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(Alliance News) - Stock prices in London are seen opening ever-so-slightly higher, falling short of the more convincing gains seen in Asia, with investors wary ahead of the latest Bank of England interest rate decision.
The BoE reveals its latest policy decision at midday. It is expected to lift the bank rate by 50 basis points to 1.75%, the largest rate hike since 1995.
IG futures indicate the FTSE 100 index is to open 5.4 points, 0.1%, higher at 7,451.08. The blue-chip index added 36.57 points, or 0.5%, at 7,445.68 on Wednesday.
In early UK corporate news, retailer Next, outsourcer Serco, and soft drinks bottler Coca-Cola Europacific Partners all lifted annual guidance. Takeover tilts to acquire private hospital firm Mediclinic and transport operator Go-Ahead were raised. Both accepted.
Next lifted profit guidance after second-quarter sales came in ahead of forecasts.
Full-price sales for the second quarter that ended July 30 rose 4.5% year-on-year, slowing from a 22% climb in the first quarter, but still topping expectations. Compared to pre-Covid times, second-quarter full-price sales were 26% higher.
Next said full price sales were GBP50 million ahead of guidance.
"In part, we believe this over-performance has been the result of unusually warm and dry weather in June and July. A marked return to formal dressing, perhaps driven by pent-up demand for social events, has also played to the strengths of the Next brand," it said.
Next lifted annual pretax profit guidance by GBP10 million to a new outlook of GBP860 million, which would be a 4.5% rise from GBP823.1 million in financial 2022.
Next added: "Sales in the first half of the year have been dominated by a sharp reversal of last year's lockdown trends. Sales in retail stores recovered, while online growth appears to have reverted back to its longer term trajectory. Many product trends have also returned to pre-pandemic norms. Lockdown winners such as home and sportswear retreated, while formalwear returned to favour. As anticipated, online returns rates and surplus stock also reverted to pre-lockdown levels."
Serco also raised guidance. Revenue and profit in the first half of 2022 increased. The outsourcer also upped its dividend.
"We did much better in the first half than we expected in January, and as a consequence also expect to do better than we originally anticipated in the full year," Chief Executive Rupert Soames said.
Revenue inched up 0.5% to GBP2.18 billion from GBP2.17 billion. Pretax profit was up 10% to GBP114.0 million from GBP103.7 million. Serco lifted its payout by 18% to 0.94 pence per share from 0.80p.
Serco now expects underlying trading profit of around GBP230 million. It had previously forecast GBP225 million.
However, Serco cautioned: "Second-half profit is expected to be lower than the first six months due to our Test & Trace work having ended, usual seasonality on some contracts including our CMS healthcare eligibility contract in the US, lower volumes on our immigration services contract in Australia, above-budget pay increases and one-off payments to non-management staff. The first-half second-half split of profits in 2022 is expected to be similar to 2021."
Coca-Cola Europacific said it now expects yearly pro-forma comparative revenue growth in the 11% to 13% range, lifted from previous 8% to 10% guidance. Operating profit is to climb by between 9% and 11%, and not 6% and 9% as previously guided.
CEO Damian Gammell said: "Given our strong first-half, we are raising revenue, operating profit and free cash flow guidance for FY22. This demonstrates the strength of our business and ability to deliver continued shareholder value."
In the six months to July 1, revenue jumped 40% to EUR8.28 billion from EUR5.92 billion. Pretax profit almost doubled, jumping to EUR898 million from EUR455 million.
Hikma Pharmaceuticals lowered guidance, however.
It said revenue in the first half of 2022 inched down 0.2% year-on-year to USD1.21 billion from USD1.22 billion. Pretax profit fell by a third to USD215 million from USD319 million.
Hikma's outlook cut came in its Generics arm. It now guides for annual revenue there between USD650 million and USD675 million, down from the previous USD710 million to USD750 million range. The unit's core operating margin will land between 15% and 16%, down from 20%.
Hikma blamed this on the "persistent challenges of the US generics market".
Elsewhere, Mediclinic backed a consortium's takeover offer, which values the hospital chain's share capital at GBP3.7 billion. On an enterprise value basis, including debt, it values it at GBP6.1 billion.
SAS Shipping Agencies Services and Remgro will pay 504p per Mediclinic share. The consortium made the latest proposal in July. Mediclinic at the time said it would be "minded" to recommend a bid of that sum to its shareholders.
Mediclinic in July said it had received three further takeover offers from the consortium, after it rejected the its first offer in June.
Mediclinic shares closed at 486p on Wednesday, giving it a market capitalisation of GBP3.58 billion.
Go-Ahead received a new takeover offer from a consortium consisting of Kinetic Holding and Globalvia Inversiones. They had already agreed on a 1,500p per share takeover.
The offer has been raised to 1,550p. The bid comprises of a 1,450p cash element and a special dividend of 100p per share. It values Go-Ahead at GBP669 million. The new offer is recommended unanimously by the Go-Ahead board and also has support from a list of institutional investors in Go-Ahead, including abrdn, Jupiter, M&G and Schroders.
Go-Ahead shares closed at 1,508.00p on Wednesday, valuing it at GBP651.1 million.
Former suitor Kelsian in July had confirmed it would not make an offer to buy Go-Ahead. The bus and ferry operator in Australia, Singapore and the UK, explained that since it first announced a possible offer for Go-Ahead on June 14, its own share price in Sydney had fallen due to volatile equity markets.
"This transaction will create a leading global, multi-modal, mass transit platform and unlock value for all stakeholders. Given our track record and experience we will provide long term capital and expertise to support the acceleration of Go-Ahead's strategy and transition to net zero," Kinetic CEO Michael Sewards and Globalvia CEO Javier Fortea said.
Markets in Asia-Pacific were largely higher on Thursday. In Tokyo, the Nikkei 225 added 0.7%, while the S&P/ASX 200 in Sydney closed flat. In China, Shanghai Composite climbed 0.5% and the Hang Seng Index in Hong Kong surged 1.6%.
Equities in Asia took heart from a strong finish in New York overnight, where stocks were bolstered by better-than-expected US data.
Economic activity in the US services sector grew in July for the 26th month in a row, according to the Institute for Supply Management on Wednesday. The ISM services PMI increased to 56.7 points in July from 55.3 in June, indicating the strongest expansion in the services sector for three months. The latest print beat market forecasts, cited by FXStreet, of 53.5 points.
The Dow Jones Industrial Average closed up 1.3% on Wednesday, the S&P 500 added 1.6% and the Nasdaq Composite surged 2.6%.
The pound was quoted at USD1.2134 early Thursday in London, up from USD1.2110 late Wednesday. The euro stood at USD1.0160, up from USD1.0125. Against the yen, the dollar was trading at JPY134.20, down slightly from JPY134.30.
Brent oil was quoted at USD96.66 a barrel early Thursday UK time, down from USD98.50 at the London equities close on Wednesday. Gold stood at USD1,770.19 an ounce, up strongly from USD1,757.20.
The economic events calendar on Thursday has construction PMI readings from France, Germany and the eurozone at 0830 BST before the UK at 0930 BST.
By Eric Cunha; ericcunha@alliancenews.com
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