LONDON MARKET PRE-OPEN: Next raises profit guidance on online strength

(Alliance News) - Stocks in London are set for an upbeat end to an abbreviated week as markets in New York and Asia registered gains overnight, shaking off fresh lockdown measures in France.

In early UK company news, Next's full-year profit dived, as expected, though guidance was raised for the year ahead, Quilter has agreed to sell Quilter International for GBP483 million and Equiniti posted a loss for 2020 with its chief financial officer set to depart.

IG says futures indicate the FTSE 100 index of large-caps to open up 24.47 points, or 0.4%, at 6738.1 on Thursday. The FTSE 100 closed down 58.49 points, or 0.9%, at 6,713.63 on Wednesday.

In the US on Wednesday, Wall Street ended mostly higher, with the Dow Jones Industrial Average ending down 0.3%, but the S&P 500 adding 0.4%, and the Nasdaq Composite surging 1.5%.

Stocks in the US rallied after President Joe Biden unveiled a far-reaching USD2 trillion infrastructure plan to shore up the nation's highways, bridges and ports, as well as fund telecommunications upgrades plus research and development to boost competitiveness, especially compared to China.

A key source of the financing would come from increasing the corporate tax rate from 21% to 28%, and cracking down on the use of tax havens to avoid paying US taxes.

The performance in New York flowed through to Asia overnight, with the Japanese Nikkei 225 index closing up 0.7%. In China, the Shanghai Composite was up 0.6%, while the Hang Seng index in Hong Kong was 1.4% higher. The S&P/ASX 200 in Sydney closed up 0.6%.

"Asia Pacific stock markets are off to a positive start today on the back of positive regional data and Wall Street finishing on a positive note," commented Jeffery Halley, senior market analyst at Oanda.

"Asia's performance today should be enough to lift European shares at the open, although France's national lockdown, and Ontario's in Canada, are likely to take the edge of bullish spirits," said Halley. "Pan-Europe PMI data should lift proceedings if it performs positively as expected."

French President Emmanuel Macron announced Wednesday that French schools would close next week and a limited lockdown in place in Paris and other regions would be extended to the whole country to battle soaring Covid-19 cases.

Macron said in an address to the nation that the current efforts to limit the virus "were too limited at a time when the epidemic is accelerating". The spread of the so-called British variant meant "we risk losing control".

He said that schools would close from Monday for the next three weeks, but this would include two weeks of spring holiday. From Saturday night and for the next four weeks, travel restrictions will be imposed across the whole country and non-essential shops will close in line with measures already implemented in Covid-19 hotspots such as Paris, he said.

The euro traded at USD1.1724 early Thursday, lower than USD1.1742 late Wednesday.

In early UK company news, clothing and homewares retailer Next reported an expected slump in full-year profit but raised guidance for the year ahead.

Pretax profit in the financial year that ended January 30 more than halved to GBP342.4 million from GBP748.5 million the year before, on total revenue that fell 17% to GBP3.53 billion from GBP4.27 billion. The fall in profit was in line with previous guidance.

Full-price sales were down 15% on the year before.

On recent trading, Next said that online sales have been much stronger than expected in the first eight weeks of the new year, and are up more than 60% on two years ago.

"This overachievement plus the expected transfer of sales from retail during the additional two weeks of lockdown, are expected to add GBP30 million of profit. As a result, we are raising our central profit guidance by GBP30 million from GBP670m to GBP700 million," said Next.

The retailer proposed no final dividend for the recently ended year, though said it remains committed to returning capital to shareholders in the long term and will review its position later in the year when it has better visibility of trade once stores reopen.

Quilter said it has agreed to sell Quilter International to Utmost for GBP483 million following a strategic review.

The sale will simplify Quilter and focus the company on its higher-growth UK wealth management business, it said.

Net cash proceeds of around GBP450 million are expected from the sale. The board said that it is currently minded to undertake a capital distribution to shareholders of the majority of the proceeds. A firm decision on the method of distribution will be made at the time of sale completion.

Quilter Chief Executive Paul Feeney said the deal represents an "excellent outcome" for all stakeholders.

"It allows us to focus on accelerating our growth and efficiency plans as well as further simplifying and focusing our business around its core UK high net worth and affluent customer proposition," said Feeney. "It also gives us the ability to deliver a further meaningful capital distribution to shareholders."

Personal protection systems maker Avon Rubber confirmed a modification to an existing US Army Integrated Head Protection System low-rate initial production contract to increase the value by an estimated USD28.4 million.

As part of the modification, the US Army has placed an order under this contract worth USD18.9 million, with deliveries expected to commence in Avon's current financial year.

Financial services administration outsourcer Equiniti swung to a loss for 2020 and also said its chief financial officer will be departing once a replacement is installed.

Revenue for 2020 fell 15% to GBP471.8 million, and the company swung to a pretax loss of GBP6.6 million from a GBP39.8 million profit. Equiniti blamed a "very challenging environment" with disruption to capital markets and the wider economy hitting its performance.

There was a significant reduction in higher-margin market-paid and discretionary projects as market activity paused, it said, and the fourth quarter was slower than expected. Interest rate cuts and other actions by central banks reduced Equiniti's interest income by GBP16.9 million.

No dividend was declared for 2020, compared to a payout of 5.49p for 2019.

"While uncertainty continues, the outlook for capital market activity in 2021 is encouraging, and we have started the year well with a number of important new business wins. Our focus is on driving performance and market share, while reducing the group's debt and delivering on our cost initiatives to offset reduced interest income in a low interest rate environment," said outgoing interim chief executive, Cheryl Millington.

Paul Lynam starts as Equiniti's new chief executive on Thursday. His appointment was announced in January, succeeding Guy Wakeley who had been in the role since 2014.

Equiniti on Thursday also said that Chief Financial Officer John Stier plans to step down. He will remain in the role until a successor is found and a smooth handover completed.

In focus on Thursday are a raft of purchasing managers' index readings. The calendar has manufacturing PMI readings from Germany, the eurozone, the UK and US at 0855 BST, 0900 BST, 0930 BST and 1445 BST respectively. In the afternoon, the latest US jobless claims figures are due at 1330 BST.

Due on Friday is the key US nonfarm payrolls report for March.

Already out on Thursday, China's manufacturing sector grew "modestly" in March, according to the latest Caixin purchasing managers' index.

The PMI ticked down to 50.6 points in March, from February's 50.9 points. The reading remained above the 50.0 no-change mark but IHS Markit noted it was the "softest" growth seen over the past 11 months.

In contrast, Japanese manufacturers signalled a second successive improvement in operating conditions in March as the headline Jibun Bank manufacturing PMI rose to 52.7 points in March from 51.4 in February. This signalled the strongest improvement in the health of the sector since October 2018.

The yen was weaker on Thursday, however. Against the yen, the dollar was quoted at JPY110.76 versus JPY110.50.

Sterling, also pushed down by a stronger dollar, was quoted at USD1.3763 early Thursday, soft on USD1.3785 at the London equities close on Wednesday.

Gold was quoted at USD1,713.87 an ounce early Thursday, higher than USD1,704.21 on Wednesday. Brent oil was trading at USD63.22 a barrel, falling from USD64.00 late Wednesday.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.