LONDON MARKET MIDDAY: Stocks rise; Olam chooses London for IPO

(Alliance News) - Stock prices in London were higher at midday on Friday as investors shrugged off concerns over higher inflation, while Singapore's Olam International chose London for the initial public offering of its food ingredients arm.

A jump in US producer prices on Thursday added to expectations the Federal Reserve will shift course and temper its economic stimulus, starting with a slowdown in its pace of bond buying.

The FTSE 100 index was up 29.00 points, or 0.4%, at 7,222.23. The flagship index was trading at its highest levels since February 2020 and was on track to end the week up 1.4%.

The mid-cap FTSE 250 index was up 36.64 points, or 0.2%, at 23,783.39. The AIM All-Share index was flat at 1,270.48.

The Cboe UK 100 index was up 0.3% at 719.40. The Cboe 250 was up 0.1% at 21,605.35, and the Cboe Small Companies down 0.3% at 15,507.34.

Analysts at ActivTrades said: "European shares are extending yesterday's gains amid a rising appetite for riskier assets ahead of the weekend. Even though the Delta variant keeps weighing on market sentiment in many regions like Asia, investors are optimistic about countries with more aggressive vaccination programs in place, such as Europe and the US. Apart from Madrid, all other European benchmarks are in green territory. Paris is even hovering towards all-time highs, with no sign of weakness so far."

In mainland Europe, the CAC 40 in Paris was up 0.3% at 6,905.01 - trading at its highest levels in 20 years and is within striking distance of the all-time high of 6,944.77.

The DAX 30 in Frankfurt breached 16,000 points for the first time, setting a fresh intraday high of 16,030.33.

Germany's flagship index was led by Adidas, which was up 2.5%. The sportswear maker late Thursday agreed to sell its ailing Reebok brand to the US's Authentic Brands in a EUR2.1 billion deal.

In the FTSE 250, Babcock International was the best performer, up 6.0%, after the defence outsourcer said it will sell subsidiary Frazer-Nash Consultancy to US science and technology company KBR for GBP293 million.

Babcock said the sale forms part of its disposal programme, which aims to generate at least GBP400 million over the next twelve months.

Babcock said Frazer-Nash Consultancy is an "outstanding business" which provides independent advice to its customers and has operated largely independently from Babcock. Cash from the sale will be used to reduce net debt.

The worst mid-cap faller was Avon Protection, down 23% after the personal protection systems maker cut revenue guidance due to order delays.

Delays and widening lead times has forced the company, formerly known as Avon Rubber, to lower its revenue guidance to between USD245 million and USD260 million for financial 2021, which ends on September 30. Avon Protection reported revenue of GBP169.0 million, or around USD233.3 million, in financial 2020.

Due to slower shipment, inventory build-up and delayed customer payments, cash conversion is expected to be around 50% for financial 2021, compared to 85% in financial 2020, the company said.

Though Avon Protection anticipates receipt of delayed orders over the coming months, supply chain issues and the "tight" US labour market are expected to continue into the next financial year.

As such, the company also lowered its revenue guidance to between USD320 million to USD340 million for financial 2022. For now, Avon Protection has maintained its guidance for financial 2023.

Elsewhere in London, Thungela Resources was up 6.2%. The coal producer posted a significant increase in interim earnings as it reported for the first time as an independent company, having been spun off from Anglo American in June.

The stock was up 4.9% in Johannesburg.

For the six months to June 30, revenue jumped to ZAR10.05 billion, about GBP490 million, from ZAR1.66 billion last year, and it swung to a profit of ZAR351 million from a ZAR122 million loss. Its operating profit surged to ZAR1.89 billion from ZAR52 million.

Thungela Resources said it was cash positive and well positioned after the spin-off and expects positive adjusted operating free cash flow for rest of 2021. As a result, it expects to declare maiden dividend at 2021 annual results at 30% of adjusted operating free cash flow.

Anglo American was down 0.5% in London and marginally lower in Johannesburg.

On AIM, Best of the Best was down 47% after the car and lifestyle competition company warned that full-year sales and profit are set to plunge.

Sales in the 15 weeks ended this past Sunday were down 15% from the previous 15-week period ended April 30, the company said.

As a result, profit in the current financial year, which ends April 30, 2022, is expected to fall 57%. In financial 2021, the company made GBP14.1 million in pretax profit on GBP45.7 million in revenue.

Meanwhile, Singapore-based agricultural firm Olam International said it has chosen London for the IPO of its food ingredients business.

Olam is in the process of demerging its two units - Olam Food Ingredients and Olam Global Agri. OFI supplies ingredients and products made from cocoa, coffee, nuts, spices, and dairy. The IPO is planned for the first half of 2022 and will be joined by a secondary listing on the Singapore Stock Exchange.

OFI is planning to raise about GBP2 billion, Reuters reported on Friday, citing sources familiar with the matter.

Olam International closed up 3.5% in Singapore, giving it a market capitalisation of SGD5.55 billion, about GBP2.96 billion.

Mark Lynch, at Oghma Partners, said: "The listing of Olam ingredients in the UK is a vote of confidence in the London equity market and reflects, amongst other things, its deep pool of liquidity. Assuming that the company does qualify as a UK food manufacturer, it provides a significant boost to the sector that has lost many former FTSE companies over the last twenty years including, Cadbury Schweppes, United Biscuits, Hillsdown Holdings, Albert Fisher, Northern Foods and Unigate.

"Importantly, it also offers investors a route into the changing world of food ingredients which is seeing an expansion in its opportunities through the growth in demand for plant based foods, plus expanding 'ag tech' and 'food tech' applications and the focus of consumers and clients on traceability and sustainability."

The pound was quoted at USD1.3795 at midday on Friday, down from USD1.3829 at the London equities close Thursday.

The euro was priced at USD1.1748, up from USD1.1729. Against the Japanese yen, the dollar was trading at JPY110.25, lower from JPY110.35.

Brent oil was quoted at USD71.25 a barrel Friday at midday, little changed from USD71.22 late Thursday. Gold was trading at USD1,760.20 an ounce, higher against USD1,750.13.

US stock market futures were pointed to a higher open after setting more record highs on Thursday.

The Dow Jones Industrial Average was called up 0.3%, the S&P 500 up 0.1% and the Nasdaq Composite up 0.1%.

On the corporate front, Walt Disney Co will be in focus after the entertainment firm late Thursday reported third-quarter revenue that topped consensus and said streaming subscriber numbers jumped.

In the three months to July 3, revenue rose 45% year-on-year to USD17.02 billion, from USD11.78 billion. The figure topped CNN-cited consensus of USD16.8 billion. Disney swung to a pretax profit of USD995 million from a USD4.84 billion loss a year earlier.

Disney booked USD5.05 billion in restructuring and impairment costs in the third quarter of the last financial year.

The stock was up 5.4% in pre-market trade in New York on Friday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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