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LONDON BRIEFING: AstraZeneca plots "new era of growth"; SSP confident

Tue, 21st May 2024 07:52

(Alliance News) - London's FTSE 100 is called to open lower on Tuesday, following a mixed close in New York overnight, and tepid trade in Asia.

Hawkish comments from some Federal Reserve central bankers on Monday kept a lid on sentiment. The Fed should keep interest rates at their current elevated levels for longer than previously expected due to disappointing recent inflation data, a senior bank official said.

Speaking at a conference in the US state of Florida on Monday, Fed vice chair for supervision Michael Barr said the bank had made "tremendous progress" in bringing inflation down from its 2022 peak, while unemployment – the other leg of its dual mandate – had remained low.

In early UK corporate news, AstraZeneca set an ambitious end of decade revenue target, Kingfisher backed its yearly guidance, and SSP expects a boost from the upcoming Olympic Games and UEFA European Football Championship.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: called down 0.5% at 8,386.70

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Hang Seng: down 2.3% at 19,189.46

Nikkei 225: down 0.3% at 38,946.93

S&P/ASX 200: down 0.2% at 7,851.70

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DJIA: closed down 0.5% at 38,806.77

S&P 500: closed up 0.1% at 5,308.13

Nasdaq Composite: closed up 0.7% at 16,794.88

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EUR: flat at USD1.0862 (USD1.0862)

GBP: up at USD1.2716 (USD1.2702)

USD: up at JPY156.21 (JPY156.14)

GOLD: down at USD2,415.55 per ounce (USD2,423.50)

(Brent): down at USD83.18 a barrel (USD83.65)

(changes since previous London equities close)

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ECONOMICS

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Tuesday's key economic events still to come:

10:00 BST eurozone trade balance

10:00 BST eurozone construction output

18:00 BST UK Bank of England Governor Andrew Bailey speaks

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The UK opposition Labour Party will build a new generation of towns in a bid to tackle the housing crisis, its deputy leader Angela Rayner will say as she attempts to curry favour with the housebuilding sector. The deputy Labour leader has said the "foundations of our past" are the inspiration for the proposals, pointing to her party's record in government following the Second World War, when towns like Stevenage and Basildon were built. Speaking at the UK Real Estate Investment and Infrastructure Forum, a property industry conference, Rayner is expected to say Labour will back "developers who deliver" if it wins power. Rayner, who is also the shadow housing secretary, will tell the conference a Labour government would set high standards on design, quality, affordable homes, green spaces and infrastructure.

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BROKER RATING CHANGES

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Barclays cuts Burberry price target to 1,090 (1,340) pence - 'equal-weight'

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Berenberg reinitiates Ascential with 'buy' - price target 395 pence

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COMPANIES - FTSE 100

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AstraZeneca set out its ambition to achieve USD80 billion in annual revenue by the end of the decade, as the pharmaceutical firm looks to bolster its oncology offering, its rare disease portfolio and launch 20 new treatments. The revenue target would represent a 75% jump from the USD45.81 billion it achieved in 2023. Chief Executive Officer Pascal Soriot said ahead of an investor day: "Today AstraZeneca announces a new era of growth. In 2023 we delivered the ambitious USD45 billion revenue goal set a decade ago. With the exciting growth of our innovative pipeline, which has the potential to transform millions of lives, we are now aiming for USD80 billion by 2030. We are planning to launch 20 new medicines by 2030, many with the potential to generate more than USD5 billion in peak year revenues. The breadth of our portfolio together with continued investment in innovation supports sustained growth well past the end of the decade."

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DIY-focused retailer Kingfisher maintained annual guidance, as it reported first-quarter sales growth in the UK & Ireland region, though its outturn in France was weaker. Group sales fell 0.3% to GBP3.26 billion on-year in the three months to April 30. At constant currency, sales rose 0.3%, however. In the UK & Ireland, where its brands include B&Q and Screwfix, sales rose 2.6% on a reported basis to GBP1.63 billion. In France, however, sales declined 8.1% to GBP1.03 billion. In France, the firm operates the Castorama and Brico Depot offerings. Both performed "broadly in line with weaker market". Overall, Kingfisher noted the largest sales growth came from seasonal items. These account for 19% of overall sales. Sales of seasonal items rose 1.9% on a like-for-like year-on-year. Sales of big-ticket items slumped 6.3% like-for-like. Sales of core items, which generates the bulk of Kingfisher's revenue, declined 0.3% like-for-like. So far in the second-quarter, sales are down 2.5% on-year on a like-for-like basis. The firm still expects adjusted pretax profit for the full-year between GBP490 million and GBP550 million.

