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(Alliance News) -Â The FTSE 100 started Tuesday's session in the green, led by share price gains for contract caterer Compass.
At the bottom of London's large-cap index was Rolls-Royce as it guided to a free cash outflow of around GBP2 billion for 2021.
The FTSE 100 index was up 25.75 points, or 0.4%, at 6,664.60 early Tuesday. The mid-cap FTSE 250 index was up 27.84 points, or 0.4%, at 6,666.69. The AIM All-Share index was down 0.1% at 1,197.40.
The Cboe UK 100 index was up 0.5% at 662.84. The Cboe 250 was flat at 17,685.04, and the Cboe Small Companies down 0.1% at 12,213.66.
In mainland Europe, the CAC 40 in Paris was up 0.5% while the DAX 30 in Frankfurt was up 0.8% early Tuesday.
Helping the internationally-exposed FTSE 100 edge up on Tuesday was a weaker pound.
The pound was on the back foot after data showed the UK unemployment rate for the three months to November came in at 5.0%, up from 4.9% in the three months to October but beating consensus, according to FXStreet, of a steeper rise to 5.1%.
Early estimates for December indicate that the number of payrolled employees fell by 2.7% compared with a year ago, marking a fall of 793,000 employees, the ONS said. Since February - being the month before the coronavirus pandemic gripped the UK - 828,000 fewer people were in payrolled employment.
Sterling was quoted at USD1.3620 early Tuesday, down from USD1.3655 at the London equities close on Monday.
The euro was firm early Tuesday, at USD1.2131 versus USD1.2125 late Monday. Against the yen, the dollar was quoted at JPY103.79 versus JPY103.81.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.0%. In China, the Shanghai Composite ended down 1.5%, while the Hang Seng index in Hong Kong closed down 2.6%.
Gold was quoted at USD1,855.02 an ounce early Tuesday, higher than USD1,848.02 at the London equities close on Monday. Brent oil was trading at USD55.71 a barrel, rising from USD55.50 late Monday.
Compass was the top performer in the FTSE 100, up 2.9% after Exane BNP raised the contract caterer to Neutral from Underperform.
At the bottom of the index was Rolls-Royce Holdings, sinking 8.3% after saying new coronavirus strains and the tighter travel restrictions introduced in their wake is creating short-term uncertainty.
Trading in December was broadly in line with expectations across all business units, the jet engine maker said, and there was "good progress" on its restructuring programme. Full-year free cash outflow was in line with previous guidance, the firm added.
While continued progress on vaccine roll-outs is encouraging for the medium-term recovery of air traffic and economic activity, new virus variants are creating uncertainty in the near-term.
"Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cash flows in 2021," said Rolls-Royce.
The FTSE 100 constituent said its current forecasts indicate free cash outflow in the region of GBP2 billion in 2021. This is based on widebody engine flying hours for this year at around 55% of 2019 levels, compared to a base case of 70% presented in October.
"We continue to expect to turn cash flow positive at some point during the second half, reflecting our forecasted profile of flying hours as they recover from today's low base," the company said.
Richard Hunter, head of markets at interactive investor, commented: "Travel stocks remain in retreat, with variants of Covid-19 unsettling investors, as the possibility of a rapid return to some kind of normality is brought into question."
British Airways parent IAG was down 3.8% in early trade while easyJet fell 3.0%. The two stocks are down 43% and 50%, respectively, over the past 12 months.
"For the likes of Rolls-Royce, heavily dependent on the return of air travel, the ongoing cash burn remains an issue," Hunter continued. "The company has strengthened its balance sheet and has access to ample liquidity, but the immediate strategy is nonetheless based on a relatively rapid resumption of flying hours."
JD Sports fell 1.4% as it confirmed it is mulling an equity placing.
Sky News on Monday reported the sportswear retailer was in talks over an around GBP400 million share sale to fund its expansion. JD confirmed Tuesday it is exploring additional funding options with a view to "increasing its flexibility to invest in future strategic opportunities", and this may involve a non pre-emptive equity placing. The company didn't put a figure on the potential raise.
In the FTSE 250, Crest Nicholson rose 2.7%. The housebuilder beat its own profit guidance and set out plans to reinstate its dividend.
Revenue for the financial year to October 31 was GBP677.9 million, down from GBP1.09 billion the year before due to Covid-19 disruption.
The company swung to a pretax loss of GBP13.5 million versus a profit of GBP102.7 million the year prior. Adjusted pretax profit of GBP45.9 million, though down from GBP121.1 million, was ahead of Crest's GBP35 million to GBP45 million guidance range.
Crest said it has entered the new year with a strong forward order book and "enhanced" balance sheet. It had net cash of GBP142.2 million on October 31, up from GBP37.2 million a year before and ahead of its November guidance.
"Looking forward, through 2021 and 2022, the next phase of Crest Nicholson's recovery will be improving operating margins to be in line with industry peers. Gross profit margins in 2021 will continue to be impacted by some of our more complex legacy sites and we will also need to invest the necessary capital to complete these. However, the group still expects to deliver strong profit growth and cash flow generation," the company said, adding that this backdrop supports the reinstatement of its dividend.
Crest plans to reinstate its dividend at two and a half times cover, effective from its half-year results.
By Lucy Heming;Â lucyheming@alliancenews.com
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