LONDON MARKET PRE-OPEN: Bunzl raises dividend after strong results

(Alliance News) - Stock prices in London are seen opening higher on Tuesday after being closed on Monday for the long holiday weekend, as investors responded positively to cautious signals from the US Federal Reserve.

In early company news, drugmaker GlaxoSmithKline said it has started late-stage trials for a Covid-19 vaccine. Distribution firm Bunzl reported positive interim results and made further acquisitions. IT services provider Computacenter issued an upbeat trading statement.

IG futures indicate the FTSE 100 index is to open 20.29 points higher at 7,168.30. The blue-chip index closed up 23.03 points, or 0.3%, at 7,148.01 on Friday.

GlaxoSmithKline and its South Korean partner SK bioscience said they have started a phase 3 clinical study of SK's Covid-19 vaccine candidate GBP510 after positive interim phase 1 and 2 results.

Glaxo said the randomised, active-controlled global trial will enrol around 4,000 participants from a range of countries and will aim to evaluate GBP510's safety and immunogenicity compared the AstraZeneca/Oxford University Covid-19 vaccine. The study will be one of the first global phase 3 trials to compare two different Covid-19 vaccine candidates.

GBP510 is a self-assembled nanoparticle vaccine candidate targeting the receptor binding domain of the SARS-CoV-2 Spike protein, combined with Glaxo's pandemic adjuvant technology, Glaxo explained.

Separately, Glaxo is working with mRNA specialist, CureVac, to jointly develop next generation, optimised mRNA vaccines for Covid-19 with the potential to address multiple emerging variants in one vaccine.

Results from the phase 3 study are expected in the first half of 2022 after which, subject to positive results and regulatory approval, the vaccine is expected to be supplied at scale worldwide through the COVAX facility. No safety concerns have been identified to date in the ongoing study, Glaxo added.

Bunzl reported a rise in first half profit which the distribution firm attributed to the resilience of its diversified portfolio, despite pointing to an easing of Covid-19 related sales.

During the pandemic, Bunzl has benefitted from distributing Covid-19 personal protective equipment to businesses.

For the six months that ended June 30, revenue was GBP4.87 billion, up 0.4% from GBP4.85 billion last year and pretax profit was GBP275.7 million, up 12% from GBP245.4 million.

Bunzl declared an interim dividend of 16.2 pence, up 2.5% from 15.8p paid out last year.

Separately, Bunzl said it completed two further acquisitions. In July, Bunzl completed the acquisition of Proin Pinilla, the largest independent safety distributor to end-users in Spain, with a focus on personal protection equipment and specialising in workwear. The business generated GBP15 million of revenue in 2020, it said. In addition, Bunzl completed the acquisition of Arprosa in July, which also distributes PPE to end-users in Spain. The business generated GBP7 million of revenue in 2020.

Chief Executive Officer Frank van Zanten said: "One of the key strengths of our decentralised business is the ability to respond to local situations, enabling a consistent focus on delivering the right solutions for our customers. Whilst we are now seeing a reversal in Covid-19 related sales, this has been more than offset by the recovery experienced in our base business over the first half. The group's performance over the first half and the excellent underlying revenue growth we have delivered over a two year period demonstrate the resilience of our diversified portfolio.

"Our outlook for 2021 is unchanged and we continue to expect, at constant exchange rates, underlying revenue to be moderately higher than the pre-pandemic period in 2019. Looking ahead, we expect future growth to be supported by a recovery in the base business and economic activity, enhanced hygiene trends and our differentiated offering of sustainable and responsible solutions."

Computacenter said trading has continued to be robust across all of of its geographies in July and August to date.

The computer services provider said the "exceptionally good performance" in the second half of 2020 makes a more difficult comparison than it experienced in the first half of this year.

However, even with a flat performance in the second half of 2021 compared to the second half of last year, the company said it would finish the year 10% ahead of current market expectations for the group's full year 2021 adjusted pretax profit. It posted adjusted pretax profit of GBP200.5 million in 2020.

"Whilst visibility in our business is never perfect, given the momentum in the business, a substantial order backlog, the successful acquisitions and a strong forecast we will endeavour to beat last year's second half performance, not just match it," the company said.

In the US on Monday, Wall Street ended mostly higher, with the Dow Jones Industrial Average down 0.2%, S&P 500 up 0.4% and Nasdaq Composite up 0.9%.

Last week, Fed Chair Jerome Powell said the central bank could be ready to slow the pace of its colossal bond-buying program this year, but would be patient about raising the benchmark interest rate while watching for the impact of the Delta variant and the labour market's recovery.

The Japanese Nikkei 225 index closed up 1.1%. In China, the Shanghai Composite was down 0.2%, while the Hang Seng index in Hong Kong was down 0.6%. The S&P/ASX 200 in Sydney ended up 0.4%.

China's services sector contracted in August for the first time since the start of the pandemic while factory activity slowed further, data showed, as domestic coronavirus travel curbs hit demand for transport and tourism.

The non-manufacturing purchasing managers' index, a key gauge of activity in China's services and construction sectors, fell to 47.5 in August from July's 53.3, the National Bureau of Statistics said.

The measure for factory activity, manufacturing PMI, came in at 50.1 in August from July's 50.4. Anything above 50 indicates expansion, while below that figure points to contraction.

China's economic recovery was dealt a blow in the summer by its largest coronavirus outbreak for months as authorities locked down millions and curbed travel during the peak summer tourism period.

AvaTrade analyst Naeem Aslam said: "Futures in the US and Europe are trading higher today as investors appear to be more optimistic regarding the performance of equity markets. There are two reasons for this. First, the dovish stance taken by Jerome Powell, the chair of the Federal Reserve, last week conveyed that interest rates would not be raised immediately after stimulus tapering and would only be changed once the economy is near full employment with inflation in check.

"Second, the excellent earnings achieved by companies have provided valuation support, which has become the foundation supporting the surge in stock prices."

The pound was quoted at USD1.3793 early Tuesday, up from USD1.3752 at the London equities close Friday.

The euro stood at USD1.1825, up from USD1.1788. Against the yen, the dollar was trading at JPY109.80, down from JPY109.92.

Brent oil was quoted at USD73.19 a barrel, up from USD72.28 at the London equities close Friday. Gold was trading at USD1,816.85 an ounce, higher against USD1,807.81.

On Tuesday, there is German unemployment at 0855 BST and eurozone inflation at 1000 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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