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COMPANIES - FTSE 250

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SSP Group reported improved half-year revenue and set out a promising outlook, expecting a summer of sport to support footfall in airports and travel stations. The operator of food and beverage outlets in travel locations said revenue in the half-year to March 31 rose 15% to GBP1.52 billion from GBP1.32 billion a year prior. Pretax profit, however, fell 19% to GBP12.8 million from GBP15.8 million. Hurting its bottom line, finance income declined 21% to GBP8.9 million, while finance expenses rose 17% to GBP54.4 million. SSP declared an interim dividend of 1.2 pence per share. It did not pay a first-half dividend a year prior. It had returned to the dividend list with a final dividend for the previous financial year. That was its first dividend since the onset of the pandemic. CEO Patrick Coveney said: "Trading momentum has continued into the second half, and we are confident in delivering on our expectations for the full year. In particular, we are well set to capitalise on what we anticipate will be a Summer of strong demand in all our markets - including Continental Europe, where the Olympics and the European Championships will help boost footfall in airports and stations. We will also start to realise the benefit of our latest value-creating acquisition in Australia and new market entries in New Zealand and Indonesia."

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Automotive engineering firm Dowlais expects weaker annual revenue year-on-year, as it noted "increased volatility of production schedules for certain battery electric vehicles platforms". Dowlais said it achieved adjusted revenue of GBP1.9 billion in the four months to April 30, a decline of 1.9% on-year. Its Automotive division suffered a 3.3% decline, though its Powder Metallurgy had a "strong start", achieving growth of 4.0%. Dowlais added: "Overall, the group has started the year broadly in line with expectations despite the increased volatility of production schedules for certain BEV platforms which have impacted the ePowertrain product group. While current industry forecasts expect an improvement in the second half, after a weak first half, some uncertainty remains. Consequently, the group anticipates revenue for 2024 to be slightly below prior year at constant currency, with performance more weighted to the second half." In 2023, it achieved adjusted revenue of GBP5.49 billion and statutory revenue of GBP4.86 billion. The adjusted figure includes its share of revenue of equity accounted investments.

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OTHER COMPANIES

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XP Power has rejected a takeover approach from New York-listed Advanced Energy Industries. Advanced Energy Industries hit out at the power control systems maker XP Power's "lack of engagement". Advanced Energy Industries is a maker of precision power conversion, measurement, and control solutions. AEI said it has made three all-cash takeover approaches, each slightly higher than the last. The first offer in October valued XP Power's equity at GBP339 million, a second roughly two weeks later in November value it at GBP369 million and the most recent, earlier this month, valued it at GBP468 million. Including debt, the latest proposal has a total value of GBP571 million. AEI said: "Each of these proposals has been at a significant premium to the share price at the time of each respective proposal, but the board of XP Power unanimously rejected each of these proposals. Given the lack of engagement from the board of XP Power, Advanced Energy believes that XP Power's shareholders should be made aware of the latest proposal, which represents a compelling and highly attractive opportunity."

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THG investor Kelso said it plans to vote against the re-election of the e-commerce firm's Chair Charles Allen. Investor Kelso said it believes THG trades "at a significant discount to its sum of the parts value". It could eat into this "discount" by moving to the Premium List of the London Stock Exchange Main Market. It is currently on the Standard List. Kelso also advised THG to clarify its "future structure to avoid the current conglomerate discount". THG added: "As a result of the lack of action and clarity on these matters, Kelso intends to vote against resolution 5, the re-election of the chair, whom we believe should be leading strategy, at the upcoming THG AGM."

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By Eric Cunha, Alliance News news editor

Comments and questions to newsroom@alliancenews.com

Copyright 2024 Alliance News Ltd. All Rights Reserved.

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