LONDON MARKET MIDDAY: Primark-Owner AB Foods Leads Blue Chips Higher

LONDON (Alliance News) - London stocks were enjoying another rebound as the post-Brexit volatility in equities continued Thursday, with Associated British Foods leading gainers in the FTSE 100 at midday, as it upgraded its earnings guidance due to the benefit of a weaker pound.

AB Foods, which owns discount fashion retailer Primark, British Sugar and agriculture and consumer goods businesses, had been facing falling revenue across the business and a deteriorating profit margin in the retail business in recent times as it suffered from the effects of the weak euro against the dollar and pound.

However, at the time of its first-half results in April, AB Foods said foreign exchange translations may no longer have a "material impact" on its full year as sterling had started to weaken, and that adjusted earnings per share would only decline marginally.

On Thursday, AB Foods reiterated an improved outlook for the full year after the pound fell even further following the UK's decision to leave the European Union last month. This time, AB Foods said it expected to see no decline in adjusted earnings per share.

Numis said the fall in sterling will have a mixed impact on AB Foods. It will see translation benefits for British Sugar, which has a cost base in pounds and revenue in euros, but Primark purchases garments mainly in dollars and sells mainly in the pound and euro.

The stock traded up 8.9% at 2,777.00 pence, edging closer to its pre-referendum level of 2,829.00p.

The FTSE 100 traded up 1.2%, or 75.81 points, at 6,539.40. The blue-chip index was supported by a rally in housebuilders, real estate investment trusts, and banks, all of which had borne the brunt of post-referendum selling.

Conversely, gold miners were taking a break from their strong gains in the aftermath of the vote, with Randgold Resources down 2.6%, Fresnillo down 1.6%, and mid-cap Centamin down 4.3%.

Centamin said its gold production in the second quarter of 2016 was significantly ahead of the previous quarter and the previous year and said it will update its full-year production and cost guidance in its upcoming financial report.

Gold production in the second quarter of 2016 totalled 140,306 ounces of gold, with improved throughput rates and consistent productivity levels. All of that production comes from the company's mine in Egypt.

The FTSE 250 index was up 1.4% at 15,882.08, and the AIM All-Share was up 0.1% at 697.94.

In mainland Europe, the French CAC 40 index was up 1.6% and the German DAX 30 was up 1.1%.

Ahead of the open in New York, futures indicated the DJIA and Nasdaq 100 indices both will open up 0.1%, while the S&P 500 was set to open flat.

US equity indices closed higher on Wednesday, after the minutes from the last Federal Reserve portrayed a cautious tone, seemingly pushing back the next US interest rate hike. The minutes from the June 14-15 meeting suggested board members were increasingly worried about the outlook for the US economy, given the weak May nonfarm payrolls number and the possible consequences of Britain's vote on EU membership.

The focus now for the US will be on ADP employment, which is released at 1315 BST, ahead of Friday's US jobs report. The ADP figure, which measures the change in the number of employed people in the US, is expected to show an increase of 159,000 in June, compared to a 173,000 increase in May.

Elsewhere in the economic calendar, the minutes from the European Central Bank's June 2 policy meeting are released at 1230 BST. Initial and continuing jobless claims from the US are at 1330 BST. The National Institute of Economic and Social Research's UK GDP estimate is at 1500 BST, and the US Energy Information Administration's crude oil stocks are at 1600 BST.

Elsewhere in UK corporate news, Marks & Spencer Group traded down 1.2%, amongst the handful of fallers in the blue-chip index.

The food, clothing and homeware retailer said group sales in the 13 weeks ended July 2 grew by 1.3% on the same period the year before, as 4.0% growth in the food division offset an 8.3% decline in the clothing & home division.

M&S said its new Simply Food stores continued to perform ahead of its expectations, while clothing & home was hit by a "weak market". Clothing & home sales also suffered from the retailer's decision to run fewer price promotions, while lowering everyday prices.

Chief Executive Steve Rowe added: "While it is too early to quantify the implications of Brexit, we are confident that our strategic priorities and the actions we are taking remain the right ones to deliver results for our customers and our business."

NCC Group, up 7.6%, said its pretax profit for the year to the end of May was pulled lower by one-off charges, but underlying trading proved very strong and the information assurance group hiked its dividend payout.

Pretax profit for the year to May 31 was GBP9.4 million, down from GBP21.4 million a year earlier as the group booked an GBP18.9 million one-off charge after shutting down its Domain Services business.

Stripping out the one-off charge, adjusted earnings before interest, taxation, depreciation and amortisation for the year was GBP43.7 million, up 48% from GBP29.5 million a year prior.

NCC declared a final dividend of 3.15 pence, taking its total payout up 17% year-on-year to 4.65p. The stock traded up 11%.

Portmeirion Group was the worst performer in the AIM All-Share, down 23%. The homewares maker said profit in 2016 is set to be materially lower due to continued difficult trading conditions in Asia and a slowdown driven by the Brexit decision in the UK.

Portmeirion said total revenue for 2016 will be higher year-on-year, driven by the acquisition of home fragrance maker Wax Lyrical. But pretax profit for 2016 is set to be materially lower than the GBP8.6 million reported in 2015, due to a continued slowdown in sales for the company in Asia. In particular, Portmeirion said sales in South Korea have shown no signs of recovery and the performance of its distributor in India has been "extremely disappointing".

In addition, the company said it has seen negative effects on demand both in the lead up to and in the aftermath of the UK's vote to leave the European Union. The fall in sterling which accompanied the vote to leave has yet to translate into firm overseas orders, it added.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

Copyright 2016 Alliance News Limited. All Rights Reserved.