7th Feb 2019 07:43
LONDON (Alliance News) - Stock prices in London are set for another lower open on Thursday, slipping back further following several sessions of strong gains. In focus on Thursday is the latest monetary policy decision from the Bank of England, while newsflow out of Brussels will be monitored as UK Prime Minister Theresa May seeks out fresh Brexit concessions.In early company news, Smith & Nephew reported a fall in annual profit on restructuring costs, while caterer Compass made an "excellent" start to the financial year and tour operator Thomas Cook said it is launching a strategic review of its airline. IG says futures indicate the FTSE 100 index of large-caps to open 15.79 points lower at 7,157.30 on Thursday. The FTSE 100 index closed down 4.28 points, or 0.1%, at 7,173.09 on Wednesday, though remains 2.2% higher for the week."European equity markets underwent a bit of a pause yesterday after Tuesday's strong gains, while US markets also underwent a small bout of profit taking after several days of gains," said CMC Markets chief market analyst Michael Hewson.He expanded: "The lack of any further detail on US, China trade talks would appear to suggest the prospect of progress is likely to be fairly limited in the short term. With three weeks to go until a new round of tariffs is due to kick in, this has to be a slight concern, and could limit further strong gains in the short term."The BoE will announce its latest monetary policy decision, alongside the release of the Monetary Policy Committee meeting minutes, at midday on Thursday. Additionally, the bank's quarterly inflation report is due, and there will be a press conference with BoE Governor Mark Carney to be held at 1230 GMT.It is widely expected that the central bank will leave UK interest rates unchanged. Sterling was quoted at USD1.2935 early Thursday ahead of the BoE, lower than USD1.2960 at the London equities close on Wednesday."Deteriorating economic data and increasing political uncertainty means we're unlikely to get a Bank of England rate hike any time soon - although the recent strength in wage growth means a move later in 2019 shouldn't be completely ruled out," said James Smith, developed markets economist at ING.Meanwhile, the pound also will be sensitive to news from May's trip to Brussels on Thursday to seek concessions from the European Union, despite the bloc's insistence that the withdrawal agreement reached last year is not up for renegotiation. May is seeking changes to the "backstop" protocol in the withdrawal agreement that is designed to guarantee that the Irish border remain open, in order to win parliamentary approval of the Brexit deal.European Council President Donald Tusk on Wednesday said the EU was not making "any new offer" and was hoping to hear from May "a realistic suggestion on how to end the impasse in which the process of the orderly withdrawal of the UK from the EU has found itself following the latest votes in the House of Commons".In early UK company news, medical devices maker Smith & Nephew said 2018 profit dipped on restructuring costs despite revenue improving. Revenue for 2018 rose 3% to GBP4.90 billion, and was up 2% on an underlying basis. Revenue growth improved over the year, with the company recording a 1% rise in the first half and a 3% increase in the second. However, pretax profit fell to GBP781 million from GBP879 million, with reported trading profit down to GBP863 million from GBP934 million. The company's trading profit margin slipped to 17.6% from 19.6%. The reduced margin reflected restructuring costs of USD120 million, with around USD60 million of benefits from this realised in 2018.For 2019, Smith & Nephew expects revenue to rise by between 2.5% to 3.5% on an underlying basis, or 1.8% to 2.8% on a reported basis, with a trading profit margin expected in a range of 22.8% to 23.2%. Contract caterer Compass said it made an "excellent" start to the financial year.Organic revenue for the three months to December 31 grew 6.9%, driven by new business wins, good retention rates, new UK defence contracts and a "positive" sporting calendar. By geography, North American revenue was up 8.0% organically, while sales rose 6.4% in Europe and 2.8% in Rest of the World."We had an excellent start to the year and now expect to be slightly above the middle of our target 4% to 6% organic growth range for the full year, with modest margin progression. In the longer-term, we remain excited about the significant structural growth opportunities globally and the potential for further revenue growth and margin expansion," said Compass. Fashion retailer Superdry said trading remained "subdued" in the third quarter. Global Brand revenue was up 5.4% to GBP479.6 million in the 13 weeks to January 26, while group revenue fell 1.5% to GBP269.3 million. Wholesale revenue increased 13%, while e-commerce was down 0.7% and store sales 8.5% lower. "Superdry's performance has remained subdued during quarter three. We continued to be impacted by the ongoing product mix and relevance issues we have previously highlighted and by the lack, until the end of quarter three and the start of quarter four, of any prolonged period of cold weather in our key markets," said Chief Executive Euan Sutherland.Insurer Beazley said annual profit tumbled due to underwriting losses in its property insurance and reinsurance business.Pretax profit for 2018 dived to USD76.4 million from USD168.0 million the year before, despite net premiums written rising 14% to GBP2.25 billion.Profitability was hampered by underwriting losses in the property insurance and reinsurance business, which led to a "sharply lower" investment return. The company generated a return on average shareholders' equity of 5% in 2018, versus 9% in 2017.The FTSE 250 constituent lifted its total dividend by 5% to 11.7p from 11.1p last year."Although market conditions were challenging, depressing our earnings, we entered 2019 with positive premium rate momentum and higher interest rates that should deliver stronger returns going forward," said Chief Executive Andrew Horton.Pork and poultry producer Cranswick said its annual forecasts remain unchanged, but its operating margin is likely to decline in the following year, due to higher costs. Revenue was the third quarter, or three months to December 31, was down 2% on last year. Strong growth in poultry and continental products was offset by lower sales from other, pork related, categories, the company said.Nonetheless, management expects for the current year remain unchanged. However, for the following financial year Cranswick said its operating margin is likely to decline, reflecting the "potentially challenging commercial landscape", together with start-up and commissioning costs associated with the Eye, Suffolk, poultry processing facility.Thomas Cook Group said its first quarter loss widened as it announced a strategic review of its airline unit. First quarter revenue was up 1% to GBP1.66 billion, while its underlying operating loss widened by GBP14 million to GBP60 million. "As expected, the knock-on effect from the prolonged summer heatwave and high prices in the Canaries have impacted customer demand for winter sun. Where Summer 2018 bookings started very strongly, bookings for Summer 2019 reflect some consumer uncertainty," said Chief Executive Peter Fankhauser. The tour operator also said it is in the early stages of reviewing its airline business, and will consider "all options" to enhance value to shareholders. In 2018, the airline generated GBP3.5 billion in revenue and underlying operating profit of GBP129 million.Larger peer TUI Group said late Wednesday that earnings for its current financial year will be "broadly stable" on last year due to "extraordinary" hot weather last summer and a weak pound. For the year ending September 30, the travel operator said it expects adjusted earnings before interest, taxes, depreciation and amortisation to be broadly stable on the record performance in the prior year of EUR1.17 billion."Consequently, we are not reiterating our guidance of at least 10% [compound annual growth rate] in underlying Ebitda at constant currency for the three years to FY20," the company said.In the US on Wednesday, Wall Street ended lower, with the Dow Jones Industrial Average ending down 0.1%, the S&P 500 down 0.2% and Nasdaq Composite declining 0.4%.In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.6%. Financial markets in China and Hong Kong were closed for the Lunar New Year holiday. The economic events calendar on Thursday has a UK Halifax house price index reading at 0830 GMT while the European Commission will release its economic growth forecasts at 1000 GMT.
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Smith & NephewCranswickThomas CookBeazleyCompass GroupSDRY.L