LONDON MARKET OPEN: Glaxo down as Unilever refuses to up consumer bid

(Alliance News) - The FTSE 100 was failing to build on recent gains early Thursday, with GlaxoSmithKline dragging on the index amid disappointment that Unilever has refused to raise its bid for the GSK consumer unit.

The FTSE 100 index was down 8.11 points, or 0.1%, at 7,581.55 early Thursday. The mid-cap FTSE 250 index was up 24.50 points, or 0.1%, at 22,679.52. The AIM All-Share index was down just 0.19 point at 1,149.30.

The Cboe UK 100 index was down 0.1% at 752.68. The Cboe 250 was up 0.1% at 20,333.79, and the Cboe Small Companies down 0.1% at 15,771.02.

In mainland Europe, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt was down 0.2% early Thursday.

GlaxoSmithKline was at the bottom of London's FTSE 100 index, down 1.9%, after Unilever late Wednesday said it will not lift its bid for GlaxoSmithKline's consumer unit above the current GBP50 billion offer.

The FTSE 100-listed consumer goods firm said it has seen a set of financial assumptions on the consumer healthcare business, outlined by current owners GSK. Unilever said the numbers do not "change our view on fundamental value".

Unilever on Wednesday added it is "committed to maintaining strict financial discipline" and ensuring any acquisitions can create value for shareholders.

Unilever shares were up 1.2% early Thursday. The stock had tumbled 7.0% on Monday and a further 4.0% on Tuesday over worries it could end up paying too much for the GSK consumer unit.

Associated British Foods fell 1.6%. The firm said its outlook remains unchanged as input cost inflation has been offset by sales growth and strong margins at fast-fashion retailer Primark.

Total sales for the 16 weeks to January 8 stood at GBP5.57 billion, up 16% on a year ago. Driving the growth was AB Foods' retail arm, which houses Primark, where sales jumped 32% to GBP2.67 billion.

Grocery, Sugar, Agriculture and Ingredients revenue rose 5% in total to GBP2.90 billion.

"All businesses have experienced inflationary pressures in raw materials, commodities, supply chain and energy. Margins in Grocery and Ingredients were impacted where sales price actions have lagged the effects of input cost inflation," said AB Foods.

In Retail, however, operating profit margin was ahead of expectations and is expected to be over 10% at the half-year. Inflationary pressures were broadly mitigated by a favourable US dollar exchange rate and a reduction in store operating costs and overheads. AB Foods added that supply chain pressures have alleviated somewhat.

Taking all of its units into consideration, AB Foods said its outlook is unchanged.

At the top of the FTSE 100 was Burberry, up 2.1% and extending Wednesday's 6.3% gain on an upbeat trading update.

In the FTSE 250, Premier Foods rose 4.9% after lifting profit forecasts following a better-than-expected financial third quarter.

Sales in the 13 weeks to January 1 were up down 1.8% on a year ago but up 7.0% on a two-year basis. The firm said it significant outperformed the market and its Mr Kipling cake brand had its "biggest ever" Christmas.

"The strong momentum from the first half of the year continued into the key Q3 trading period, with our brands growing by 11.3% compared to two years ago. This was well ahead of the market across all our categories and resulted in very encouraging share gains," said Chief Executive Alex Whitehouse.

After "three strong quarters of trading", Premier Foods lifted its full-year profit expectations. It expects trading profit of at least GBP145 million and adjusted pretax profit of at least GBP125 million. It noted that current consensus for trading profit is GBP140.7 million and for adjusted pretax profit GBP119.3 million.

Spirent Communications was up 4.7% after saying it expects to delivery full-year adjusted operating profit slightly ahead of market consensus, which it placed as USD116 million.

Deliveroo rose 4.3% on a strong finish to 2021, with fourth-quarter orders up 42%.

Gross transaction value in the final three months of 2021 stood at GBP1.73 billion, up 33% on a year before. A 42% rise in orders to 80.8 million helped to offset a 7% dip in gross transaction value per order to GBP21.4.

In the UK, gross transaction value rose 35% to GBP945 million, with orders up 41% at 40.4 million but gross transaction value per order down 4% at GBP23.4.

For 2021 as a whole, gross transaction value rose 67% to GBP6.62 billion on a reported basis. At constant currencies, gross transaction value rose 70%, at the top end of guidance for 60% to 70% growth.

In Asia on Thursday, the Japanese Nikkei 225 index ended up 1.1%. In China, the Shanghai Composite ended down 0.1%, while the Hang Seng index in Hong Kong soared 3.4%. The S&P/ASX 200 in Sydney rose 0.1%.

China further reduced bank lending costs Thursday in the latest move to boost its stuttering economy, providing some much-needed support to the country's beleaguered developers.

The People's Bank of China said it lowered the one-year loan prime rate to 3.7% from 3.8% in December.

It had reduced the LPR – which guides how much interest commercial banks charge to corporate borrowers – in December, for the first time in 20 months, as the economy was threatened by the real estate crisis and coronavirus flare-ups.

Property firm shares and bonds surged on the fresh rate cut.

"The rate cut together with the global easing in yields and stories that Chinese regulators are considering measures to support struggling developers have supported Asian equity sentiment this morning," said Danske Bank.

Sterling was quoted at USD1.3631 early Thursday, flat on USD1.3630 at the London equities close on Wednesday.

The euro traded at USD1.1356, firming on USD1.1345 late Wednesday. Against the yen, the dollar rose to JPY114.36 versus JPY114.25.

Gold was quoted at USD1,839.91 an ounce early Thursday, flat versus USD1,840.20 on Wednesday. Brent oil was trading at USD87.78 a barrel, easing from USD88.68 late Wednesday.

The economic events calendar on Thursday has eurozone inflation readings at 1000 GMT and the latest US jobless claims numbers at 1330 GMT.

By Lucy Heming; lucyheming@alliancenews.com

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