(Alliance News) - Stock prices in London were seen opening higher on Tuesday, as investors looked to world governments and central banks to provide economic support in the face of the new coronavirus pandemic.
In company news, blue-chip caterer Compass Group said it expects to take a substantial hit from the coronavirus outbreak as it lowered its operating profit expectations. Plumbing and heating products supplier Ferguson said the demerger of its UK operations is on track as it raised its interim dividend. Electrical goods and mobile phone retailer Dixons Carphone announced job cuts, as it closes 531 stand-along mobile phone stores.
IG futures indicate the FTSE 100 index is to open up 64.02 points at 5,215.10. The blue-chip index closed down 215.03 points, or 4.0%, at 5,151.08 Monday.
Compass Group reported organic revenue growth for the five months ending February 29 came in at 6% as it said government measures to contain the virus in its Asia Pacific region "did not materially impact our business".
However, Compass said the acceleration of containment measures from world governments and clients in Continental Europe and North America have put a dent in its financial expectations for the half year.
Compass said the vast majority of Sports & Leisure and Education business in these regions have been closed, as such the company's business and industry volumes are being hurt severely.
Compass's current expectations are that interim 2020 organic revenue growth should be between zero and 2%. The company is implementing "significant mitigation plans" to manage costs, and at this stage expects the drop-through impact of lost revenue to be between 25% to 30% across the business.
As a result, Compass's interim operating profit for financial 2020 will be in a range between GBP125 million to GBP225 million - lower than expected. In financial 2019, interim operating profit was GBP951 million.
Compass will report interim results on May 13.
Ferguson said it saw strong operational delivery in the first half of its financial year.
For the half year ended January 31, revenue rose 1.1% to USD10.97 from USD10.85 billion a year before, while pretax profit fell 5.7% to USD640 million from USD679 million.
Ongoing revenue rose 4.3% to USD9.89 billion from USD9.49 billion, while trading profit rose 9.5% to USD782 million from USD714 million. The company attributed the performance to continued market share gains in the US. In the US, Ferguson posted revenue growth of 5.0% and underlying trading profit growth of 5.7%.
Ferguson raised its interim dividend by 7% to 67.5 US cents from 63.1 cents.
The company makes a bulk of its revenue in the US and said the demerger process for its Wolseley UK business is on track and expects to complete the transaction within the current calendar year. The company named DS Smith Chair Gareth Davis to chair Wolseley once the process has completed.
Foreign exchange services provider Finablr said it has appointed an unnamed accounting firm to undertake "rapid contingency planning" for a potential insolvency appointment to maximise value.
Dixons Carphone said it will close all of its UK standalone Carphone Warehouse stores - 531 shops representing 8% of its total UK selling space. The company said mobile phones are to be sold through Carphone Warehouse sections in electrical goods retailer Currys. It expects 2,900 redundancies as the businesses are combined. It said the 70 Carphone Warehouse stores in the Republic of Ireland aren't affect, nor are international operations.
Dixons Carphone added that it has not yet seen a "material impact" from Covid-19 but is preparing for one. It said it still expects adjusted pretax profit of GBP210 million in its current financial year.
G7 leaders on Monday pledged to "do whatever it takes" to protect the economy, but US President Donald Trump acknowledged the world's largest economy "may be" headed into recession.
The US Federal Reserve acted again on Monday, with its New York branch announcing another USD500 billion in cash injections on top of a massive liquidity and bond-buying program unveiled in recent days, and the Bank of Japan also announcing new bond purchases. The Fed on Sunday slashed borrowing costs to almost zero - its second emergency cut in less than two weeks.
The pound was quoted at USD1.2236 Tuesday morning, lower than USD1.2271 at the London close Monday.
In response to the pandemic, UK Chancellor of the Exchequer Rishi Sunak will set out a new package of support for businesses hit by the outbreak less than a week after announcing GBP12 billion of emergency funding in the Budget.
Around 250,000 people will die in Britain as a result of the coronavirus outbreak unless more draconian measures are adopted to protect the population, scientists have warned.
The Imperial College Covid-19 response team - which has been advising ministers - said that even with the "social distancing" plans set out by the UK government, the health system will be "overwhelmed many times over".
In its latest report, it said the only "viable strategy" was a Chinese-style policy of "suppression" involving the social distancing of the entire population.
The euro stood at USD1.1171, up from USD1.1149. Against the yen, the dollar was trading at JPY106.47, higher compared to JPY105.85.
Brent oil was quoted at USD30.57 a barrel Tuesday morning, up from USD29.99 late Monday. Gold was quoted at USD1,487.96 an ounce, down from USD1,508.34.
The Japanese Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite closed down 0.9%, while the Hang Seng index in Hong Kong is down 0.1%.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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