LONDON MARKET OPEN: Barratt Stirs Housebuilders; Pets At Home Jumps

Fri, 08th Jan 2021 08:32

(Alliance News) - Stock prices in London opened higher Friday with the FTSE 100 getting a boost from share price gains for pest control firm Rentokil Initial and large-cap housebuilders following a promising trading update from Barratt Developments.

Barratt said it will resume dividend payments when declaring its interim results in February. Rentokil said its full-year outturn will be at the upper end of market expectations.

"Sentiment in equity markets remains relatively positive with hopes of more US fiscal stimulus from the incoming government seemingly providing support," analysts at Lloyds Bank said.

The FTSE 100 index was up 15.51 points, or 0.2%, at 6,872.47 early Friday, continuing its strong start to 2021. London's leading stock barometer is up 6.4% in the new year.

The mid-cap FTSE 250 index gained 160.09 points, or 0.8%, to 21,169.95. The AIM All-Share index was up 0.2% at 1,177.00.

The Cboe UK 100 index was down marginally at 684.22. The Cboe 250 was 0.5% higher at 18,405.27, but the Cboe Small Companies edged fractionally lower to 12,081.80.

In Paris, the CAC 40 was up 0.7%, while Frankfurt's DAX 30 was 0.8% higher.

In London, Barratt said its first-half performance was "excellent", though its sales rate has now moderated from previous highs, as the housebuilder expected.

For the first half ended December 31, Barratt's sales rate climbed 12% to 0.77 net private reservations per active outlet per week. The housebuilder has been boosted by the stamp duty holiday and by the UK government sparing the housing sector from recent Covid-19 restrictions.

Barratt's home completions rose 9.2% annually to 9,077 and total forward sales at December 31 were 14% higher year-on-year at 13,588 homes at a value of GBP3.21 billion, which up 19% from 12 months ago.

"The board continues to recognise the importance of dividends to all shareholders. As announced at our full-year results, the board plans to implement a dividend policy based on a full-year dividend cover of 2.5 times. Subject to no material change in the operating environment, the board now expects to agree the resumption of dividends with the interim results on 4 February 2021," Barratt added.

Housebuilders will be in focus when Halifax releases its latest monthly UK house price data at 0830 GMT.

Ahead of the data, London-listed housebuilders were in the green. Barratt grew 3.1%, Taylor Wimpey rose 1.8% and Persimmon was up 1.7%.

Rentokil was also one of London's best large-cap performers, up 2.3%.

Rentokil said its annual adjusted pretax before amortisation will be at the upper end of the GBP292 million to GBP337 million market forecast range.

"Trading across both our Hygiene and Pest Control categories has continued to be strong in Q4 - primarily reflecting continued strong sales from one-off disinfection service," Rentokil said.

The company on Friday unveiled another acquisition, it said it has bought Tampa, Florida-based residential pest control company Environmental Pest Service. EPS had annualised revenue of USD80 million in 2020, Rentokil said.

For the whole of 2020, Rentokil forked out GBP180 million on acquisitions. The figure does not include the buy of EPS, whose price tag was not disclosed.

Among mid-caps, retailers were in focus. Marks & Spencer posted a sales fall but hailed its "robust" Christmas trading. Pets at Home reported strong life-for-like sales growth during December.

The animal products retailer said that in December alone, like-for-like revenue grew in the "high-teens".

Pets at Home shares rose 14%, the best mid-cap performer early on Friday.

Promisingly, the company now expects annual pretax profit to be GBP77 million ahead of its previous guidance of GBP93.2 million, "including the previously announced repayment" of GBP28.9 million in business rates relief.

M&S rose 1.8% and said its Christmas trading was "robust" though a nationwide lockdown in England proved costly, causing revenue in its Clothing & Home unit to tumble more than 40% in November alone.

For the whole of the retailer's third quarter ended December 26, group revenue fell 8.4% yearly to GBP2.77 billion. In the UK arm alone, revenue fell 8.2% to GBP2.53 billion and was down 7.6% on a like-for-like basis.

By unit, it was a familiar story for the mid-cap retailer. The Food arm saw 2.2% annual third-quarter revenue growth to GBP1.74 billion. On a like-for-like basis, revenue in the unit rose 2.6%.

At the Clothing & Home arm, third-quarter revenue was down 25% year-on-year at GBP787 million, falling 24% like-for-like.

However, broker Shore Capital Markets took heart from M&S's update.

"M&S beat our expectations for Q3 FY2021 trading in both C&H and Food categories, which is pleasing," Shore commented.

Elsewhere in London, pub operator Marston's fell 0.7% but said its joint-venture with Carlsberg UK has helped boost its liquidity during a time of prolonged closures due to Covid-19.

"Despite the ongoing temporary disruption to trading, we have significant liquidity following the completion of the joint venture," Marston's said.

The company said it has bank facility headroom of GBP176 million. It added that 97% of its staff have been furloughed and its weekly cash burn during lockodwn is between GBP3 million and GBP4 million.

Marston's also noted the deal it struck with Welsh brewer SA Brain to operate its portfolio of 156 pubs in Wales through leased and management contract agreements.

The company expects all its pubs to be closed until March "at the earliest" as the UK's vaccination rollout progresses.

On Thursday, UK Prime Minister Boris Johnson Thursday pledged an unprecedented national effort to roll out Covid-19 vaccines across the UK. He said "if all goes well" then hundreds of thousands of vaccines can be administered per day by January 15.

The pound was quoted at USD1.3568 early Friday morning, up marginally from USD1.3565 at the London equities close on Thursday.

The euro stood at USD1.2228, down from USD1.2274 at the European equities close on Thursday. Against the yen, the dollar was trading at JPY103.98, improved from JPY103.80.

The economic events calendar on Friday has eurozone unemployment figures at 1000 GMT before key US jobs report for December at 1330 GMT.

Figures are expected to show 71,000 jobs were added in December, down from 245,000 in November.

"We look for a rise in employment of 150,000, which would be the smallest gain since April but there is a risk that the outturn may be even lower. Indeed, ADP estimates that private sector employment fell by 123,000 in December," Lloyds Bank analysts added.

US futures were higher ahead of the news. The Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all closed at record highs on Thursday.

Tensions in the US calmed after outgoing President Donald Trump pledged an orderly transition of power to President-elect Joe Biden following ugly and violent scenes in the Washington earlier this week.

Brent oil fetched USD54.74 a barrel early Friday, up from USD54.51 at the London equities close on Thursday.

Gold was quoted at USD1,888.86 an ounce, down from USD1,914.89.

By Eric Cunha; ericcunha@alliancenews.com