LONDON MARKET PRE-OPEN: Ferguson resumes payout after strong interim

(Alliance News) - Stock prices in London are seen opening higher on Tuesday, tracking global peers, as investors grow optimistic about the economic reopening from the pandemic.

In early company news, Chilean copper miner Antofagasta delivered strong annual results. Plumbing and heating products supplier Ferguson resumed dividend payouts. Drugmaker AstraZeneca secured a deal with the US government for additional doses of its Covid-19 treatment, while countries across Europe suspend use of Astra's Covid-19 vaccine.

IG futures indicate the FTSE 100 index is to open 27.80 points higher at 6,777.50. The blue-chip index closed down 11.77 points, or 0.2%, at 6,749.70 Monday.

Antofagasta hiked its dividend as it reported positive annual results and a strengthened balance sheet.

For 2020, revenue was up 3.3% to USD5.13 billion from USD4.94 billion in 2019. Pretax profit was USD1.41 billion, up 4.4% from USD1.35 billion. Earnings before interest, tax, depreciation and amortisation rose 12% to USD2.74 billion in 2020 from USD2.44 billion the year prior.

The miner declared a final dividend of 48.5 cents per share, bringing the total dividend for the year to 54.7 cents per share, up 17.8 cents in 2019.

Chief Executive Ivan Arriagada said: "The year has been challenging, but we have successfully kept our people safe and healthy, achieved our production and exceeded our cost targets, and increased Ebitda by 12.3% to USD2.7 billion, yielding a 53% Ebitda margin...Our resilient operations performed well with high levels of throughput and our Cost & Competitiveness Programme delivered benefits of USD197 million, nearly double the targeted amount. Our balance sheet strengthened even further."

Antofagasta said it had USD82 million in net debt at the end of 2020, for a net debt to Ebitda ratio of just 0.03 times.

Ferguson said it delivered good top-line growth in the first half of its financial year and despite "challenging personal and professional" circumstances.

For the half year ended January 31, revenue was up 4.2% to USD10.31 billion from USD9.89 billion at the same time the year before, and pretax profit rose 18% to USD739 million from USD628 million.

Ferguson declared an interim dividend of 72.9 US cents, having paid out nothing the year before and said that now the disposal of its UK side has completed, a special dividend of 180 cents per share will be paid in May. It also announced a new USD400 million share buy back scheme.

Ferguson completed the GBP308 million sale of heating & plumbing distribution business Wolseley UK to US private equity firm Clayton, Dubilier & Rice LLC at the start of February.

CEO Kevin Murphy said: "Since the start of the third quarter, we have continued to trade well, generating high single digit organic revenue growth. While the outlook for the second half remains very uncertain, we expect to generate above market revenue growth in good residential markets aided by increasing inflation. However, we expect this to be partially offset by increasing supply chain pressures, transportation costs and the reversal of temporary cost reduction actions taken during the initial stages of the lockdown starting in April of last year.

"We are well positioned to manage through this environment and we will continue to invest in talented associates and digital capabilities to serve our customers and take advantage of market opportunities."

AstraZeneca said it has modified an existing agreement with the US government to supply up to 500,000 additional doses of AZD7442, a long-acting antibody combination which is in late-stage development for the prevention and treatment of Covid-19.

The Anglo-Swedish drugmaker said the new US government deal builds on earlier deals for a total of 200,000 doses with the US Department of Health & Human Service and Department of Defense. The value of the extended agreement is USD205 million and is contingent on AZD7442 receiving and Emergency Use Authorisation from the US Food & Drug Administration.

AstraZeneca said the total value of current agreements with the US government for the development and supply of AZD7442 in 2021 is about USD726 million. Further, the extended agreement is not anticipated to effect the company's financial guidance for 2021.

CEO Pascal Soriot said: "The long-acting antibody combination has the potential to offer almost immediate protection to those who are not able to be vaccinated, to both prevent infection or treat the disease in patients already infected with the virus. The US government's support is critical in helping accelerate the development of AZD7442, which we believe will be an important tool in the fight against COVID-19."

AstraZeneca also said it has completed the sale of its 27% stake in Viela Bio Inc to Horizon Therapeutics. It will receive USD775 million in cash proceeds and profit from the Viela stake sale, but this also isn't expected to affect its guidance for 2021.

The Japanese Nikkei 225 index ended up 0.5% on Tuesday. In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong is up 0.2%. The S&P/ASX 200 in Sydney finished 0.8% higher.

In New York on Monday, the Dow Jones Industrial Average closed up 0.5%, S&P 500 up 0.7% and Nasdaq Composite up 1.1%.

"As we look ahead to today's European open, it seems likely that last night's late US rebound is likely to lead into a modestly positive start for markets here in Europe later, with Asia markets also trading higher this morning, though whether we can hang onto any positivity is another matter, given the failure to hang onto yesterday's similarly strong start," said CMC Markets analyst Michael Hewson.

News that several European countries had stopped administering the AstraZeneca Covid-19 vaccine on safety fears, dealing a blow to the continent's already stuttering inoculation programme, appeared to have little impact on sentiment.

As the US vaccine programme progresses and Americans begin to get their government cash handouts as part of President Joe Biden's stimulus pledge, investors are betting that months of pent-up spending will soon be let loose on the world's top economy, a key driver of global growth.

However, hopes over a swift recovery come as investors grow increasingly fearful it will fan inflation and force national banks to wind down the ultra-loose monetary policies that have helped send equities higher.

The US Federal Reserve's latest two-day policy meeting, which begins Tuesday, is front and centre of investors' minds as they look for its response to the rally in US bond yields that has rattled trading floors.

However, the general consensus is that Fed policymakers will maintain their vast bond-buying scheme and keep US interest rates at record lows until 2023.

"[Fed Chair Jerome] Powell will likely replay his best hits when discussing inflation, noting that price increases later in the year won't be large or persistent. The summertime is when inflation could rear its ugly head, so Powell should be able to push back any concerns until then," said Oanda Markets analyst Edward Moya.

The pound was quoted at USD1.3868 early Tuesday, down from USD1.3885 at the London equities close Monday.

The euro was priced at USD1.1933, little changed from USD1.1931. Against the Japanese yen, the dollar was trading at JPY109.15, up from JPY109.08.

Brent oil was priced at USD68.25 a barrel Tuesday morning, lower from USD68.70 late Monday. Gold was trading at USD1,734.65 an ounce, up from USD1,730.28.

The economic events calendar on Tuesday has the ZEW economic sentiment survey for both the eurozone and Germany at 1000 GMT and US retail sales at 1230 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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