LONDON MARKET PRE-OPEN: Crest Profit To Slump; Premier Foods Upbeat

(Alliance News) - Stock prices in London are set to open lower on Wednesday following caution in Asia overnight as markets eye fresh Covid-19 outbreaks across the globe.

"Although Wall Street equities continued to power higher, led by big-tech, I suspect that Asia also has one eye on the disturbing re-emergence of Covid-19 across the world. Or in the case of the US and Latin America and South Asia, its accelerating trajectory upward," said Jeffrey Halley, senior market analyst, Asia Pacific, at Oanda.

In early UK company news, Persimmon appointed the boss of transport operator National Express as the housebuilder's next chief executive. Fellow housebuilder Crest Nicholson guided to a sharp drop in full-year profit. Premier Foods swung to an annual profit as it expects to beat forecasts for the financial year ahead.

IG says futures indicate the FTSE 100 index of large-caps to open 36.52 points lower at 6,283.60 on Wednesday. The FTSE 100 index closed up 75.50 points, or 1.2%, at 6,320.12 on Tuesday.

In Asia on Wednesday, 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 down 0.2%.  

Against the yen, the dollar rose to JPY106.58 from JPY106.37.

"New cases in Australia, New Zealand, China, South Korea and Germany are adding a note of caution to Asian markets, balancing out the V-shaped recovery gnomes of Wall Street," said Halley.

In the US on Tuesday, Wall Street ended in the green, with the Dow Jones Industrial Average up 0.5%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.7%.

The US added 792 deaths in 24 hours, the Johns Hopkins University tally showed Tuesday, as the country's top infectious diseases expert warned there were "historic" challenges ahead.

Many states have largely lifted lockdown measures, and New York – the country's epicentre for the pandemic – took a big step Monday by allowing non-essential businesses to reopen. But some 20 states, primarily in the south and west, have seen a rebound in infections.

Earlier Monday, US government health experts led by Anthony Fauci warned Congress that the country faces "historic" challenges with the virus and should prepare for a lengthy battle. Fauci warned the next two weeks would be "critical to our ability to address...surgings" in Florida, Texas and other states.

Even in Europe, which has been loosening travel restrictions following a brutal few months when it was the epicentre of the pandemic, there have been major setbacks.

Germany on Tuesday reimposed lockdowns on more than 600,000 people following a cluster of infections at a slaughterhouse, while world men's tennis number one Novak Djokovic tested positive after hosting an exhibition tournament in the Balkans.

The euro traded at USD1.1320 early Wednesday, marginally softer than USD1.1325 late Tuesday.

In the UK, health leaders are calling for an urgent review to ensure Britain is properly prepared for the "real risk" of a second wave of coronavirus

The appeal is backed by the presidents of the Royal Colleges of Physicians, Surgeons, GPs and Nursing – as well as the chairman of the British Medical Association.

It comes after Boris Johnson announced on Tuesday the biggest easing to date of the coronavirus lockdown in England. The prime minister said the two-metre social-distancing rule would be replaced with a "one-metre plus" rule paving the way for pubs, restaurants, hotels and cinemas to begin reopening from July 4.

In an open letter to the leaders of all the UK political parties published in the British Medical Journal, the health leaders call for a "rapid and forward-looking assessment" of the state of national preparedness in the event of a renewed flare-up.

Sterling was quoted at USD1.2512 early Wednesday, dipping from USD1.2526 at the London equities close on Tuesday.

In early UK company news, Persimmon said National Express boss Dean Finch as been chosen as the housebuilder's next chief executive and will take up the post at the end of the year.

He will succeed David Jenkinson, who announced in February that he wanted to step down once a successor had been identified.

"The board believes that Dean is a great fit for Persimmon and is well qualified to lead the business into the next phase as we continue to drive a programme of change to become the leading volume builder of good value, quality family homes throughout the UK. I look forward to welcoming him to the company at the end of the year," said Persimmon Chair Roger Devlin.

JD Wetherspoon said it has created a 'Wetherspoon Covid-19 Secure Operating Plan' as it prepares to reopen its pubs on July 4, but it does not intend to start any new pub development projects in the next 12 months.

In addition, Wetherspoon's lenders have approved a GBP48.3 million loan through the Coronavirus Large Business Interruption scheme.

Crest Nicholson swung to a pretax loss as Covid-19 dented its first half performance and it guided to a sharp drop in annual profit.

Revenue for the half year to April 30 dropped 52% to GBP240.0 million, and the housebuilder swung to a pretax loss of GBP51.2 from a GBP64.4 million profit a year prior.

The FTSE 250 constituent said it saw strong sales momentum in the wake of the UK general election and the run up to the spring selling season, but Covid-19 "significantly impacted" the first-half performance.

"Revenue and profit were both lower than we had anticipated with a substantial number of private completions planned for the end of April being postponed. We also saw indecision in several bulk deal negotiations as we entered the period of peak uncertainty," said Crest.

It has, though, been "encouraged" by the trading environment in recent weeks, even if the backdrop remains "highly uncertain".

Crest now expects adjusted pretax profit to be around GBP35 million to GBP45 million for the current financial year, after achieving just GBP4.5 million in adjusted profit for the first half. A year ago, first half adjusted pretax profit amounted to GBP64.4 million.

For the financial year ended October 31, 2019, the firm achieved adjusted pretax profit of GBP121.1 million.

Faring better was Mr Kipling cakes maker Premier Foods. It swung to an annual profit and said it expects to beat forecasts for the financial year ahead.

Revenue for the year to March 28 rose 2.8% to GBP847.1 million, with Premier Foods swinging to a pretax profit of GBP53.6 million from a GBP42.7 million loss, as administration costs fell 51% to GBP76.6 million.

The UK Grocery business grew revenue each quarter and by 4.5% in the full-year. The firm's grocery categories and brands saw a "sharp increase" in volumes in the last three weeks of the financial year, as large numbers of consumers in the UK sought to build household stocks of some products during the Covid-19 pandemic.

Looking ahead, Chief Executive Alex Whitehouse said: "Revenues in the first quarter of FY20-21 are expected to be approximately 20% ahead of the same quarter a year ago reflecting continued strong demand for the group's product ranges, particularly in our Grocery business. Consequently, we expect to exceed current expectations for FY20-21 Revenue and Trading profit despite incurring some additional operating costs in our supply chain. Our options for cash deployment and capital allocation will improve as a result of expected further Net debt reduction in FY20-21."

Asset manager Brooks Macdonald said its subsidiary has agreed to buy the Channel Islands wealth management and funds business of Lloyds Bank for up to GBP9.6 million.

The initial consideration is expected to be up to GBP9.3 million in cash, with a contingent amount of up to GBP330,000 payable two years after completion, depending on the business meeting pre-agreed performance targets relating to the retention of portfolio clients.

Lloyds Bank International's wealth management and offshore funds business has a "high quality investment offering with an affluent and high net worth client base", Brooks Macdonald said.

"As well as the good strategic fit, our discussions with Lloyds Bank International have shown we have similar cultures with a shared strong focus on clients and intermediaries. This acquisition, the second for Brooks Macdonald in this financial year, is a further step forward in achieving our growth ambitions, complementing our organic strategy, creating value for shareholders and bringing benefits for clients and intermediaries," said Brooks Macdonald Chief Executive Caroline Connellan.

Gold was quoted at USD1,769.03 an ounce early Wednesday, higher than USD1,765.19 on Tuesday. Brent oil eased to USD42.76 a barrel early Wednesday from USD43.58 late Tuesday.

The economic calendar has Ifo's German business climate index at 0900 BST.

By Lucy Heming; lucyheming@alliancenews.com

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