25th Feb 2020 07:52
(Alliance News) - Stock prices in London are seen opening higher on Tuesday, as markets attempt to stage a modest rebound following heavy losses on Monday due to fears over the global spread of coronavirus.
In company news, aerospace parts maker Meggitt said its chair will step down in 2021, as it warned warned growth in 2020 will be hindered by the halt to production of Boeing's 737 MAX aircraft, alongside disruption caused by coronavirus.
Speciality chemicals firm Croda reported a fall in annual results amid "subdued market conditions", and building products firm SIG announced leadership changes.
IG futures indicate the FTSE 100 index is to open 38.37 points higher at 7,195.20. The blue-chip index closed down 247.09 points, or 3.3%, at 7,156.83 on Monday.
The epidemic has killed nearly 2,600 people and infected some 77,000 people in China, with new cases and fatalities emerging in Europe, the Middle East and Asia in recent days.
The spread of COVID-19 in other parts of the world has accelerated over the past week, with Iran, South Korea and Italy emerging as the worst new hotspots.
Meggitt said it delivered a strong set of results in 2019, with organic revenue growth of 8% coming in ahead of its raised guidance and a good performance across all end markets.
Meggitt reported revenue of GBP2.28 billion in 2019, up 9% from GBP2.08 billion in 2018, lifting pretax profit 33% to GBP286.7 million from GBP216.1 million.
The company posted organic revenue growth of 8%, which it said reflected a strong performance in growing end-markets. Within this, there was 8% growth in civil aerospace, 11% in defence and 10% in energy.
Meggitt declared a full-year dividend of 17.50 pence, up 5.1% from 16.65p in 2018.
Looking ahead, Meggitt said "sector specific factors" including the production halt of the grounded Boeing 737 MAX and supply chain disruption, as well as the "wider macroeconomic impact" of coronavirus are expected to hold back margin progression in the short-term.
Meggitt expects 2020 organic revenue growth in a range of 2% to 4% and 2020 underlying operating margin improved by 30 to 50 basis points.
"As previously guided, we also expect the level of free cash flow to be lower as a result of: an increase in capital and operating expenditure relating to our move to Ansty Park and investment in carbon capacity; an increase in cash tax paid; and one-off property-related cash receipts in 2019," Meggitt said.
"At the current time, we expect the effect of these sector-specific and macroeconomic factors to be felt beyond 2020. Nonetheless, we expect to deliver low to mid-single digit organic revenue growth and underlying operating margins in the range of 18.5% to 19.0% in 2021," the company added.
In addition, Meggitt said Chair Nigel Rudd to step down from the board by 2021 annual general meeting, but is to remain in the role until a successor is appointed.
Croda International said its "strong business model" delivered a resilient performance in subdued market conditions in 2019.
For 2019, Croda reported a decline in revenue of GBP1.38 billion, down from GBP1.39 billion in 2018, while pretax profit fell 4.9% to GBP302.3 million from GBP317.8 million. Operating profit fell 1.8% to GBP339.7 million from GBP342.5 million.
The company attributed the fall in earnings to difficult market conditions in Personal Care unit and Performance Technologies division.
Revenue from Croda's Personal Care unit - which is the company's growth driver - came in at GBP485.2 million in 2019, down from GBP487.8 million in 2018. In Performance Technologies, revenue was GBP430.2 million, down from GBP456.4 million in 2018.
Croda International raised its full-year dividend by 3.4% to 90p from 87.0p in 2018.
CEO Steve Foots said: "An excellent performance in Life Sciences was reflected in sales growth and margin improvement. Sales in Personal Care were significantly impacted by a slower US market and by new legislation in China, but conditions improved in line with our expectations in the final quarter, and sector profitability increased further. Performance Technologies slowed in line with the wider sector, due to weak industrial demand.
"In the year ahead, subject to trading conditions remaining similar, we expect to make further progress in our consumer markets, whilst demand in industrial markets is expected to remain weak but stable. Our growth will be second half weighted."
SIG said Chief Executive Officer Meinie Oldersma and Chief Financial Officer Nick Maddock have resigned from their respective roles with immediate effect. The company has appointed Steve Francis as CEO on an initial contract until December 31 and appointed Kath Kearney-Croft as interim CFO.
Back in December, the Sheffield-based building materials company said Oldersma had taken a leave of absence of "a number of weeks" due to a family illness.
SIG said its 2019 results are anticipated to be in line with the guidance provided in January of underlying pretax profit of GBP42 million. In January, the building products supplier guided for a substantial drop in profit for 2019, amid challenging market conditions and declining revenue.
Trading in the early period of 2020 has seen a continuation of the trends in the last quarter of 2019, SIG said on Tuesday.
The Japanese Nikkei 225 index closed down 3.3% on Tuesday. In China, the Shanghai Composite ended down 0.6%, while the Hang Seng index in Hong Kong is up 0.2%. Financial markets in Japan reopened on Tuesday after being closed on Monday for a holiday.
The pound was quoted at USD1.2939 Tuesday morning, firm from USD1.2928 at the London equities close on Monday.
On the political front, the substance of Brexit trade talks are due to be finalised as ministers on both sides of the Channel prepare to sign-off on their negotiation red lines.
The EU General Affairs Council is set to meet on Tuesday morning in Brussels to approve the bloc's mandate for trade talks with the UK, which are gearing up to start next month.
The announcement on Brussels' agreed terms, which could be controversial after earlier drafts contained what Downing Street read as a veiled reference to the Elgin Marbles, is expected in the afternoon.
The euro was quoted at USD1.0855 Tuesday morning, lower than USD1.0862 at the close on Monday. Against the yen, the dollar was quoted at JPY110.84, up from JPY110.56 late Monday.
Brent oil was quoted at USD56.71 a barrel Tuesday morning, up from USD55.65 at the equities close Monday.
Gold was quoted at USD1,637.32 an ounce Tuesday morning, down from USD1,671.11 late Monday.
By Arvind Bhunjun; [email protected]
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