22nd Jan 2020 07:47
(Alliance News) - Stocks in London are set to rebound on Wednesday after suffering losses in the previous session on worries over the spread of a new strain of coronavirus in Asia.
In early UK company news, Burberry increased its full-year revenue growth guidance. Berkeley unveiled plans to boost shareholder returns over the next two years. Ted Baker said its overstatement of inventory was larger than first expected.
IG says futures indicate the FTSE 100 index of large-caps to open 18.80 points higher at 7,629.50 on Wednesday. The FTSE 100 index closed down 40.74 points, or 0.5%, at 7,610.70 on Tuesday.
"Equity markets had an altogether softer tone yesterday, weighed down by concerns that the coronavirus currently sweeping through China might spread outside the Asia region. Reports that a case has been diagnosed in the US prompted some light profit-taking in US markets, as US investors returned from their long weekend," said Michael Hewson, chief market analyst at CMC Markets.
"As it is for now, investors are cautious but not overly concerned, as can be seen from today's session in Asia which initially saw equity markets come under further pressure, but which have since rebounded, despite new cases of the virus slowly increasing," he continued.
Hewson added: "While the virus appears contained investors still appear to be in 'buy the dip' mode and as such today's rebound in Asia markets looks set to translate into a positive open here in Europe as well as a new record high for the German DAX when it opens in a few hours' time."
In Asia on Wednesday, stocks traded in the green. In Tokyo, the Nikkei 225 index closed up 0.7%. The Shanghai Composite ended up 0.3%, while the Hang Seng index in Hong Kong was up 1.2%.
Wall Street had ended lower on Tuesday, with the Dow Jones Industrial Average down 0.5%, the S&P 500 down 0.3% and Nasdaq Composite down 0.2%.
Netflix shares traded 2.3% higher after-hours in New York after the video streaming company said it added millions of new subscribers globally over the past quarter.
The global streaming television giant largely beat expectations with a profit of USD587 million in the fourth quarter as revenue rose 31% from a year ago to USD5.5 billion. Netflix added a better-than-expected 8.8 million subscribers worldwide to hit 167 million, but growth in North America was below forecasts with 550,000 new members, including 420,000 in the US.
In London, Burberry on Wednesday said it delivered "another good quarter" with comparable store sales up as it raised its full-year revenue outlook.
Retail revenue grew 1% at actual exchange rates and 2% at constant currency in the quarter to December 31 to GBP719 million. Comparable store sales were up 3%, ahead of the growth rate of 1% reported for the same period a year ago.
Growth was led by full price sales, partially offset by lower levels of markdown inventory available for sale and continued disruptions in Hong Kong.
Among regions, Asia Pacific grew by a "low single digit percentage", driven by mainland China which was up mid-teens, whilst sales in Hong Kong halved. The Americas were "stable", while sales in Europe, Middle East, India & Africa were supported by tourist spend.
For the 2020 financial year as a whole, the company expects total revenue to grow by a low single digit percentage at constant currency, compared to previous guidance of "broadly stable". The luxury retailer's adjusted operating margin is expected to remain broadly stable due to disruption in Hong Kong.
UK housebuilder Berkeley said it plans to increase its shareholder returns by GBP455 million over the next two years.
Under its existing programme, a return of GBP125 million was due to be made by March 31, 2020 and GBP280 million was planned for each of the following financial years. However, the company now plans to return GBP500 million by means of a B share scheme in March 2020 and a further GBP500 million to shareholders in March 2021.
Following this, the company intends to revert to making annual returns of GBP280 million in six-monthly instalments of GBP140 million through either share buybacks or dividends up to and including September 30, 2025.
Berkeley said it came to this decision in light of the progress made in bringing forward its new building sites, its assessment of the prevailing operating environment, and a review of its net cash position and future requirements.
Accounting software firm Sage Group said total organic revenue rose 6.7% to GBP465 million in the first quarter of its financial year, which was the three months to December 31.
Recurring revenue was up 11% - underpinned by software subscription growth of 25% - while Other Revenue, SSRS and processing, was down 16%. The fall in Other Revenue reflected Sage's "managed decline" in licence sales and the de-prioritisation of professional services revenue as the business continues to focus on subscriptions.
WH Smith said it delivered a "good performance" in the first 20 weeks of its financial year, with Travel revenue up strongly.
Total revenue was up 7% in the 20 weeks to January 18 while like-for-like revenue was down 1%. The company's performance was boosted by its Travel arm, which posted a 19% increase in revenue and a 3% rise in like-for-like sales.
Excluding the magazine and stationery retailer's acquisitions of InMotion and Marshall Retail Group, total Travel sales were up 5%.
Operations in WH Smith's high street side of the business lagged, with revenue down 5% and like-for-like sales also slipping 5%. The gross margin was, however, ahead of plan and WH Smith said it has identified GBP3 million of additional cost savings.
"Looking ahead, we are on track for the current year and as we continue to grow our share of the global travel retail market, the group is well positioned for the years ahead," said Chief Executive Carl Cowling.
JD Wetherspoon said sales grew strongly in the second quarter of its financial year as it backed its annual guidance.
For the 12 weeks to January 19, like-for-like sales were up 4.7% and total sales increased 4.2%. In the year-to-date, like-for-like sales were up 5.0% and total sales by 4.9%.
"We continue to anticipate a trading outcome for this financial year in line with our previous expectations," said Chair Tim Martin.
Upmarket clothing retailer Ted Baker said a review has concluded that the value of inventory held on its balance sheet was overstated by more than first thought.
Ted Baker said a review by Deloitte has now concluded, and the London-listed firm expects to report that the value of inventory held on its balance sheet at January 26 was overstated by GBP58 million. This is "materially higher", it admitted, than the preliminary assessment of GBP20 million to GBP25 million made in early December.
"As previously stated, the overstatement is a non-cash item and related to prior years," Ted Baker said.
In forex, sterling was quoted at USD1.3051 early Wednesday, firm on USD1.3045 at the London equities close on Tuesday.
"The Bank of England is the one central bank in play this month. Investors expect the major swing factor to be the flash PMIs, published on Friday," said Stephen Innes, chief market strategist at AxiCorp.
"Yesterday decent UK employment figures continued to resonate in Asia and help lift cable," he said.
In Wednesday's economic calendar, there is UK public sector net borrowing at 0930 GMT and the US housing price index at 1400 GMT.
The euro was quoted at USD1.1076 early Wednesday, soft compared to USD1.1096 late Tuesday. Against the yen, the dollar was quoted at JPY110.02 versus JPY109.95.Â
Gold was quoted at USD1,552.90 early Wednesday, down from USD1,557.30 on Tuesday. Brent was quoted at USD64.28 early Wednesday, down from USD64.72 late Tuesday.
By Lucy Heming; [email protected]
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BurberryWetherspoon (J.D)Wh SmithBerkeley GroupSage GroupTED.L