9th Sep 2019 07:38
(Alliance News) - Stock prices in London are seen opening in the green on Monday, tracking Asian equity markets higher amid stimulus measures in China.
In company news, Primark store chain owner Associated British Foods said its full-year outlook is unchanged, Lloyds Banking Group suspended the remainder of its share buyback programme, and plastic products supplier Essentra made an acquisition.
IG futures indicate the FTSE 100 index is to open 24.36 points higher at 7,306.70. The blue-chip index closed up 11.17 points, or 0.2% at 7,282.34 on Friday.
AB Foods said its full-year outlook remains unchanged, with adjusted earnings per share expected to be in line with last year. The company said it has seen strong profit performances from Primark and its Grocery unit. However these are expected to be offset by an anticipated decline at AB Sugar.
The company said two thirds of operating profit are earned outside the UK and the weakening of sterling, will result in a translation gain this year of around GBP10 million.
At Primark, sales are expected to be 4% ahead of last year at constant currency and actual foreign exchange rates, driven by increased selling space but partially offset by a 2% decline in like-for-like sales, the company said.
AB Foods said Primark's first half operating margin was 11.7%, ahead of 9.8% the same time last year on the weaker dollar. However, the margin in the second half will be lower reflecting the effect of a stronger dollar on purchases.
"The strengthening of the US dollar during this year and the recent weakening of sterling will increase the cost of goods for next year. We anticipate achieving some mitigation from reduced materials prices, the favourable effect of exchange rates in sourcing countries and better buying. Combined with a more typical level of markdown, we expect a reduced margin next year," AB Foods said.
Regarding Brexit, AB Foods said its businesses have completed "all practical preparations" should the UK no longer be a member of the EU and contingency plans are in place if some of its businesses experience disruption at the time of exit.
Lloyds Banking Group became the latest UK lender to update the market on new charges relating to the mis-selling of payment protection insurance.
Lloyds said it received more payment protection insurance information requests than expected before the PPI deadline on August 29.
The bank estimated that it will need to make an incremental charge for payment protection insurance claims, in addition to the provisions set out at the interim results, in the range of GBP1.2 billion to GBP1.8 billion. The estimated range amounts are preliminary and unaudited.
Lloyds said it continues to process claims and the final PPI provision could be above or below the range provided.
In light of this, Lloyds has decided to suspended the remaining GBP600 million of its GBP1.75 billion share buyback programme.
"In line with normal practice, the board will give consideration to the distribution of surplus capital at the year end and continues to target a progressive and sustainable ordinary dividend. As previously reported, the board's view of the level of capital required by the group to grow the business, meet regulatory requirements and cover uncertainties reduced earlier this year from around 13% to around 12.5%, plus a management buffer of around 1%," Lloyds said.
Essentra said it has acquired Spanish packaging firm Nekicesa Packaging from private equity firms GED Iberian B and EBN Vaccaria for an undisclosed sum. The company said Nekicesa supplies the pharmaceutical end-market in Spain and will be reported under the Packaging division.
Nekicesa has been acquired on a cash-free, debt-free basis, funded from existing facilities and will be "immediately earnings enhancing", Essentra added.
The Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite is up 0.7%, while the Hang Seng index in Hong Kong is up 0.1%.
Asian equity markets started Monday on a positive note after China on Friday unveiled fresh stimulus measures, while below-par US jobs data also released Friday reinforced expectations the Federal Reserve will cut interest rates later this month.
The People's Bank of China on Friday said it would slash the amount of cash lenders must keep in reserve to its lowest level in 12 years, freeing up more than USD100 billion for the stuttering economy, the world's second largest.
On the economic front, China's exports fell in August by 1% year-on-year amid a protracted trade war with the US, official data showed on Sunday.
Exports fell to just over USD214 billion, while imports fell 5.6% to just under USD180 billion, figures from the Beijing statistics office showed.
According to the figures, exports to the US took a particularly big plunge, dropping by 16% to USD37.3 billion.
Japan's economy grew at an annual rate of 1.3% in the April-to-June period, revised down from an initial estimate of 1.8%, a government report showed on Monday. The reading was in line with the forecast by analysts in a recent Nikkei Business Daily poll, slowing from a 2.2% expansion in the first quarter, the Cabinet Office said in a statement.
The pound was quoted at USD1.2274 early Monday, down from USD1.2312 at the London equities close Friday.
UK Prime Minister Boris Johnson was expected to ramp up the pressure on members of Parliament to back a snap general election or face five weeks of watching the Brexit negotiations from the sidelines.
Johnson could prorogue Parliament as early as Monday in a move that would suspend all proceedings until October 14.
But Johnson will present MPs with a way out of an enforced holiday by giving them another vote on holding a general election before a final decision to prorogue is taken.
Downing Street has until Thursday to suspend Parliament.
An Opposition law, dubbed the Benn Bill after Labour MP Hilary Benn, that would extend the Brexit deadline until January 2020 is expected to receive Royal Assent before prorogation kicks-in, but MPs would be thrown out of Parliament almost immediately afterwards and face a nervous wait to see whether Johnson will obey the legislation.
The economic events calendar on Monday has UK industrial and manufacturing production figures at 0930 BST.
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