17th Oct 2019 07:35
(Alliance News) - Stocks in London are called marginally higher on Thursday, with the pound lower, as focus lies on Brussels to see if there is any chance of a Brexit deal being reached at the last EU summit before the UK's planned Halloween withdrawal from the bloc.
In early UK company news, WH Smith unveiled a further push into the US market with the acquisition of travel retailer Marshall Retail, and Domino's Pizza Group said it has decided to exit its international operations.
IG says futures indicate the FTSE 100 index of large-caps to open 18.25 points higher at 7,186.20 on Thursday. The FTSE 100 index closed down 43.69 points, or 0.6%, at 7,167.95 on Wednesday.
UK Prime Minister Boris Johnson is heading to Brussels for a crunch EU summit on Thursday as he tries to get a Brexit deal breakthrough across the line.
After a roller coaster few days of political twists and turns when an agreement seemed within touching distance, talks continued as the PM faced his EU counterparts before an expected Parliamentary showdown on Saturday.
The PM's hopes of an end to the deal deadlock on Wednesday night were dashed as Tory allies the DUP appeared to dig in against elements of the proposed agreement. The DUP is unhappy with the prospect of a customs border between Northern Ireland and the rest of the UK, as well as issues of consent regarding the suspended Stormont assembly.
Talks between the UK and EU looked set to go down to the wire before the EU heads of government gathering.
Johnson needs to get an agreement approved at the summit if he is to avert a major political bust-up over asking Brussels to delay Brexit beyond the scheduled October 31 deadline.
"Although the parties seem to have come close to a deal at this week's talks, they couldn't find a solution to the Irish border paradox yet. And the truth is, even if the leaders came to an agreement among themselves, there is only a slim chance for Boris Johnson to find sufficient support in Parliament to give it a green light," commented Ipek Ozkardeskaya, senior market analyst at London Capital Group.
Sterling was quoted at USD1.2760 early Thursday, down compared to USD1.2834 at the London equities close on Wednesday.
In early UK company news, Marmite maker Unilever said it continues to expect annual underlying sales growth in the lower half of its 3% to 5% range.
Underlying sales growth for the third quarter of 2019 was 2.9%, and 3.4% for the nine months to the end of September.
Emerging markets underlying sales growth was 5.1%, comprising volume growth of 2.2% and price growth of 2.8%. Developed Markets underlying sales growth dipped 0.1%.
"We have maintained momentum in the quarter, with a good balance between volume and price. Emerging markets and Home Care have been the key growth drivers. We will step-up competitive top line performance through innovation and portfolio evolution to serve the faster growing geographies and channels," said Chief Executive Alan Jope.
"For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow," he added.
Hygiene and pest control firm Rentokil Initial was "pleased" with its third-quarter results as sales grew.
Revenue for the third quarter amounted to GBP727.2 million, up 13% year-on-year at actual exchange rates and 9.6% on a constant currency basis. Ongoing revenue was up 9.8% at constant rates, with 5.5% of this organic, a sharp acceleration from the 4.2% reported in the first half of 2019.
Ongoing revenue is the performance of Rentokil's continuing operations after stripping out disposed or closed businesses.
"I am pleased with our Q3 results and our group organic growth of 5.5% is our highest level of quarterly organic growth in over a decade. Pest Control has performed well, growing organically by 5.9%, and Hygiene has demonstrated further momentum, growing organically by 4.8%," said Chief Executive Andy Ransom.
Books and stationery seller WH Smith unveiled plans to expand further across the Atlantic with the purchase of US travel retailer Marshall Retail for USD400 million, about GBP312 million.
The transaction will broadly double the size of WH Smith's international travel business, the FTSE 250-listed firm explained, with an annual cost synergy run-rate of USD11 million expected by the third full year following completion.
WH Smith intends to raise GBP155 million, representing 7% of its existing share capital, via an accelerated bookbuild to part fund the deal. The raise will be led by Barclays and JP Morgan.
Marshall Retail currently operates 170 stores in North America, with 59 of these inside airports. The firm is expected to deliver revenue of USD204 million and earnings before interest, tax, depreciation and amortisation of USD31.5 million in 2019.
This acquisition comes almost exactly a year after WH Smith announced the purchase of US-based travel retailer InMotion Entertainment for USD198 million.
The integration of InMotion is now complete, WH Smith said on Thursday, and its performance has been ahead of initial expectations. Digital and travel accessories retailer InMotion operates from 116 stores across 43 airports in the US.
Turning to the London-listed firm's annual results, revenue for the year to August 31 rose to GBP1.40 billion from GBP1.26 billion, while pretax profit edged up to GBP135 million from GBP134 million. Travel total revenue was up 22%, or 8% higher when stripping out InMotion, and 3% higher on a like-for-like basis.
WH Smith's travel operations once again outperformed its high street estate, with the High Street unit reporting revenue down 2% with like-for-like sales down 2%. However, there was a good gross margin performance in the arm and costs were "tightly controlled".
On current trading, WH Smith said it has made a "good start" to the new financial year. After the first six weeks, total travel revenue is up 25% with like-for-like sales 5% higher. High Street total revenue is down 4%, and 3% lower on a like-for-like basis. For the group, revenue is up 12% and like-for-like sales 1% higher.
Domino's Pizza Group said it has decided to exit its struggling International unit as it reported a "solid" third-quarter performance in the UK & Ireland.
UK & Ireland system sales for the 13 weeks to September 29 amounted to GBP288.2 million, up 3.9% year-on-year. International sales, however, slipped 2.7% to GBP25.3 million.
For the group as a whole, system sales were up 3.4% to GBP313.5 million.
Domino's said its review of its International business has concluded, and it will exit the markets - which include Switzerland, Iceland, Norway and Sweden - in an orderly manner.
"Although the financial results have stabilised, the performance of our international business remains disappointing. Over the past six weeks we have completed a review with external consultants, assessing each of our four international markets and the future prospects for our businesses. We have concluded that, whilst they represent attractive markets, we are not the best owners of these businesses," explained David Wild, chief executive.
The core UK & Ireland performance was solid, he added.
"Normal working practices continue to be impacted by our franchisee dispute. As we said at our interim results, this situation is complex, and we expect a resolution to take time, certainly into 2020. We remain committed to working with our franchisees to agree sustainable win-win solutions," said Wild.
In the US on Wednesday, Wall Street closed lower, with the Dow Jones Industrial Average ending down 0.1%, the S&P 500 down 0.2% and Nasdaq Composite closing 0.3% lower.
Shares in Netflix traded 10% higher after-hours after the streaming giant's latest quarterly update showed robust subscriber growth and better-than-expected profit.
Netflix reported net income of USD665 million in the recently ended quarter, jumping up from USD403 million in the same period last year and topping most analyst forecasts. The California-based company saw revenue up 31% at USD5.25 billion and added 6.8 million subscribers worldwide to reach a total of 158.3 million.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite is down 0.1%, while the Hang Seng index in Hong Kong is up 0.5%.
In the economic calendar on Thursday, there are UK retail sales at 0930 BST while eurozone construction output is at 1000 BST and US industrial production at 1415 BST.
By Lucy Heming; [email protected]
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