LONDON MARKET PRE-OPEN: Reckitt tops consensus and flu season "strong"

(Alliance News) - Stock prices in London are seen opening slightly lower on Thursday following an uncertain handover from Asia, as investors mull the possibility of quick interest rate hikes from the Federal Reserve, in addition to ongoing tensions between Russia and Ukraine.

Fed policymakers envisage a faster pace of US interest rate increases during the course of 2022, according to minutes from January's meeting released Wednesday.

At the January 25 to 26 meeting, minutes showed members of the Federal Open Market Committee thought "a faster pace of increases...would likely be warranted" compared to the prior tightening cycle.

IG futures indicate the FTSE 100 index is to open 11.0 points, or 0.1%, lower at 7,592.78. The blue-chip index closed down 5.14 points, or 0.1%, at 7,603.78 on Wednesday.

In early UK corporate news, household goods firm Reckitt Benckiser said its annual results topped expectations, while industrial software firm Aveva said its third-quarter revenue suffered from tough comparatives. Mondi has sold a unit for over EUR600 million, while Ocado has expanded a tie-up with a French grocer.

In numbers out earlier, Standard Chartered reported pretax profit for 2021 of USD3.35 billion, more than doubled from USD1.61 billion a year prior, but missing analyst expectations of USD3.84 billion by 13%.

The emerging markets-focused lender said net interest income slipped 0.7% to USD6.80 billion from USD6.85 billion as low interest rates scuppered growth. The figure beat the USD6.78 billion analyst consensus.

Hygiene and household goods firm Reckitt said revenue in 2021, lapping tough comparatives, fell 5.4% to GBP13.23 billion from GBP13.99 billion. At constant currency, the decline was 0.3%. Revenue topped company-compiled consensus of GBP12.80 billion, however.

Excluding the contribution of its former Infant Formula & Child Nutrition business in China, Reckitt's annual revenue fell 2.1% to GBP12.85 billion from GBP13.13 billion. At constant currency rates, revenue by this measure was up 3.3%.

Reckitt back in June agreed to sell the business to Primavera Capital Group for USD2.2 billion. The disposal was completed in September.

Reckitt swung to a pretax loss of GBP260 million from a GBP1.87 million profit in 2020, due primarily to a huge loss on disposal. The China IFCN business was one of three disposals Reckitt made in 2021. The trio of sales resulted in a pretax loss on disposal of GBP3.52 billion. No such costs were registered in 2020.

Chief Executive Laxman Narasimhan says Reckitt's aim to "rejuvenate sustainable growth" is on track. Like-for-like net revenue in 2021 rose 3.5% at constant currency and was up 17% from 2019.

In the fourth quarter alone, like-for-like net revenue increased 3.3%.

Reckitt explained: "Our Health business saw strong growth of 18% led by growth of over 40% in our [over-the-counter] portfolio, with a strong start to the 'flu season, a continued strong performance from our Intimate Wellness portfolio and stabilisation in Dettol."

Reckitt recommended a final payout of 101.6 pence per share, unchanged from 2020. Its annual dividend was also unchanged at 174.6p per share.

Looking to 2022, it targets like-for-like net revenue growth between 1% and 4%.

"We are targeting growth in adjusted operating margins in 2022, from our base of 22.9%, underpinned by multiple levers, despite significant commodity inflationary pressures," it added.

Industrial software firm Aveva on Thursday said recurring revenue grew 9.6% on an annualised basis in the rolling 12 months to December 31, the conclusion of the third quarter of its financial year.

"ARR growth in Q3 FY 2022 was broad based, with increases from key industries, including food, manufacturing, energy, pharmaceuticals and mining," Aveva said.

However, the clean top-line figure fell. Third quarter revenue "declined by a low single digit rate year-on-year", on a constant currency basis.

The prior year's third quarter "included the benefit of several large contract renewals with point-in-time revenue recognition".

"The group's sales pipeline for the remainder of the financial year is solid, supporting management plans for good revenue growth in the final quarter, giving a revenue outlook for the full year that is in line with expectations," Aveva added.

Ocado has extended a partnership with French grocer Groupe Casino.

The extension sees the duo birth a joint-venture that will develop customer fulfilment centres in France.

"The joint venture will draw on the combined strengths of Ocado and Groupe Casino to provide logistics services for future CFCs. These services include project management for CFC construction and set-up, as well as the recruitment and operations management of personnel," Ocado said.

"There is not expected to be any initial capital cost associated with the JV to either Ocado group or Groupe Casino. CFC-related capital costs typically associated with OSP partners will be funded in future CFCs by tenant grocery retailers in line with their capacity commitments."

Packaging firm Mondi announced it will sell its Personal Care Components business to Osaka, Japan-based Nitto Denko for an enterprise value of EUR615 million. Nitto is a maker of tapes, sealing materials and surface films.

Mondi said the unit, charged with making components for personal and home care products, has a "limited overlap" with the rest of the company.

AIM-listed Unbound Group, formerly known as Electra Private Equity, updated on annual fortunes at its Hotter Shoes subsidiary.

Hotter's revenue advanced 10% annually in the fourth quarter that ended January 30. Annual revenue increased 16% to GBP51.9 million from GBP44.5 million, shaking off "significant challenges" hitting the UK retail sector.

In addition, Unbound said Hotter has teamed with Marks & Spencer, selling its products through the UK retailer's 'Brands at M&S' platform.

"This follows agreements with other retailers including John Lewis, Next and The Very Group to sell Hotter products online," Unbound added.

In Asia on Thursday, the Nikkei 225 in Tokyo fell 0.8%, though the S&P/ASX 200 in Sydney rose 0.2%. The Shanghai Composite closed 0.1% higher, and the Hang Seng in Hong Kong was marginally lower in late trade.

"US and European futures hint at a negative start on Thursday," Swissquote analyst Ipek Ozkardeskaya commented.

"The US didn't let the tensions de-escalate, insisting that Russia is certainly not pulling back its troops but is rather increasing its presence at the Ukrainian border. The US warning hit the investor appetite at yesterday's session and reversed the earlier week gains in stock indices."

Oil prices slipped early Thursday, after topping USD96 a barrel on Wednesday. Brent was quoted at USD93.75 a barrel, down from USD96.00 at the London equities close on Wednesday.

Gold rose to USD1,875.18 an ounce from USD1,862.20.

The dollar was mixed early Thursday. The pound was quoted at USD1.3592, up from USD1.3577 at the London equities close on Wednesday. The euro stood at USD1.1363, down from USD1.1367. Against the Japanese yen, the dollar was trading at JPY115.27, down from JPY115.48.

The economic events calendar on Thursday has the latest US jobless claims numbers at 1330 GMT.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.