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(Alliance News) - Stock prices in London are seen opening slightly higher on Friday, tracking gains on Wall Street overnight, on a quiet day for scheduled company updates and economic indicators.
In early company news, defence outsourcer Babcock International continued to streamline the business. Personal protection systems maker Avon Protection warned on annual revenue amid delayed orders. Anglo American spin-off Thungela Resources reported stellar interim earnings.
IG futures indicate the FTSE 100 index is to open 11.57 points higher at 7,204.80. The blue-chip index closed down 26.91 points, or 0.4%, at 7,193.23 Thursday.
Babcock International Group said it has reached an agreement with US science and technology company KBR to sell its subsidiary Frazer-Nash Consultancy for GBP293 million.
Babcock said the sale forms part of its disposal programme, which aims to generate at least GBP400 million over the next twelve months.
Babcock said Frazer-Nash Consultancy is an "outstanding business" which provides independent advice to its customers and has operated largely independently from Babcock. Cash from the sale will be used to reduce net debt.
"We are making real progress on our plan to streamline and focus the group on our key markets. Divesting at least GBP400 million of businesses in our targeted disposals programme will enable us to reduce complexity and increase our focus as we return Babcock to strength," said Chief Executive Officer David Lockwood.
Avon Protection said it has continued to see good commercial progress in the second half of financial 2021, but lowered its annual revenue guidance. Its financial year ends in September.
The company, formerly known as Avon Rubber, said order intake in the ten months to July 31 was USD221 million. This represents order growth, excluding its US helmet business Team Wendy, of 13% from the same time last year, giving a strong order book of USD146 million. When including recent acquisition Team Wendy, order growth was up 21% year-on-year.
However, Avon said delays in the receipt of orders, supply chain disruption and a tight US labour market has increased significantly through the second half of the financial year.
Avon said that, although it expects this Covid-19 related disruption to be temporary, it has resulted in a reduction in revenue guidance for financial 2021 to between USD245 million to USD260 million. The company posted revenue of GBP168.0 million for the year ended September 30.
Avon was confident that the delayed orders will be received over the coming months, but expects supply chain disruption and a tight US labour market to persist into next year.
As a result, it also cut financial 2022 revenue expectations, to between USD320 million and USD340 million, whilst maintaining current guidance for 2023.
"We remain as confident as ever about the medium-term prospects of Avon Protection, underpinned by a record order book, a growing and visible contract pipeline and world leading businesses and technologies. We will carry significant momentum into next year, which will also benefit from a strong ramp-up in the Ballistics business, and remain well set for growth in 2022 and beyond," said CEO Paul McDonald.
Coal producer Thungela Resources posted a significant increase in interim earnings as it reported for the first time as an independent company, having been spun off from Anglo American earlier this year.
For the six months to June 30, revenue jumped to ZAR10.05 billion from ZAR1.66 billion last year, and it swung to a profit of ZAR351 million from a ZAR122 million loss. Its operating profit surged to ZAR1.89 billion from ZAR52 million.
Thungela Resources said it was cash positive and well positioned after the spin-off and expects positive adjusted operating free cash flow for rest of 2021. As a result, it expects to declare maiden dividend at 2021 annual results at 30% of adjusted operating free cash flow.
"We are pleased to note the recent recovery of global thermal coal prices. These are reflective of the continued demand for high quality coal amid challenging supply dynamics across many regions. Our business reported an increase in earnings, with earnings per share of 313 cents. The steps we have taken to upgrade our portfolio and our continued focus on improving productivity and operating costs, will no doubt stand us in good stead into the future," said CEO July Ndlovu.
In New York on Thursday, the Dow Jones Industrial Average closed marginally higher, S&P 500 up 0.3%, and Nasdaq Composite up 0.4%. The Dow and S&P 500 ended at record highs.
In Tokyo, the Nikkei 225 index closed down 0.1% on Friday. In China, the Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong was down 0.9%. The S&P/ASX 200 in Sydney ended up 0.5%.
Asian markets drifted Friday as a broadly positive week drew to a close, with investors pricing in the likelihood that Federal Reserve officials will start withdrawing the vast financial support put in place at the start of the pandemic.
Also playing on sentiment were the fast-spreading Delta virus variant, which is forcing governments to introduce containment measures, and the Chinese government's regulatory steps to tighten its grip on the world's number two economy .
"Asia markets - which have lagged behind to some extent this week over concerns around rising infection rates and lagging vaccination rates across the region, as well as a more interventionist Chinese regulator - look set to finish the week on a mixed note, while markets here in Europe look set to open slightly higher," said CMC Markets analyst Michael Hewson.
"For now, markets appear to be working on the baseline assumption that a [US stimulus] taper is coming, and getting comfortable with that idea, and as long as the discussion doesn't move onto the more sensitive topic of rate rises, then the current trend of higher highs looks set to continue," Hewson added.
Meanwhile, coronavirus case rates have risen in most regions of England and among almost all age groups, the latest figures show. The Public Health England data comes after an expert warned that the rate of decline in new daily symptomatic cases across the UK could be slowing down.
Case rates rose in all regions of England except the North East, and among all age groups except 10 to 19-year-olds, according to the latest PHE weekly surveillance report.
The highest rate is among 20 to 29-year-olds, with 670.7 cases per 100,000 people in the seven days to August 8, up week-on-week from 628.6.
The pound was quoted at USD1.3806 early Friday, down from USD1.3829 at the London equities close Thursday.
The euro was priced at USD1.1740, up from USD1.1729. Against the Japanese yen, the dollar was trading at JPY110.39, little changed from JPY110.35.
Brent oil was quoted at USD70.72 a barrel Friday morning, down from USD71.22 late Thursday. Gold was trading at USD1,758.20 an ounce, higher against USD1,750.13.
Friday's economic calendar has EU foreign trade figures at 1000 BST and US import and export price indexes at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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