LONDON MARKET OPEN: Babcock surges after promising no equity issue

Tue, 13th Apr 2021 08:52

(Alliance News) - Stock prices in London opened lower on Tuesday ahead of closely watched US inflation figures in the afternoon, while Babcock International shares rose sharply in response to overhaul plans.

The FTSE 100 index was down 5.49 points, or 0.1%, at 6,883.63. The mid-cap FTSE 250 was up 11.87 points, or 0.1%, at 22,165.42. The AIM All-Share index was up 0.1% at 1,235.37.

The Cboe UK 100 index was down 0.1% at 686.80. The Cboe 250 was up 0.1% at 19,805.30. The Cboe Small Companies was flat at 14,234.75.

In mainland Europe, the CAC 40 index in Paris and the DAX 30 in Frankfurt both were up 0.2%.

"Since the entire market has been caught up in the inflation/interest rates/bond yield fears that have intermittently taken hold this year, Tuesday's inflation figures are almost as relevant for Europe as they are for the US," said Spreadex analyst Connor Campbell.

In the FTSE 100, Just Eat Takeaway.com was up 2.1% after the Anglo-Dutch food delivery firm saw an improved performance in the first quarter of its current financial year, driven by strong growth in the UK and by its investment programme.

Just Eat said total orders in the first quarter grew by 79% year-on-year to 200.0 million, while delivery orders surged to 69.4 million from 23.3 million.

Delivery orders in the UK multiplied to 22.9 million in the first quarter of 2021 from 2.9 million a year earlier. New partnerships were signed with household brands such as Leon, Tortilla and Chipotle, as well as coffee chains Starbucks and Costa, adding to Just Eat's growing restaurant supply. In London, Just Eat Takeaway said it achieved triple-digit order growth.

Rival Deliveroo, which delivers its maiden trading update as a listed company on Thursday, was up 2.7% in a positive read-across.

JD Sports Fashion was up 1.3% after the athletic apparel retailer said it put in a resilient performance despite its high-street stores being closed for a majority of the year under lockdown restrictions.

For the financial year ended January 30, revenue was GBP6.17 billion, up 0.9% from GBP6.11 billion in financial 2020. JD posted pretax profit of GBP324.0 million, down 7.0% from GBP348.5 million.

On a headline basis, meaning before exceptional items, pretax profit was GBP421.3 million, down 4.0% from GBP438.8 million the year before. In January, JD Sports had said it expected to report headline pretax profit of at least GBP400 million.

JD declared a final and full-year dividend of 1.44 pence, up from 0.28p.

Aviva was up 0.8% after Investec raised the insurer to Buy from Add.

In the FTSE 250, Babcock International was the standout performer, up 23%. The defence contractor said it will not pay a dividend for financial 2021 or 2022 - but nor will it come to the market for more money - as it embarks on a thorough restructuring of the business.

Babcock said its financial 2021 results will include GBP1.7 billion in impairments and charges following a contract profitability and balance sheet review.

The company said it conducted the review as it moves to simplify the business and reduce layers in a restructuring.

Babcock said that, as part of its focus on building a strong balance sheet, the board will not be recommending a dividend for financial 2021 or 2022.

The company added that the aims to "return Babcock to strength without the need for an equity issue".

Among actions it intends to take instead, Babcock said it expects to raise GBP400 million from disposals over the next 12 months. Additionally, its restructuring plan is expected to save GBP40 million per year from a one-off expense of GBP40 million.

"The new management team intends to revive Babcock's balance sheet via non-core asset disposals and cost efficiencies 'without the need for an equity issue'. This is likely to positively surprise the market today," noted analysts at Jefferies.

In Asia, the Japanese Nikkei 225 index ended up 0.7% on Tuesday. In China, the Shanghai Composite closed down 0.5%, while the Hang Seng index in Hong Kong was up 0.4%. The S&P/ASX 200 in Sydney closed marginally lower, down 4.00 points.

The pound was quoted at USD1.3745 early Tuesday, flat from USD1.3746 at the London equities close on Monday, following the release of UK economic data.

The UK economy registered growth in February as the country adapted to life in lockdown conditions, according to the latest figures from the Office for National Statistics.

The UK economy grew 0.4% month-on-month in February, rebounding from 2.2% contraction in January, as UK government restrictions affecting economic activity remained broadly unchanged. The latest reading missed the the market forecast, cited by FXStreet, for 0.6% growth.

Analysts at FXPro commented: "The planned easing of restrictions in the coming weeks should soon turn the service sector into a booster for recovery rather than a hindrance. Relatively strong data might help the pound gain support after its slump against the dollar below 1.37 at the end of last week. Potentially, by the end of this week, GBP/USD could consolidate near 1.3850. A further rise would suggest a recovery of the British currency's bullish rally after a pullback since late February."

The euro was priced at USD1.1891 early Tuesday, lower from USD1.1911. Against the yen, the dollar was trading at JPY109.65, up from JPY109.40.

Brent oil was quoted at USD63.70 a barrel Tuesday morning, higher from USD63.58 at the London equities close on Monday. Gold was trading at USD1,724.55 an ounce, down from USD1,734.45.

Tuesday's economic calendar has US consumer price index readings at 1330 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com