von der Leyen said Sunday as the bloc sought to claw back time lost rolling out the jabs.
The Anglo-Swedish company had announced last week that it could deliver only a quarter of the doses originally promised to the bloc for the first quarter of the year because of problems at one of its European factories.
But AstraZeneca, whose vaccine was authorised for use in the EU on Friday, has now agreed to send nine million additional doses and "will start deliveries one week earlier than scheduled", Von der Leyen said in a tweet.
The pound was quoted at USD1.3740 early Monday, up from USD1.3712 at the London equities close Friday.
The euro was priced at USD1.2131, marginally lower from USD1.2135. Against the yen, the dollar was trading at JPY104.70, soft from JPY104.75.
Brent oil was quoted at USD55.35 a barrel Monday morning, down from USD56.00 at the London equities close Friday. Gold was trading at USD1,862.51 an ounce, up from USD1,857.20.
The economic events calendar on Monday has manufacturing PMI readings from Germany, the eurozone and the UK at 0855 GMT, 0900 GMT and 0930 GMT respectively.
Ahead in the UK corporate calendar this week, BP and Royal Dutch Shell will report annual results on Tuesday and Thursday respectively. Consumer goods firm Unilever posts annual results Thursday.
By Arvind Bhunjun; [email protected]
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