12th Aug 2020 07:54
Alliance News) - Stock prices in London are seen opening lower on Wednesday after equity markets in the US ended in the red on Tuesday, while the UK was confirmed in recession for the first time since the 2008-09 financial crisis.
In early company news, online takeaway platform Just Eat Takeaway.com said it expects growth to remain strong as revenue rose. Cybersecurity firm Avast said it has benefited from the global work from home movement triggered by lockdown restrictions. Online fashion retailer ASOS continued its strong momentum
IG futures indicate the FTSE 100 index is to open 13.84 points lower at 6,140.50. The blue-chip index closed up 103.75 points, or 1.7%, at 6,154.34 on Tuesday.
Avast said it saw a resilient performance in the first half during the Covid-19 outbreak as more people work from home during the pandemic.
For the half-year ended June 30, revenue was up 1.5% at USD433.1 million from USD425.4 million last year but pretax profit was down to USD115.3 million from USD143.9 million.
Avast declared an interim dividend of 14.7 US cents, up 8.1% from last year.
Looking ahead, Avast maintained previous annual guidance for organic mid-single-digit revenue growth and raised organic billings growth expectation from in-line to be slightly in excess of organic revenue growth.
"While we do not anticipate the strongly elevated performance levels of the second quarter to be sustained, we are confident that Avast is able to capture material benefits from the most recent period beyond the short term. Firstly, we are optimistic that the increased user activity seeded during this period will translate over time into durable demand for our products. Secondly, we believe that the stronger digitisation trends brought about by the pandemic are likely to persist in some measure and the resultant value of cybersecurity and privacy products will be felt more than ever. Thirdly, we look forward to realising the full potential of our expanding product portfolio," Avast said.
Just Eat Takeaway.com said revenue rose as a result of increased demand for food deliveries during lockdown.
The firm said the integration of Takeaway.com with Just Eat is on track and progressing well.
For the half-year ended June 30, revenue multiplied to EUR675 million from EUR179 million last year. The figures are presented as if the combination was completed on January 1, 2019 to provide comparable information for the full six-month period, the company said.
Like-for-like revenue grew by 44% to EUR1 billion from EUR715 million a year ago.
But the company's net loss widened to EUR158 million from EUR27 million. Adjusted earnings before interest, taxes, depreciation and amortization came in at EUR177 million, up from EUR76 million a year earlier. Pretax loss widened to EUR121 million from EUR7 million.
Just Eat Takeaway said the loss was mainly driven by amortisation, advisory, transaction and integration-related expenses connected to the combination of Just Eat and Takeaway.com and the proposed transaction with Grubhub.
"Just Eat Takeaway.com is in the fortunate position to benefit from continuing tailwinds. The United Kingdom, Germany, Canada, the Netherlands, Australia,and Brazil are performing particularly strongly. Our businesses have healthy gross margins and all our segments are adjusted EBITDA positive. On the back of the current momentum, we started an aggressive investment program, which we believe will further strengthen our market positions. We are convinced that our order growth will remain strong for the remainder of the year," said Chief Executive Jitse Groen.
ASOS said it has continued to deliver a strong operational performance and improvements in profitability as a result of a focus on "trading dynamically and managing the business rigorously".
The fast-fashion retailer said it expects to report annual results "significantly ahead of market expectations". Revenue growth is now expected to be between 17% and 19%, with pretax profit in the region of GBP130 million to GBP150 million.
In the financial year that ended August 31, 2019, ASOS reported pretax profit of GBP33.1 million on GBP2.73 billion in revenue.
The improvement in expectations is supported by stronger than anticipated underlying demand as more people shop online during lockdown restrictions.
"We had expected to see underlying returns normalise once lockdown measures eased and customers were both able to ship returns and felt more comfortable doing so. However, in recent weeks, we have gained better visibility on this pattern in customer behaviour as we have progressed through the returns cycle and it has become evident that returns are not increasing at the rate we originally anticipated. As a result, we have seen a significant and sustained reduction in returns rates since April," ASOS said.
ASOS said looking forward, the consumer and economic outlook remains uncertain and it is unclear how long the current favourable shopping behaviour will persist.
The UK economy entered into recession for the first time since the 2008-09 financial crisis, according to figures the Office for National Statistics on Wednesday.
On an annual basis, UK gross domestic product fell 21% in the three months to June, having contracted 1.7% in the first quarter of 2020. Market forecasts, cited by FXStreet, was for an annual contraction of 22%.
On a quarterly basis, UK GDP shrank by 20% having contracted 2.2% in the first three months of 2020. The quarterly figure was in line with FXStreet's consensus estimate.
A recession is defined as two successive quarters of decline in gross domestic product.
Economic uncertainty caused by the pandemic means Chancellor Rishi Sunak may delay his autumn Budget, according to the Financial Times. The newspaper said fears of a second wave of Covid-19 had led Sunak to consider delaying major public spending decisions until after the crisis, most likely until the spring.
The dollar was stronger across the board early Wednesday.
The pound was quoted at USD1.3050, down from USD1.3084 at the London equities close Tuesday.
The euro was quoted at USD1.1717, down from USD1.1770 late Tuesday. Against the yen, the dollar was quoted at JPY106.75, firm from JPY106.49 in London.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.4%, S&P 500 down 0.8%, and Nasdaq Composite down 1.7%.
Senate Majority Leader Mitch McConnell gave investors a scare when he told Fox News there had been no progress on US stimulus, fanning concerns the talks could take a lot longer than envisaged.
"As a result of last night's late sell-off in the US, markets here in Europe look set to open lower, with the main focus of attention on today's preliminary UK second-quarter GDP numbers. There has been an awful lot of pessimism surrounding these numbers, even more so in light of the horror show that was the numbers out of Europe a couple of weeks ago," said CMC Markets analyst Michael Hewson.
In Asia, the Japanese Nikkei 225 index ended up 0.3%. In China, the Shanghai Composite is down 2.1%, while the Hang Seng index in Hong Kong is down 0.5%.
Gold was trading at USD1,881.31 an ounce early Wednesday, sharply lower from USD1,947.40 at Tuesday's equities close in London.
Brent oil was priced at USD44.66 a barrel Wednesday morning, up from USD45.12 a barrel at Tuesday's close.
In Wednesday's economic calendar there is a eurozone industrial production print at 1000 BST, followed by US MBA mortgage applications at 1200 BST and the US consumer price index reading at 1330 BST.
By Arvind Bhunjun; [email protected]
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