LONDON MARKET OPEN: Aveva rises on positive trading, growth targets

(Alliance News) - Stock prices in London opened sharply higher on Thursday as the second half of the year got underway, while Aveva Group led the large-caps as it set out new financial targets.

The FTSE 100 index was up 67.59 points, or 1.0%, at 7,105.21. The mid-cap FTSE 250 index was up 226.19 points, or 1.0%, at 22,602.21. The AIM All-Share index was up 6.97 points, or 0.6%, at 1,255.28.

The Cboe UK 100 index was up 0.8% at 707.50. The Cboe 250 was up 0.7% at 20,275.73, and the Cboe Small Companies was flat at 15,367.10.

In Paris, the CAC 40 was up 0.7%, while Frankfurt's DAX 30 up 0.9%.

"European stock markets have made a solid start to the second half of the year, making up for yesterday's losses," said Markets.com analyst Neil Wilson.

"European and global stock markets have enjoyed a strong run-up in the last six months as a combination of ultra-loose monetary policy, fiscal largesse and a vaccine-enabled reopening of economies allowed investors to look ahead to a brighter future for earnings and growth. Now there are risks on the horizon, but the market remains biased to the upside," Wilson added.

In the FTSE 100, Aveva Group was the best performer, up 3.9%, after the industrial software provider, which is holding its capital markets day event Thursday, outlined new financial targets.

Aveva said it has had a good start to financial 2022, achieving 10% revenue growth in the first two months of the financial year on an organic constant currency basis.

In addition, Aveva set new five-year financial targets to the year ending March 31, 2026. Aveva is targeting a revenue compound annual growth rate of around 10% over the period.

The company said its revenue growth will be supported by revenue synergies relating to its OSIsoft acquisition, which are expected to be at least USD100 million in 2026. Aveva also targets an adjusted operating profit margin of at least 35% in 2026.

Associated British Foods was up 3.5% after the company reported a rise in third quarter revenue, driven by growth from its Primark clothing chain.

For the three months that ended June 19, total revenue at constant currency was up 47% to GBP3.65 billion from the same time last year. Third-quarter revenue in the Grocery division was up 2% to GBP2.71 billion, up 10% in the Agriculture arm to GBP391 million, and up 21% in the Sugar unit to GBP406 million.

AB Foods said like-for-like sales for the quarter at Primark were 3% ahead of the comparable period two years ago when sales were at pre-Covid levels.

The Ingredients unit saw revenue edge up 3% from a year ago in the third quarter to GBP376 million, while revenue in the Retail arm, which houses Primark, tripled from a year ago to GBP1.6 billion in with the reopening of all stores and the opening of seven new stores.

AB Foods said its forecast for full year sales at Primark has "increased accordingly" and adjusted operating profit is now expected to be broadly in line with last year.

"Primark is back with a bang after restrictions were eased and has taken over the heavy lifting which other parts of the group had assumed during the various lockdowns," said interactive investor's Richard Hunter. "Optimism surrounding the stock continues unabated, driven by recovery and growth prospects in both the UK and overseas retail businesses and with the insurance of a diverse overall offering. As such, the market consensus still points to a strong buy."

JD Sports Fashion was up 3.0% after the athletic apparel retailer bowed to shareholder pressure over its corporate governance, splitting its chair and CEO roles.

JD Sports said trading in the immediate period after the reopening of non-essential shops in England was encouraging in the UK as both existing and new consumers to the company's product ranges. Consistent with other retailers, it said, store footfall remains fragile with online traffic at elevated levels.

Looking ahead, JD said it is on track to deliver pretax profit before exceptional items for the financial year ending in January 2022 at an increased level of "no less than" GBP550 million. It posted pretax profit before exceptional items of GBP421.3 million in financial 2021.

JD Sports, which has been under fire over its corporate governance practices, said it will divide the current roles of executive chair and CEO before its next annual general meeting and a comprehensive process will commence shortly.

Standard Chartered was up 1.7% after Credit Suisse raised the emerging markets-focused bank to Neutral from Underperform.

Legal & General was up 1.5% after Credit Suisse double upgraded the 185-year-old insurer to Outperform from Underperform.

At the other end of the large-caps, B&M European Value Retail was the worst performer, down 2.8%, after the stock went ex-dividend meaning new buyers no longer qualify for the latest payout.

The Japanese Nikkei 225 index closed down 0.3% on Thursday. In China, the Shanghai Composite finished down 0.1%, while markets in Hong Kong were closed for Special Administrative Region Establishment Day holiday. The S&P/ASX 200 in Sydney ended down 0.7%.

The Chinese manufacturing sector expanded at a weaker pace in June, with firms recording slower increases in both output and new orders, survey results from IHS Markit showed.

The headline seasonally adjusted purchasing managers' index – a composite indicator designed to provide a single-figure snapshot of operating conditions in the manufacturing economy – edged down to 51.3 points in June from 52.0 in May. This figure is still above the 50.0 point mark, with anything above denoting expansion.

The pound was quoted at USD1.3828 early Thursday, up from USD1.3812 at the London equities close Wednesday.

The euro was priced at USD1.1850, marginally lower from USD1.1856. Against the yen, the dollar was trading at JPY111.22, up from JPY110.94.

Brent oil was quoted at USD74.95 a barrel Thursday morning, down from USD75.02 at the London equities close Wednesday.

The OPEC+ group of oil-producing countries are to meet Thursday via videoconference and are expected to agree to boost output in August to meet demand and limit recent price rises.

The cost of crude oil has surged back to levels last seen in October 2018, which would normally support arguments in favour of boosting production.

India, the world's third-largest consumer of crude, has urged OPEC+ to phase out its current regime of cuts and allow prices to fall as inflation pressure threatens to hobble economic recovery.

Gold was trading at USD1,777.00, up from USD1,764.86 late Wednesday in London.

The economic calendar Thursday has manufacturing PMIs from Germany, the eurozone and UK at 0855 BST, 0900 BST and 0930 BST respectively, with the US Markit PMI print at 1445 BST and the ISM report at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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