LONDON MARKET PRE-OPEN: SSE ups outlook; Croda eyes consumer arm boost

(Alliance News) - Stock prices in London are seen opening higher on Tuesday, with the mood boosted by a strong session in New York that carried through into Asian trading.

Equities in London had started the week in a cautious fashion, with traders mindful of rising Covid-19 cases in China and now month-long war between Russia and Ukraine.

IG says futures indicate the FTSE 100 index of large-caps to open up 28.8 points, or 0.4%, at 7,501.94 on Tuesday. The FTSE 100 closed down 10.21 points, or 0.1%, at 7,473.14 on Monday.

In early UK corporate news, electricity utility SSE lifted annual guidance and said it does not have any supply pacts with Russian counterparts. Housebuilder Bellway reported first-half earnings growth. Chemicals maker Croda International outlined its aim to lift the fortunes of its Consumer Care arm.

FTSE 100-listed SSE lifted its adjusted earnings per share guidance for the financial year, which ends on Thursday, amid a backdrop of energy market volatility.

It expects adjusted EPS in the range of 92 and 97 pence, up from the previous 90p guidance. It could represent a rise of much as 11% from 87.5p in financial 2021.

Dividend guidance was unchanged, remaining linked with the retail price index for now. SSE will pay 81p per share plus RPI for this year. It will have an RPI-linked payout for the following year before a rebase to 60p in financial 2024 after.

In addition, SSE said unfavourable weather has led to a "shortfall in output from renewable sources" since it updated on its third quarter in early-February.

Renewables output was 19% below expectations in the nine months ended December 31. This has eased to 12% below forecasts as of March 22.

On Russia, the company added: "SSE does not have any energy supply contracts with Russian counterparties, and we are ceasing trading activities with these entities.

"The war has had significant consequences for energy markets and policy, contributing to historically high and volatile prices. However, SSE has so far been served well by its prudent hedging approach and has successfully managed any increasing credit and collateral requirements."

The impact of a prolonged conflict, or an escalation, is "difficult to predict", however, it said.

Croda, ahead of hosting an investor day on Tuesday, said it is focused on "accelerating growth in its Consumer Care sector".

"The event will focus on how Consumer Care has evolved significantly in recent years to become a highly differentiated sector for Croda, comprising four business units, each with leading market positions in fast growth niches," the company said.

The personal care arm, which part of Consumer Care, includes the Sederma skin care brand. The unit was bolstered by the EUR820 million acquisition of Spanish fragrances firm Iberchem, announced in November 2020.

By 2025, Croda targets sales of GBP1 billion in Consumer Care, up from GBP763 million in 2021.

"In the coming years, Consumer Care expects to deliver a minimum of 5% annual sales growth, with synergies from the recent fragrances & flavours acquisitions in addition to this. In 2022, there is likely to be an additional benefit to sales from the successful recovery of cost inflation," the company said.

Croda added that the unit's trading in the first three months of 2022 has been "robust".

FTSE 250-listed housebuilder Bellway said revenue in first half ended January 31 rose 3.5% to GBP1.78 billion from GBP1.72 billion.

Pretax profit climbed 9.8% to GBP307.6 million from GBP280.2 million a year earlier.

It lifted its by payout 29% to 45.0 pence from 35.0p.

For the full year, it expects dividend cover to be three times its underlying earnings. This will be reduced to 2.5 times by financial 2024, Bellway said. It thinks this would represent a "prudent and sustainable level, supported by strong investment returns and enhanced cash generation".

Bellway backed annual guidance of completing 11,100 new homes, up from 10,138 homes in the prior financial year.

"Completions will be weighted slightly towards the first half of the financial year, as was the case in financial year 2021, with this a reflection of on-site construction progress. Bellway also remains on track to deliver target completions of around 12,200 homes in financial year 2023, representing volume growth of some 20% over a two-year period," the company said.

In the first half of financial 2022, it completed 5,694 new homes, up 0.7% annually from 5,656.

Elsewhere in London, handbag maker Mulberry said it expects revenue "moderately ahead of current expectations" for the financial year ending April 2.

"Mulberry has taken this opportunity to increase its marketing investment in the second half of FY22 to further build global brand awareness. Despite this additional expenditure, the profit for FY22 will be moderately ahead of current expectations," it said.

Irn-Bru maker AG Barr posted a substantial earnings rise for a year in which it resumed payouts.

Revenue in the year to January 30 rose 18% to GBP268.6 million from GBP227.0 million. Pretax profit was 62% higher at GBP42.2 million from GBP26.0 million.

AG Barr proposed a 10p final payout, taking its ordinary dividend for the year to 12p. It had also paid a 10p one-off special dividend in October. The soft drinks maker had paid out nothing in financial 2021 and 4.00p in financial 2020.

"Like most companies we are facing significant inflationary pressures, but we are well-placed as a group to deal with these and will continue to seek to manage our exposure proactively through mitigating actions across revenue management, pricing, procurement and cost control," Chief Executive Roger White said.

In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.3%, the S&P 500 up 0.7% and the Nasdaq Composite up 1.3%.

In Asia on Tuesday, the Japanese Nikkei 225 index closed up 1.1%. In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was up 0.8%. The S&P/ASX 200 in Sydney ended up 0.7%.

Underpinning Tuesday's improved risk mood was news that Ukrainian forces had recaptured a key Kyiv suburb and were clinging onto control of the besieged city of Mariupol, as negotiators prepared to meet Russian counterparts for face-to-face talks in Istanbul on Tuesday.

Ukrainian and Russian negotiators will resume peace talks under the shadow of shock allegations that delegates were poisoned at a previous round of negotiations.

Ukraine played down the allegations. Foreign Minister Dmytro Kuleba said the Istanbul talks would focus on easing the humanitarian situation and sounded a note of scepticism about the hopes for success.

Sterling was quoted at USD1.3098 early Tuesday in London, up against USD1.3090 at the London equities close on Monday.

The euro traded at USD1.0991 early Tuesday, up from USD1.0973. Against the yen, the dollar rose JPY123.49 versus JPY123.32.

North Sea benchmark Brent slipped to USD111.24 a barrel early Tuesday versus USD111.48 late Monday as Covid-19 worries in China continued to hurt oil prices.

"Oil prices are caught in a downward spiral, and yesterday we saw the most significant one-day sell-off since March 15. The sell-off in oil prices is mainly due to the concerns among traders about the new lockdown in China, which has sent oil prices tumbling," Avatrade analyst Naeem Aslam commented.

Gold was quoted at USD1,923.16 an ounce, lower than USD1,937.20 on Monday.

Still to come on the economic events calendar on Tuesday are UK mortgage approvals at 0930 BST and US consumer confidence at 1400 BST.

By Eric Cunha; ericcunha@alliancenews.com;

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