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(Alliance News) - Stock prices in London are seen opening slightly lower on Tuesday as investors look ahead to the release of key US inflation data in the afternoon.
In early company news, sportswear retailer JD Sports Fashion raised its dividend, citing the profitability of its international businesses, particularly in the US. Defence contractor Babcock International said it would not pay a dividend for financial 2021 or 2022 as it undergoes a review of the business.
IG futures indicate the FTSE 100 index is to open 3.22 points lower at 6,885.90. The blue-chip index lost 26.63 points, or 0.4%, to close at 6,889.12 on Monday.
There are growing fears that the reopening of the global economy will send prices surging this year and force central banks to tighten the ultra-loose monetary policies that have helped sustain a year-long equity rally.
Analysts at Danske Bank explained: "Markets are waiting for the March US inflation number and the reaction will be an important signal of how much of the rise in inflation is already priced by markets. The expected increase in inflation is mostly driven by the rise in oil prices as base effects will lift the annual increase (oil prices collapsed in March and April last year due to the outbreak of Covid-19).
"The question is how much the rise in oil prices feeds into core inflation as well...Futures point to another uneventful session though with markets around unchanged."
JD Sports said it delivered a resilient performance despite its high-street stores being closed for a majority of the year under lockdown restrictions.
For the financial year ended January 30, revenue was GBP6.17 billion, up 0.9% from GBP6.11 billion in financial 2020.
JD posted pretax profit of GBP324.0 million, down 7.0% from GBP348.5 million. On a headline basis, meaning before exceptional items, pretax profit was GBP421.3 million, down 4.0% from GBP438.8 million the year before. In January, the FTSE 100 firm had said it expected to report headline pretax profit of at least GBP400 million.
JD Sports Fashion declared a final and full-year dividend of 1.44 pence, up from 0.28p.
JD said the annual performance demonstrated the significant retention of sales and profitability through a period of global uncertainty and multiple periods of temporary store closures reflects brought about by the Covid-19 pandemic.
During the year it launched its first flagship store for JD in Times Square, New York with a "positive reaction from customers and international brand partners".
Looking ahead, JD said its estimate for headline pretax profit for financial 2022 will be in the range of GBP475 million to GBP500 million.
Babcock International Group said its financial 2021 results are to include GBP1.7 billion in impairments following a contract profitability and balance sheet review.
The company said it conducted the review as it moves to simplify the business and reduce layers in a restructuring.
"This review is looking at a sample of approximately 100 contracts, representing around GBP2.6 billion of revenue each year across all four sectors. The selected contracts received differing levels of review depending on their perceived risk. We have also performed a review of the balance sheet covering all of the balance sheet captions. Again, these reviews were performed on a risk basis across all four sectors," the company said.
Babcock expects financial 2021 underlying revenue of GBP4.69 billion, down from GBP4.87 billion in financial 2020 and underlying operating profit of GBP307 million, down from GBP524 million.
Babcock said that, as part of its focus on building a strong balance sheet, the board will not be recommending a dividend for financial 2021 or 2022.
The company added that the aims to "return Babcock to strength without the need for an equity issue".
Among actions it intends to take instead, Babcock said it expects to raise GBP400 million from disposals over the next 12 months. Additionally, its restructuring plan is expected to save GBP40 million per year from a one-off expense of GBP40 million.
"We have confidence that the markets we address and our capabilities to address those markets will be favourable in the medium term. However, we will be revising our forecasts for profitability for future periods as we continue to assess the business. We are cautious about progress in 2022 profitability as it will be a year of transition and also given the ongoing uncertainty of when COVID-19 restrictions will be lifted in our markets," Babcock said.
Just Eat Takeaway.com said an improved performance in the first quarter of its current financial year was driven by strong growth in the UK and by its investment programme.
The Anglo-Dutch food delivery services provider said total orders in the first quarter grew by 79% year-on-year to 200.0 million, while delivery orders surged to 69.4 million from 23.3 million.
Delivery orders in the UK multiplied to 22.9 million in the first quarter of 2021 from 2.9 million a year earlier. New partnerships were signed with household brands such as Leon, Tortilla and Chipotle, as well as with coffee chains Starbucks and Costa, adding to Just Eat's growing restaurant supply. In London, Just Eat Takeaway said it achieved triple-digit order growth.
In Asia, the Japanese Nikkei 225 index ended up 0.7% on Tuesday. In China, the Shanghai Composite was down 0.5%, while the Hang Seng index in Hong Kong was up 0.5%. The S&P/ASX 200 in Sydney closed marginally lower, down 4.00 points.
The pound was quoted at USD1.3731 early Tuesday, down from USD1.3746 at the London equities close on Monday.
The UK economy registered growth in February as the country adapted to life in lockdown conditions, according to the latest figures from the Office for National Statistics on Tuesday.
The UK economy grew 0.4% month-on-month in February, rebounding from 2.2% contraction in January, as UK government restrictions affecting economic activity remained broadly unchanged. The latest reading missed the the market forecast, cited by FXStreet, for 0.6% growth.
The euro was priced at USD1.1890 early Tuesday, lower from USD1.1911. Against the yen, the dollar was trading at JPY109.70, up from JPY109.40.
Brent oil was quoted at USD63.50 a barrel Tuesday morning, marginally lower from USD63.58 at the London equities close on Monday. Gold was trading at USD1,726.95 an ounce, down from USD1,734.45.
Tuesday's economic calendar has US consumer price index readings at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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