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LONDON MARKET PRE-OPEN: Redrow Warns On Profit, Pulls Out Of London

Tue, 30th Jun 2020 07:49

(Alliance News) - Stock prices in London are seen opening slightly higher on Tuesday after positive economic data from China took the sting out of a rise in Covid-19 infections and the reimposition of containment measures in some countries around the world.

In early company news, housebuilder Redrow warned profit for financial 2020 will be lower due to a strategic shift, as it grapples with the coronavirus crisis. InterContinental Hotels said revenue per available room is set to be lower. Asset manager Standard Life Aberdeen appointed a new chief executive.

IG futures indicate the FTSE 100 index is to open 10.83 points higher at 6,236.60. The blue-chip index closed up 66.47 points, or 1.1%, at 6,225.77 on Monday.

Redrow said it has decided to scale-back operations in London to focus on the Colindale Gardens development and continue to target future growth in its higher-returning regional businesses and Heritage product line.

The housebuilder said costs and related significant impairments associated with scaling-back the London business will be taken in its financial 2020 accounts. As a consequence of Covid-19 and making these provisions, Redrow warned profit for the financial year that ended on Sunday will be substantially below that of financial 2019.

Turning to trading, Redrow said the timing of site closures due to Covid-19 towards the end of March had a significant effect on its results in a year which was budgeted to be weighted to the end of the second half.

Redrow said it completed 4,032 homes in the year to the end of June compared to 6,443 in the previous year. Turnover is expected to be GBP1.34 billion, down from GBP2.11 billion last year.

Redrow said: "The prospects for the wider economy and its impact upon the new homes market remains uncertain. Despite this, as lockdown restrictions have eased, trading has been encouraging, driven by high customer demand for Help to Buy as more buyers look for support as the mortgage market and economy recovers.

"The group's output will inevitably continue to be affected by the ongoing fallout from the Covid-19 pandemic. Notwithstanding this, the group's record order book, excellent product range and dedicated team of talented people, means it is well-placed to deliver a robust performance against an uncertain outlook."

Redrow said its order book stands at GBP1.42 billion, up from GBP1.02 billion a year ago.

InterContinental Hotels Group said the pace of hotels reopening has continued to accelerate through the second quarter, with only 10% of the global estate currently still closed as a result of lockdown measures.

IHG said good progress has been made across the Europe, Middle-East, Asia & Africa region, as government-mandated hotel closures have been lifted, with around 30% currently remaining closed. In Greater China, just 1% are closed.

IHG said it expects to report a revenue per available room decline of 75% for the second quarter, which will result in a 52% decline for the half-year period. The company said there have been "small but steady" improvements in RevPAR through the second quarter, mostly attributable to the Americas franchised estate and the Greater China region. Occupancy levels in comparable open hotels have improved to over 40% in the US, it noted.

Standard Life Aberdeen said Stephen Bird will join the board of directors and take up the role of chief executive-designate on Wednesday. Bird will succeed Keith Skeoch, who is stepping down as CEO after five years running the asset manager. Bird previously served as CEO of Global Consumer Banking at Citigroup.

The Japanese Nikkei 225 index closed up 1.6%. In China, the Shanghai Composite is up 0.7%, while the Hang Seng index in Hong Kong is up 1.0%.

China's factory activity picked up pace in June, official data showed, although analysts warned weak global demand and a potential coronavirus resurgence are weighing on its longer-term recovery.

China's purchasing managers' index, a key gauge of activity in factories, came in at 50.9 points in June, better than the 50.5 forecast in a Bloomberg News poll of analysts and up 0.3 points from May. Anything above 50 indicates expansion. The non-manufacturing PMI came in at 54.4 points, up from 53.6, according to the National Bureau of Statistics.

Meanwhile, China passed a sweeping national security law for Hong Kong, a historic move that critics and many western governments fear will smother the finance hub's freedoms and hollow out its autonomy. The legislation was unanimously approved by China's rubber-stamp parliament on Tuesday morning.

The pound was quoted at USD1.2274 early Tuesday, flat from USD1.2271 at the London equities close Monday.

In economic news, data from the Office for National Statistics showed UK gross domestic product decreased by 1.7% in the first quarter on an annual basis. This was a downward revision of 0.1 percentage point from the previous estimate.

On a quarterly basis, UK gross domestic product shrank by 2.2% in the first three months of 2020, after showing no growth in the previous period and compared with a preliminary estimate of 2.0%.

The ONS said this was the largest fall in UK GDP since the third quarter of 1979 as a coronavirus lockdown from mid-March forced non-essential businesses to close and consumers to stay at home.

UK Prime Minister Boris Johnson is promising a "New Deal" with billions of pounds of investment to ease the UK through the aftermath of the coronavirus pandemic.

The prime minister will use a keynote speech in the West Midlands on Tuesday to say he wants to follow in the footsteps of President Franklin Roosevelt, who led the US out of the Great Depression in the 1930s.

Johnson will say his message is "build, build, build" as the UK comes out of lockdown after the Covid-19 pandemic. The PM will say the government intends to spend GBP5 billion "to accelerate infrastructure projects".

The euro was quoted at USD1.1231, lower from USD1.1243 late Monday in London. Against the yen, the dollar was trading at JPY107.73 in London, flat on JPY107.71.

Brent oil was quoted at USD41.46 a barrel Tuesday morning, up from USD41.24 a barrel at the London equities close Monday. Gold was quoted at USD1,771.88 an ounce, up from USD1,760.70.

In Tuesday's economic calendar, eurozone inflation is due at 1000 BST and US Federal Reserve Chair Jerome Powell testifies before Congress at 1730 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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