(Alliance News) - Stock prices in London are seen opening in the red on Friday following a lower New York close on Thursday, as a spike in US jobless claims exacerbated worries about weakness in the world's largest economy.
In early UK company news, telecommunications firm Vodafone said an initial public offering of newly formed Vantage Towers is on track for 2021. Education publisher Pearson held its interim dividend steady. Energy supplier Centrica is to sell its North American business for USD3.63 billion to focus back on the UK and Ireland.
IG futures indicate the FTSE 100 index is to open 64.14 points lower at 6,147.30. The blue-chip index closed up 4.34 points, or 0.1%, at 6,211.44 on Thursday.
Pearson said Covid-19 has dealt a major blow to trading, but was encouraged by the improving trends and pick up in sales in June.
In the six months to June 30, sales decreased by 18% to GBP1.49 billion from GBP1.83 billion last year, with portfolio adjustments reducing sales by GBP53 million and currency movements increasing revenue by GBP25 million.
Pearson's first-half operating profit rose to GBP107 million from GBP37 million, the increase largely due to the gain on sale of Penguin Random House, it said. Pretax profit rose to GBP35 million from GBP13 million last year.
The education publisher said the group sales decline largely reflects test centre and school closures in Global Assessment and International due to Covid-19. After deterioration from March to May, Pearson saw improving sales trends in June as lockdowns eased.
Pearson declared an interim dividend of 6.0p, unchanged from last year.
"At this stage, it remains difficult to predict the ultimate disruptive impact of the Covid-19 pandemic on Pearson's performance for the full year. However, the second quarter performed in line with our expectations and, while risks remain, particularly around enrolments in the back to school period and local lockdowns impacting schools reopenings, based on our current assessment of these trends we are on track to deliver adjusted operating profit broadly consistent with market expectations," the company said.
Vodafone said the coronavirus crisis hurt sequential organic service revenue growth due to lower revenue from roaming and visitors, project delays and lower prepaid revenue in some smaller markets.
For the first quarter ended June 30, total revenue slipped 1.4% to EUR10.5 billion from EUR10.6 billion in the first quarter of financial 2020 and was down 2.8% on an organic basis. However, service revenue rose 1.3% to EUR9.1 billion from EUR9.0 billion, though was down 1.3% on an organic basis.
Vodafone said it was on track to deliver at least EUR0.4 billion net operational expenditure reduction in Europe in financial 2021 and adjusted EBITDA outlook unchanged, remaining "flat to slightly down". It reiterated its guidance for full-year free cash flow of at least EUR5.0 billion.
"Our trading performance in the first quarter demonstrates the relative resilience of our operating model and focused delivery of our strategic priorities. Whilst we have seen the direct impact on our revenue from travel restrictions and business project delays, we have also seen increased usage in voice and data, alongside record NGN broadband customer net additions in Europe," said Chief Executive Nick Read.
Vodafone also said it will list its Vantage Towers infrastructure business in Frankfurt next year. Vantage Towers is "Europe's leading tower infrastructure platform", Vodafone said, with over 68,000 towers across 9 markets.
Vodafone said Vantage Towers has a senior management team is fully in place, led by CEO Vivek Badrinath and Chief Financial Officer Thomas Reisten.
"We have a strong platform to capture growth opportunities in connectivity across Europe, leveraging our long-term arrangements with leading operators. Today I am also pleased to announce the merger of Vodafone's and Wind Hellas' towers businesses in Greece, which creates the leading tower infrastructure company in Greece," Badrinath said.
Centrica agreed to sell its North American energy supply, services and trading business, Direct Energy, to NRG Energy for USD3.6 billion in cash.
The energy supplier said the disposal increases the long-term strength of its balance sheet with proceeds intended to be used to reduce net debt significantly and to make a contribution to the defined benefit pension schemes. Centrica added it will focus on its core home markets of the UK and Ireland, where it has "leading market positions".
Separately, Centrica said it delivered a resilient performance overall against the backdrop of Covid-19.
For the six months to June 30, revenue fell to GBP10.70 billion from GBP11.57 billion last year and its pretax loss narrowed to GBP264 million from GBP569 million.
