LONDON MARKET OPEN: WH Smith sinks on downbeat profit outlook

(Alliance News) - Stocks in London opened higher on Wednesday following gains in Asian equity markets, while WH Smith fell to the bottom of the FTSE 250 after warning profit in the year ahead would be at the lower end of market expectations.

The FTSE 100 index was up 49.92 points, or 0.7%, at 7,170.11. The mid-cap FTSE 250 index was up 91.53 points, or 0.4%, at 24,194.19. The AIM All-Share index was up 0.4% at 1,297.72.

The Cboe UK 100 index was up 0.8% at 713.41. The Cboe 250 was up 0.4% at 21,977.52, and the Cboe Small Companies was up 0.1% at 15,574.81.

In mainland Europe, the CAC 40 stock index in Paris was up 0.9%, while the DAX 30 in Frankfurt was up 0.7%.

In the FTSE 100, property companies Land Securities and British Land were up 1.7% and 1.6% respectively after Morgan Stanley raised the stocks to Equal Weight from Underweight.

In the FTSE 250, Tyman was the best performer, up 6.6%, after Berenberg raised the door and window components supplier to Buy from Hold.

888 Holdings was up 1.8% after the gambling firm said it delivered a record first half revenue and profit, made strong strategic progress, and increased its full year expectations.

For the six months ended June 30, revenue was up 39% to USD528.4 million from USD379.1 million last year and pretax profit up 14% to USD57.9 million from USD50.9 million.

888 declared an interim dividend of 4.5 US cents, up from 3.2 cents paid out at the same time last year.

Looking ahead, 888 said it was confident that revenue and adjusted earnings before interest, tax, depreciation, and amortisation in the full year will be slightly ahead of its prior expectations.

At the other end of the midcaps, WH Smith was the worst performer, down 5.2%, after the books and stationery retailer cautioned on the year ahead amid an "uncertain" travel rebound path.

WH Smith, which has outposts in train stations and airports as well as the high street, said second half group revenue was 65% of the same period two years ago. This marked an improvement from the first half figure of 60%. For the eight weeks to August 28, revenue showed a further improvement, standing at 71% of the levels reported two years ago.

For its travel unit, second half revenue stood at 38% of 2019's levels. UK travel passenger numbers remain "significantly" down on 2019 levels, the company said, but it is seeing a gradual recovery.

However, it warned on the financial year ahead.

WH Smith said: "As previously stated, we remain confident in revenues returning to pre-Covid levels in the next two to three years. While there will be a return to good levels of profitability in the year ending August 2022, the trajectory of the recovery in travel remains uncertain. This combined with the previously announced accounting finance charges relating to the successful convertible bond issue on April 29, means that we currently anticipate the levels of profitability for the year ending August 2022 will be at the lower end of market expectations."

The Japanese Nikkei 225 index closed up 1.3%. In China, the Shanghai Composite ended up 0.6%, while the Hang Seng index in Hong Kong was up 0.5%. The S&P/ASX 200 ended down 0.1%.

Chinese manufacturers signalled a slight deterioration in business conditions in August, driven by a drop in output and new work, data from Caixin and IHS Markit showed.

The headline seasonally adjusted purchasing managers' index posted below the neutral 50.0 level, at 49.2 points in August, down from 50.3 points in July, to signal a deterioration in the health of the sector. Though only marginal, it was the first time that business conditions had worsened since April 2020, with the index dipping to its lowest level for a year-and-a-half.

Meanwhile, improvement in operating conditions in the Japanese manufacturing sector softened slightly in August, figures from au Jibun Bank and IHS Markit showed.

The headline au Jibun Bank Japan manufacturing purchasing managers' index dipped to 52.7 points in August from 53.0 points in July. This indicated a softer improvement in the health of the sector, reflecting the continued impact of the Covid-19 pandemic.

Against the yen, the dollar was trading at JPY110.30, up from JPY110.01.

The pound was quoted at USD1.3755 early Wednesday, flat from USD1.3753 at the London equities close Tuesday. The euro was priced at USD1.1800, flat from USD1.1802.

Brent oil was quoted at USD72.09 a barrel Wednesday morning, down from USD72.12 late Tuesday, ahead of a virtual OPEC meeting. Gold was trading at USD1,812.44 an ounce, up from USD1,805.13.

Wednesday's economic calendar has a raft of manufacturing PMI data from the eurozone at 0900 BST, the UK at 0930 BST and the US at 1445 BST. In addition, EU unemployment data is released at 1000 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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