LONDON MARKET PRE-OPEN: ASOS posts stellar earnings amid online boom

(Alliance News) - Stocks in London are seen opening higher on Thursday as investors digested the latest meeting minutes from the US Federal Reserve, which reaffirmed the central bank's commitment to supporting the economy.

In early company news, speciality chemicals company Johnson Matthey said it is conducting a strategic review of its Health business. Online fashion retailer ASOS reported strong first half results, while brick and mortar retailer Dunelm posted a drop in quarterly sales.

IG futures indicate the FTSE 100 index is to open 28.68 points higher at 6,914.00. The blue-chip index closed up 61.77 points, or 0.9%, at 6,885.32 Wednesday.

Johnson Matthey said its financial 2021 operating performance is expected to be around the top end of market expectations.

The speciality chemicals company said following disruption from Covid-19, its second half was materially stronger. Johnson Matthey attributed the performance to increased activity in autos and other key end markets and actions taken to transform its operations, including tight cost management. Further, its strong operational performance has enabled continued investment into strategic growth projects.

Johnson Matthey said it continues to review its portfolio to focus on areas to maximise value for shareholders. As part of that process, the company is undertaking a strategic review of its Health business.

In the Clean Air division, Johnson Matthey said there was a strong recovery in demand across all regions towards the end of the first half following a period of disruption caused by the coronavirus pandemic.

Johnson Matthey said strength continued through the second half, with global auto production better than previous expectations. As a result, the Clean Air unit's full year operating performance is expected to be only moderately below the prior year.

"We expect a significant improvement in margin in the second half to above 13% and approaching pre-Covid-19 levels, driven by an improvement in volumes and early benefits from our transformation programme. In our final quarter, there was limited impact on automotive OEM customer production levels from the shortage of semi-conductor chips," the company said.

ASOS said it delivered a strong performance in the first half of the financial year as the fast-fashion retailer continued to benefit from the online shopping craze during the Covid-19 pandemic.

For the six months to February 28, revenue increased 24% to GBP1.98 billion from GBP1.60 billion at the same time the year before and pretax profit more than tripled to GBP106.4 million from GBP30.1 million.

ASOS said first half retail sales alone jumped 24% to GBP1.92 billion from GBP1.55 billion as its customer base increased by 1.5 million to 24.9 million during six months.

In addition, ASOS said the integration of Arcadia's Topshop brands was progressing to plan as part of the strategy to further develop an eclectic range of products.

Looking ahead, ASOS said expectations for the full-year increased in line with the first half performance and the outlook for the second half remains unchanged. It expects the second half to be cash generative driven by underlying performance, continued capital expenditure discipline and supported by the normal working capital cycle.

"We are delighted with our exceptional first-half performance and proud of the work our teams have put in to achieve this. These record results, which include robust growth in sales, customer numbers and profitability, demonstrate the significant progress we have made against all of our strategic priorities and the strength of our execution capability. The swift integration of the Topshop brands and the impressive early customer engagement is also especially pleasing," said Chief Executive Officer Nick Beighton.

Dunelm Group reported a drop in third quarter revenue as stores were closed for most of the period due to lockdown restrictions.

For the third quarter to March 27, total sales were GBP236.6 million, down 17% from GBP284.4 million at the same time last year. However digital sales - which includes click & collect and home delivery - surged to make up 92.4% of total sales from 22.5% a year before.

Looking ahead, Dunelm said: "We are anticipating a strong consumer response to the lifting of the restrictions; our stores are well stocked and ready for re-opening and our colleagues are excited to welcome customers back. Given the unusual circumstances, there is still a range of potential outcomes for 2021. However, assuming that the majority of our stores open as expected on April 12 and there are no further Covid-19 restrictions this financial year, we expect to end the year modestly ahead of the top of the current range of analyst expectations."

London stocks are poised for a higher start on Thursday after minutes from the mid-March meet of the Federal Open Market Committee showed the US central bank said it would continue to maintain an accommodative stance until its inflation outcomes are achieved.

The policy-setting FOMC left its benchmark rate unchanged in the range of 0% to 0.25%, as widely expected. Following the two-day meeting, the Fed signalled that interest rates will remain at near zero through until 2023.

The minutes from the March 17 meeting of the FOMC noted: "Members agreed that the Federal Reserve was committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum-employment and price-stability goals."

The members also reaffirmed the central bank would aim to achieve inflation moderately above 2% for some time so that inflation averages 2% over time and longer-term inflation expectations remain well anchored at 2%.

In the US on Wednesday, Wall Street ended mostly higher, with the Dow Jones Industrial Average up 0.1%, S&P 500 up 0.2%, but the Nasdaq Composite closed 0.2% lower.

"US markets traded in a fairly modest fashion with the S&P500 eking out a record close as investors adopted a cautious approach with stocks trading close to record highs. This fairly benign and optimistic environment is expected to see a positive open for markets here in Europe as investors absorb last night's Fed minutes," said CMC Markets analyst Michael Hewson.

In Asia, the Japanese Nikkei 225 index ended down 0.1%. In China, the Shanghai Composite is up 0.3%, while the Hang Seng index in Hong Kong is up 0.7%.

Meanwhile, Prime Minister Boris Johnson has sought to reassure the public the Oxford/AstraZeneca vaccine is safe after UK regulators said there was a possible link between the jab and "extremely rare" blood clots.

The UK Medicines & Healthcare products Regulatory Agency said the benefits still outweigh the risks overall but while it has not concluded that the vaccine causes rare brain clots, it said the link is getting firmer.

Johnson sought to boost public confidence in the vaccine as he said the changes in its use would not force a change in the road map out of lockdown.

The pound was quoted at USD1.3765 early Thursday, up from USD1.3747 at the London equities close on Wednesday.

The euro was priced at USD1.1872, down from USD1.1891. Against the yen, the dollar was trading at JPY109.70, flat from JPY109.72.

Brent oil was quoted at USD62.72 a barrel on Thursday morning, up from USD62.08 late Wednesday in London. Gold was trading at USD1,743.74 an ounce, marginally higher against USD1,739.40.

In Thursday's international economic calendar, there is UK Markit construction PMI at 0930 BST and eurozone producer prices at 1000 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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