It declared no interim dividend, having paid out 1.5p last year.
Centrica said: "Looking forward, as lockdowns ease in our core markets we have already seen some recovery in energy demand and more normal sales of services and solutions. We would expect these trends to continue into the second half of the year, assuming a second wave of Covid-19 does not lead to further severe lockdowns in our core markets.
"However, we remain cautious on the potential for incremental working capital outflow and bad debt cost during the second half of the year, if customers delay or defer payments given the uncertain economic outlook and the implications for unemployment. Given the uncertainty this causes, we are not providing any specific financial guidance for the full year at this time, having withdrawn adjusted operating cash flow guidance at the time of our trading update in April."
In the US on Thursday, Wall Street ended sharply lower, with the Dow Jones Industrial Average down 1.3%, S&P 500 down 1.2% and Nasdaq Composite down 2.3%.
China had revoked the license for the US consulate in the southwestern city of Chengdu, in retaliation for the closure of China's Houston consulate earlier this week. The tit-for-tat move is a "legitimate and necessary response to the unreasonable measures by the US", the foreign ministry said in a statement.
US Secretary of State Mike Pompeo said Thursday that the Chinese consulate in Houston was a centre for espionage and operations to illegally obtain US companies' trade secrets.
In addition, The US Department of Labor on Thursday reported that 1.4 million people applied for jobless benefits last week, the first week-over-week increase in claims since the early days of the coronavirus crisis this spring.
Meanwhile, Republicans have been struggling to come up with an economic stimulus bill to counter a USD3.5 trillion Democrat proposal, fanning concerns they will not pass a measure ahead of their August break.
CMC Markets analyst Michael Hewson said: "Further increases in the weekly jobless claim's numbers over the next two to three weeks is likely to halt the progress, casting further shade on the markets over-optimistic V-shaped scenario. This concern is likely to have been one of the catalysts behind yesterday's slide in US markets, along with further sharp increases in US coronavirus cases, as well as further delays to a new stimulus bill.
"This weakness is set to manifest itself in a much weaker European open this morning, after a similarly weak Asia session, that has also seen China confirm its countermeasures to the US's closure of its Houston consulate. The ordering of the closure of the US's Chengdu consulate, along with a ratcheting up of the anti-China rhetoric amongst US policymakers, has prompted further weakness as we come to the end of a week, which saw European stocks push up to their highest levels in almost five months."
In China, the Shanghai Composite is down 2.6%, while the Hang Seng index in Hong Kong is down 2.2%. Financial markets in Japan are closed again Friday for the Health & Sports Day holiday.
The pound was quoted at USD1.2727 early Friday, down from USD1.2752 at the London equities close Thursday.
On the political front, the UK and the EU broke up their latest round of post-Brexit talks by ruling out a quick deal but voicing hope for agreement in the coming months.
UK Prime Minister Boris Johnson had promised to add "a bit of oomph" to the stalled negotiations when he personally joined them last month. His main goal then was to get a framework deal struck by the end July that could assure UK businesses they would not have to start preparing for a messy no-deal breakup when the current transition period ends on December 31.
But chief negotiators said it was unlikely because of a fundamental gap on major areas such as fishing rights and fair competition rules.
The UK's Brexit negotiator David Frost accused the EU of failing to recognise Britain's economic and political independence and described the gulf between the sides on some points as "considerable".
Frost's counterpart Michel Barnier criticised London for refusing to move on its red lines.
The euro stood at USD1.1594, flat from USD1.1597. Against the yen, the dollar was trading at JPY106.45 in London, lower from JPY106.91.
Gold was quoted at USD1,886.41 an ounce, down from USD1,894.10 late Thursday.
Brent oil was quoted at USD43.44 a barrel, down from USD44.02 at the London equities close Thursday.
Friday's economic calendar has services and manufacturing PMI readings from Germany, the eurozone, the UK and the US at 0830 BST, 0900 BST, 0930 BST and 1445 BST respectively.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Pearson (PSON)
Centrica (CNA)
Vodafone (VOD)