LONDON MARKET OPEN: Melrose rises on GBP500 million share buyback

(Alliance News) - Stock prices in London opened mostly lower on Wednesday, while Melrose Industries bucked the down trend by announcing a substantial cash return to shareholders.

The FTSE 100 index was down 8.64 points, or 0.1%, at 7,590.45. The mid-cap FTSE 250 index was down 21.83 points, or 0.1%, at 20,377.60. The AIM All-Share index was up 2.97 points, or 0.3%, at 975.96.

The Cboe UK 100 index was down 0.1% at 757.04. The Cboe 250 was flat at 18,097.62, and the Cboe Small Companies was up 0.1% at 14,773.25.

In mainland Europe, the CAC 40 in Paris was down 0.2% and the DAX 40 in Frankfurt was down 0.3%.

In the FTSE 100, Melrose Industries was the best performer, up 7.1%, after the industrial turnaround specialist launched a GBP500 million share buyback.

Melrose on Monday said it had agreed to offload its Ergotron business to funds managed by Sterling Group, in a USD650 million deal.

Back in March, Melrose had delayed a promised shareholder return, pointing to market uncertainty due to the war in Ukraine, saying a future cash return was being kept under review.

Following the business disposal and its "ongoing strong financial position", Melrose said it was satisfied that it had "sufficient certainty" in order to begin a buyback programme.

"Having agreed the sale of Ergotron, we are now in a position to again distribute capital to our shareholders and have chosen the quickest way to start to achieve that goal. We will continue to keep under review the appropriate capital structure of Melrose as we position for continuing success," said Chief Executive Simon Peckham.

Conversely, Aveva was down 1.2% after the industrial software provider warned on revenue growth for financial 2023.

For the financial year that ended March 31, revenue rose by 45% to GBP1.19 billion from GBP820.4 million the year before, but Aveva swung to a pretax loss of GBP18.6 million from a GBP34.2 million profit.

Annual adjusted earnings before interest and tax was GBP365.1 million, up 2.9% from GBP354.7 million last year.

Looking ahead, Aveva said adjusted Ebit for financial 2023 will be hurt by some additional costs. These include wage inflation due to "very competitive" software labour market conditions. Aveva said revenue growth is expected to be lower in financial 2023 than in 2022 on an organic constant currency basis, and its adjusted Ebit margin is expected to narrow, before resuming growth in 2024.

In the FTSE 250, Wizz Air was down 2.5%, after the eastern Europe-focused airline posted a widened annual loss but pledged extra resources to help deal with the chaotic travel disruption seen at airports.

For the financial year ended March 31, revenue was EUR1.66 billion, up from EUR739.0 million in financial 2021, but its pretax loss widened to EUR641.5 million from EUR566.5 million.

Looking ahead, Wizz Air said it sees strong consumer demand for the summer, but expects an operating loss for the first quarter of financial 2023.

"The industry is witnessing supply-chain issues across airports, including in our network. Shortages of staff in air traffic control, security and other parts of the supply-chain are impacting airlines, our employees and our customers directly. We are deploying extra resources to minimize disruptions and urge all other stakeholders to do the same, having customers' best interests always in mind," said Chief Executive Jozsef Varadi.

On AIM, Keywords Studios was up 1.5% after the video game industry services company agreed to buy US game development studio Forgotten Empires for up to USD32.5 million.

Keywords will pay USD15.8 million in cash initially, plus a mix of cash and shares based on performance in the first year. Ohio-based Forgotten Empires had USD7.2 million in revenue in 2021. It has 53 game developers and worked on games such as Age of Empires and Age of Mythology.

In Asia on Wednesday, the Nikkei 225 index in Tokyo closed up 1.0%. In China, the Shanghai Composite closed up 0.7%, while the Hang Seng index in Hong Kong was up 2.0%. The S&P/ASX 200 in Sydney ended up 0.4%.

The pound was quoted at USD1.2567 early Wednesday, down slightly from USD1.2576 at the London equities close Tuesday.

The euro was priced at USD1.0691, unmoved from USD1.0692. Against the yen, the dollar was trading at JPY133.25 in London, higher against JPY132.57.

Brent oil was quoted at USD121.02 a barrel Wednesday morning, up from USD120.11 late Tuesday. Gold stood at USD1,849.45 an ounce, down from USD1,850.60.

Wednesday's economic calendar has eurozone GDP at 1000 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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