Serco Share News (SRP)

(Alliance News) - London stocks were mixed at the start of the new week, the FTSE 100 treading water after a mixed Asia session but the FTSE 250 edging up on share price gains for CMC Markets and Cineworld.

The FTSE 100 index was down just 2.21 points at 7,345.70 early Monday. The mid-cap FTSE 250 index was up 41.95 points, or 0.2%, at 23,599.41. The AIM All-Share index was up 1.65 points, or 0.1%, at 1,254.36.

The Cboe UK 100 index was flat at 728.14. The Cboe 250 was up 0.1% at 21,048.50, and the Cboe Small Companies up 0.2% at 15,588.11.

In mainland Europe, the CAC 40 in Paris was up 0.1% while the DAX 40 in Frankfurt was broadly unchanged early Monday.

"European traders are looking at the Asian session and picking up the momentum from there...caution is the keyword that comes to mind," said Naeem Aslam, chief market analyst at AvaTrade.

London's FTSE 100 was lower despite a rise by its largest constituent. Royal Dutch Shell climbed on plans to streamline its dual 'A' and 'B' share structure into a single one.

'A' shares were up 1.8% in early trade and 'B' shares up 1.2%.

The single share structure will allow for an acceleration in distributions by way of share buybacks, reduce risk for shareholders, and let Shell manage its portfolio with greater flexibility, the company said. Shell also will align its tax residence to the UK.

Shell will retain its current share listings and will still be eligible for FTSE UK indices. One change, however, will be its name.

Shell explained: "Carrying the Royal designation has been a source of immense pride and honour for Shell for more than 130 years. However, the company anticipates it will no longer meet the conditions for using the designation following the proposed change."

Cybersecurity firms Avast and Darktrace topped the FTSE 100 in opening dealings, the former up 6.3% and the latter rising 2.0%. NortonLifeLock said said the US merger control condition for its takeover of Avast has been satisfied.

Surging to the top of the FTSE 250 was CMC Markets, rallying 11% as it confirmed it is mulling a split of its leveraged and non-leveraged divisions.

After a report over the weekend from Sky News, CMC said it is in "very early stages" of separating its "two strong underlying businesses", which offer contracts-for-difference and shares, respectively. It expects to start its review of such a move before the end of the year and complete it by June 2022.

"Both businesses have benefited from significant investment and each have strong growth prospects in sizeable markets with excellent competitive positions," said CMC.

CMC did warn that as talks are exploratory at this stage, a managed separation of the businesses is not guaranteed.

Cineworld rose 5.3%. The cinema operator reported positive cash flow for October as it has seen strong demand since reopening, driven by an "excellent" film slate.

Box office and concession revenue neared pre-virus levels, standing at 90% of 2019's result in October on a constant currency basis, improving from just 50% in July. The UK & Ireland was the standout region last month, with revenue exceeding 2019 levels.

The cinema operator pointed to a strong movie line-up, including the latest James Bond film and 'Dune'. Further, there are still major blockbusters to be released in 2021, including 'Ghostbusters: Afterlife' and 'Spider-Man: No Way Home'.

The revenue performance has been underpinned by cost control, Cineworld said, though the firm did note some inflationary pressures. Nonetheless, it generated positive cash flow in October, an "important milestone in the company's recovery".

Outsourcer Serco, up 2.3%, upgraded guidance after stronger-than-expected trading in recent months.

It now expects revenue for 2021 to be around GBP4.4 billion, boosted from its previous forecast of GBP4.3 billion and further ahead of 2020's GBP3.9 billion. Underlying trading profit is seen around GBP225 million, again lifted from prior guidance of GBP200 million and soaring past 2020's GBP163 million.

However, it did caution that most the factors behind its improved performance are unlikely to repeat.

It pointed to volumes of work related to Covid-19 support in the UK and Australia, which were higher, and continued for longer, than anticipated. Some contracts across the business performed better than expected, such as immigration-related contracts again in the UK and Australia.

Looking ahead, Serco expects 2022 guidance to be broadly in line with current company-compiled analyst consensus at around GBP4.2 billion for revenue and GBP196 million underlying trading profit.

In Asia on Monday, the Japanese Nikkei 225 index closed up 0.6%. In China, the Shanghai Composite ended down 0.2%, while the Hang Seng index in Hong Kong ended up 0.3%. The S&P/ASX 200 in Sydney closed up 0.4%.

Stocks in mainland China eased after data showed the economy showed signs of stabilising in October, but the outlook remains uncertain.

Industrial production grew 3.5% on-year last month, up from September, said the National Bureau of Statistics, as China worked to boost coal production and ease the energy shortage. A survey of economists by Bloomberg News tipped a 3.0% expansion. However, NBS spokesman Fu Linghui cautioned that the "international environment remains complex and severe" with many uncertainties.

Retail sales rose 4.9% on-year, according to the latest data, picking up pace from September and far exceeding forecasts for 3.7%. But observers warn that this could be bogged down by recent virus containment measures, reimposed following a fresh outbreak in mid-October that has spread to several regions.

Meanwhile, Japan's economy shrank far more than expected in the three months to September, as a surge in virus cases hit spending and supply chain issues hampered business.

The world's third-largest economy shrank 0.8% quarter-on-quarter, much worse than the 0.2% economists had forecast. The contraction was driven in part by a 1.2% dip in household consumption that tracked the imposition of a virus state of emergency over the summer, when Japan saw its worst-ever Covid surge.

Against the yen, the dollar was higher at JPY113.91, versus JPY113.88 late Friday in London.

Sterling was quoted at USD1.3419 early Monday, firm from USD1.3413 at the London equities close on Friday. The euro traded at USD1.1455, firm on USD1.1450 late Friday.

Gold was quoted at USD1,863.03 an ounce early Monday, higher than USD1,861.52 on Friday. Brent oil was trading at USD81.85 a barrel, down from USD82.26 late Friday.

By Lucy Heming; lucyheming@alliancenews.com

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