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LONDON BRIEFING: Melrose Industries suffers semi-conductor shortage

Tue, 5th Oct 2021 08:04

(Alliance News) - Melrose Industries on Tuesday reported "frustrating" computer chip shortages.

The industrial buy-improve-and-sell specialist said it is seeing improvement in its Aerospace end-markets, with revenue in the period up 16% on a year ago. Its performance is expected to improve further as the business continues restructuring.

However, Melrose did flag industry-wide supply problems hitting the Automotive and Powder Metallurgy divisions. While underlying demand is strong, the global semiconductor shortage has led to 'in month cancellations' from customers rising from a normal rate of around 1% to a current rate of 20% to 25%.

"Tightened supply of semi-conductors to the automotive industry are frustrating and difficult to plan for, but whilst they affect current trading, they don't impact long-term value, particularly as cash is well controlled and debt reduced," said Chief Executive Simon Peckham.

"We have made our businesses better, more flexible and resilient to deal with near term headwinds, and all our businesses are on track to achieve their margin targets assuming partial end-market recoveries."

Melrose shares were down 4.7% early Tuesday.

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



MARKETS



FTSE 100: marginally higher at 7,030.47



Hang Seng: up 0.3% at 24,097.91

Nikkei 225: closed down 2.2% at 27,822.12

DJIA: closed down 323.54 points, or 0.9%, at 34,002.92

S&P 500: closed down 56.58 points, or 1.3%, at 4,300.46

Nasdaq Composite: closed down 311.21 points, or 2.1%, at 14,255.48



EUR: down at USD1.1598 (USD1.1621)

GBP: soft at USD1.3599 (USD1.3605)

USD: up at JPY111.17 (JPY110.96)

Gold: down at USD1,758.83 per ounce (USD1,764.50)

Oil (Brent): down at USD81.42 a barrel (USD81.85)

(changes since previous London equities close)



ECONOMICS AND GENERAL



Tuesday's Key Economic Events still to come

China Golden Week continues. Financial markets closed in Shanghai; open in Hong Kong.

0955 CEST Germany services purchasing managers' index

1000 CEST EU eurozone services PMI

1100 CEST EU producer price index

0900 BST UK SMMT registration figures

0930 BST UK services PMI

0830 EDT US international trade in goods & services

0945 EDT US services PMI

1000 EDT US ISM Report on services PMI

1630 EDT US API weekly statistical bulletin



Ireland's private sector continued to post robust growth in September, survey results showed, led by the services economy, which finished its best quarter in over 15 years. The AIB Ireland services purchasing managers' index registered 63.7 points in September, unchanged from a month earlier and remaining well above the 50.0 no change mark. Over the three months to September, the services PMI's tally was 64.7 points, the best quarter since the second quarter of 2006. The composite PMI - a weighted average of the manufacturing and services scores - ticked down to 61.5 points in September from 62.6 in August. It was still a robust reading, representing the seventh successive month of growth. Figures on Friday had shown Ireland's manufacturing PMI fell to 60.3 points in September from August's score of 62.8.



BROKER RATING CHANGES



BARCLAYS RAISES PETROFAC PRICE TARGET TO 280 (140) PENCE - 'EQUAL WEIGHT'



INVESTEC RAISES VIRGIN MONEY TO 'BUY' ('HOLD') - TARGET 220 (215) PENCE



COMPANIES - FTSE 250



Greggs said it has managed to weather supply and staffing shortages and lifted its full-year outlook. The baker and retailer reported like-for-like sales growth of 3.5% on a two-years basis for the third quarter. It noted that growth was particularly strong in August and remained in positive territory in September, with the two-year growth rate 3.0% in the four weeks to October 2. And this growth was achieved despite staffing and supply chain disruption, it noted. "Greggs has not been immune to the well-publicised pressures on staffing and supply chains, and we have seen some disruption to the availability of labour and supply of ingredients and products in recent months," said Greggs. "Food input inflation pressures are also increasing; whilst we have short-term protection as a result of our forward buying positions we expect costs to increase towards the end of 2021 and into 2022." Nonetheless, its strong performance in the third quarter lends confidence for the full-year, and Gregg expects its annual result to be ahead of previous internal expectations. Greggs is on Tuesday hosting a capital markets day, at which it will unveil plans for 500 of its shops to be open until 8pm by the end of next year as part of a bid to double revenue to around GBP2.4 billion by 2026. It is in the process of re-establishing an ordinary dividend policy and sees potential for additional distributions in the near term, the company added.



Assura said it has been "extremely active" in its financial year to date, with its portfolio of primary care properties standing at 625 with an annualised rent roll worth GBP127.5 million. In the six months to September 30, the investor and developer added 27 properties to the portfolio for a total cost of GBP117 million, while completing 11 disposals for cash proceeds of GBP15 million. "Assura is proud to have invested over GBP1 billion into primary care properties since April 2017 and currently have a record development pipeline totalling GBP480 million," said Chief Executive Jonathan Murphy.



Great Portland Estates flagged its strongest quarterly rent collection since 2019 and unveiled the sale of a London property for GBP181.5 million. The FTSE 250-listed property investor reported GBP14.3 million of new annual rent signed in the quarter to September 30 and an improved period for rent collection, receiving 84% of all rents - its strongest quarterly performance since December 2019. It also reported the sale of 160 Old Street, London for GBP181.5 million to a fund advised by J.P. Morgan Global Alternatives. The property was sold by the Great Ropemaker Partnership - a joint venture between Great Portland and Ropemaker Properties Ltd, the property nominee of the BP Pension Fund - at a 5% premium to its March valuation.



COMPANIES - MAIN MARKET AND AIM



Hotel Chocolat reported a double-digit annual revenue increase and swing to profit, with results ahead of expectations. Revenue grew 21% to GBP164.6 million in the year to June 27 from GBP136.3 million the year before. It swung to a pretax profit of GBP7.8 million from a loss of GBP7.5 million. "This pleasing set of results primarily reflects the strong performance of the group's multichannel proposition and the group's fast-growing active customer database," the chocolatier and retailer said. It opted not to pay a dividend given opportunities to invest fur further growth, and plans to recommence payouts "when it is appropriate to do so". "The group has entered FY22 in a strong position, with an increased active customer base, and with multiple clear avenues for further growth, spanning product ranges, channels and territories, all of which are delivering encouraging progress. Since the period end the group has traded in line with the board's expectations," Hotel Chocolat said.



COMPANIES - GLOBAL



Facebook, Instagram and WhatsApp were back up and running after being shuttered by a global outage on Monday. The widespread disruption was blamed on a "faulty configuration change", with Facebook saying in a statement: "Our engineering teams have learned that configuration changes on the backbone routers that coordinate network traffic between our data centres caused issues that interrupted this communication. This disruption to network traffic had a cascading effect on the way our data centres communicate, bringing our services to a halt."



Tuesday's Shareholder Meetings

Joules Group PLC - AGM

Prospex Energy PLC - GM re director changes



By Tom Waite; thomaslwaite@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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