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(Alliance News) - Stock prices in London are seen opening marginally higher on Thursday, tracking slight gains by US equities overnight, as investors look ahead to a slew of services PMI readings.
In early company news, discount store chain B&M European Value Retail reported stellar annual results. Business publisher and exhibitions firm Informa said trading was in line with expectations.
Exeter-based water utility Pennon Group rewarded shareholders with a special payout as it acquired its neighbour, Bristol Water.
IG futures indicate the FTSE 100 index is to open 8.60 points higher at 7,116.60. The blue-chip index closed up 27.54 points, or 0.4%, at 7,108.00 on Wednesday.
B&M European Value Retail said it experienced an exceptional year as customers flocked to the popular discount retailer during stringent restrictions brought about by the Covid-19 pandemic.
B&M's business offers an assortment of branded food, non-perishable grocery, and general merchandise products, all sold at low prices.
In the UK, the Luxembourg-based company was allowed to trade through lockdowns as it was classified as an essential retailer.
For the financial year ended March 27, revenue was up 26% to GBP4.80 billion from GBP3.81 billion the year before and pretax profit doubled to GBP525.4 million from GBP252.0 million.
In addition, adjusted earnings before interest, tax, depreciation and amortisation increased by 83% to GBP626.4 million from GBP342.3 million. In March, B&M had guided for adjusted Ebitda to be in the range of GBP590 million to GBP620 million.
The company said the B&M UK business experienced very strong sales in the last month of the financial year, with the final week being the strongest in its history which led to the Ebitda outperformance.
B&M declared a total dividend of 17.3 pence, more than doubled from 8.1p paid out the year before.
Chief Executive Officer Simon Arora said: "Looking ahead, there are many uncertainties as society slowly emerges from lockdown and trading patterns are likely to be unpredictable for much of the year. Within our UK business, we will be up against the strong comparatives from last year but we remain confident that the B&M customer proposition, with its modern network of predominantly out-of-town stores and value-led variety offer, will prove highly relevant to the needs of shoppers. As such, we are well positioned to support the communities in which we trade, retain the loyalty of new customers, and to continue our store roll-out strategy."
Informa said that, following the release of its annual results in April, it has continued to trade in line with expectations.
Informa said it remains on track to deliver the baseline revenue target for the year of at least GBP1.7 billion, as well as remaining cashflow positive, supported by improving underlying revenue growth in its two subscriptions-led businesses.
CEO Stephen Carter said: "Further strength in Informa's subscriptions-led businesses and measured confidence in the progressive return of physical events in Mainland China, North America and the Middle East, is delivering further stability and security.
"We remain on track to deliver our revenue commitments through the 2021 transition year, whilst continuing to generate positive cashflow. Improving growth in subscriptions, ongoing expansion in Digital Services and the enduring strength of our B2B brands and platforms, gives us increasing confidence in revitalisation and growth through 2022 to 2024."
Pennon Group acquired Bristol Water and declared a special dividend, share buyback and share consolidation, as it reported annual results.
For the financial year to March 31, the utility posted revenue of GBP644.6 million, up 1.2% from GBP636.7 million the year before, but pretax profit was GBP132.1 million, down 32% from GBP193.1 million.
In addition, Pennon said it has acquired Bristol Water Holdings for an equity value of GBP425 million and enterprise value of GBP814 million from iCon Infrastructure and Itochu Corp.
Pennon also announced a return of capital to shareholders, consisting of a special dividend of GBP1.5 billion - representing 355 pence per share - and a share buy-back programme of up to GBP0.4 billion.
As part of the special dividend, Pennon intends to consolidate its share capital on the basis of two new shares for every three existing shares.
"The effect of the share consolidation will be that the existing shares will be replaced by the new shares so as to reduce the number of shares in issue and reflect the amount of cash to be returned to shareholders, thus being economically neutral," the company explained.
Pennon declared a final dividend 14.97p, leading to an annual dividend of 21.74p, down from 43.77p. Pennon said the special dividend equates to GBP3.55 per share after the share consolidation, while the final dividend will equate to 22.46p and the full-year dividend 32.61p. Pennon also said it expects to increase its dividend base by 2.00p per share in financial 2022 to recognise the earnings accretion of the Bristol Water acquisition
Chief Executive Susan Davy said: "This has been a pivotal year for the group as we have repositioned Pennon to focus on driving sustainable growth in the UK water sector, building stability for the longer term, and recognising ongoing shareholder loyalty.
"We have ensured Pennon is well positioned for the future, reinvesting for growth, and retaining sufficient funds to drive further value. The acquisition of Bristol Water announced today, is the next step in the growth of the group, building on significant experience as a leader and consolidator in the industry."
Wall Street ended higher on Wednesday, with the Dow Jones Industrial Average up 0.1%, S&P 500 up 0.1%, and Nasdaq Composite up 0.2%.
"European and US futures are trading flat today as traders aren't sure [about] backing riskier assets after a lacklustre session on Wall Street yesterday. It seems like the markets are returning to their previous pattern of summer trading, which means a no broader return for the equity market during the summer months," said AvaTrade analyst Naeem Aslam.
The Japanese Nikkei 225 index closed up 0.4%. In China, the Shanghai Composite was up 0.5%, while the Hang Seng index in Hong Kong was down 0.4%. The S&P/ASX 200 in Sydney ended 0.6% higher.
The Chinese services sector saw softer expansion in May as it continued its trend of growth for the thirteenth consecutive month, data from IHS Markit showed.
The headline seasonally adjusted general services purchasing managers' index for China slipped to 55.1 points in May from April's four-month high of 56.3, but remained firmly above the neutral 50.0 level to signal a marked increase in activity. The reading has stayed above the 50.0 point mark for 13 consecutive months now.
Faring much worse, the Japanese services sector contracted sharply in May as tighter restrictions weighed on output and demand, according to survey results reported by IHS Markit. The seasonally adjusted Japan services business activity index fell sharply to 46.5 in May, from 49.5 in April.
The au Jibun Bank Japan composite purchasing managers' index - which measures combined output in the manufacturing and service sectors – fell to 48.8 in May from 51.0 in April, highlighting a renewed fall in private sector output. The decline was marginal, yet the quickest since February, Markit noted.
Ireland's service sector saw strong growth in May as pent-up demand was unleashed after Covid-19 restrictions were lightened, data from Markit showed.
The services business activity index increased sharply for the fourth successive month to 62.1 in May from to 57.7 in April. The pace of expansion was the strongest since March 2016, Markit said, and noted the index has trended at 54.8 since its inception in May 2000.
Still in the economic calendar on Thursday are services PMIs from Germany, the eurozone, UK and US at 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively. Also due in the US are ADP's job report at 1315 BST and jobless claims at 1330 BST.
The dollar was higher against major counterparts early Thursday. The pound was quoted at USD1.4153, down from USD1.4182 at the London equities close Wednesday.
The euro was priced at USD1.2198, down from USD1.2214. Against the yen, the dollar rose to JPY109.74 from JPY109.61.
Brent oil was quoted at USD71.83 a barrel early Thursday, up sharply from USD70.96 late Wednesday in London. Gold stood at USD1,902.77 an ounce, slightly lower from USD1,904.77.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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