(Alliance News) - Stock prices in London are seen opening slightly higher on Tuesday following a positive US close overnight amid progress in Washington on the Biden administration's economic spending plans.
In early company news, hospitality firm Whitbread posted upbeat interim results as lockdown restrictions eased. Distribution firm Bunzl cautioned over waning demand for personal protective equipment. Online beauty products retailer THG took steps to improve its corporate governance.
IG futures indicate the FTSE 100 index is to open 10.38 points higher at 7,233.20. The blue-chip index closed up 18.27 points, or 0.3%, at 7,222.82 Monday.
Whitbread said its Premier Inn chain's recovery in the first half was ahead of expectations as lockdown restrictions eased in the UK and Germany.
For the six months to August 26, revenue more than doubled to GBP661.6 million from GBP250.8 million last year. Pretax loss was nearly eliminated, narrowing to GBP19.3 million from GBP724.7 million.
Whitbread declared no interim dividend, in line with year before. The company explained that dividend payments are not permitted under its bank covenant waiver conditions until March 2023, but it said it intends to return to paying a dividend at the first available point that it is permitted to do so.
Looking ahead, Whitbread said its sales recovery is ahead of expectations, and its UK like-for-like revenue per available room run rate has "potential" to make a full recovery next year.
Further, Whitbread said leisure demand remains strong in the UK into heading into the second half, while business demand was improving.
"Whitbread traded significantly ahead of the market in the UK during the first half of the year, with our regional hotels trading ahead of pre-Covid-19 levels in the last six weeks of the half. This strong performance has continued into the second half, with sustained high levels of leisure demand and resilient demand from tradespeople. Whilst some uncertainty remains over the speed and timing of the market recovery for office-based and international demand and the evolution of the pandemic in the winter months, we believe that UK like-for-like RevPAR run rates have the potential to reach full recovery in at some point during 2022," said Chief Executive Officer Alison Brittain.
Bunzl said its third-quarter performance was helped by its diversification, as a recovery in its base business offset a decline in sales of Covid-19 related products.
Revenue was rose 7.8% from the same time last year at actual currency rates and rose by 13% at constant rates. Underlying revenue growth at constant currency was 2.5%, as acquisitions contributed 4.2% to the revenue growth and extra trading days 6.2%.
Bunzl, which saw strong demand for its services in supplying Covid-19 personal protective equipment, noted adjusted operating margin was hurt by ongoing price deflation in pandemic-related products.
Looking ahead, Bunzl expects "slight" underlying revenue growth in 2021 compared to 2020 at constant exchange rates. Margin expectations for the year remain unchanged, with adjusted operating margin expected to be only slightly ahead of historical levels. It expects the group operating margin to revert toward its historical level in 2022.
Bunzl also said it has completed the acquisition of US agricultural supplies distributor Intergro.
Chief Executive Officer Frank van Zanten said: "At our recent capital markets day, as well as providing insights into the opportunity that sustainability presents to Bunzl, we highlighted the strength of our compounding strategy which has delivered strong shareholder returns for many years. This track record of success continues with another good trading performance in the third quarter and the acquisition of Intergro, which is our 11th acquisition year to date. Intergro is complementary to our existing agricultural business and broadens the group's product offering to customers. Our acquisition pipeline remains active, supported by the strength of our balance sheet."
THG, which trades as the Hut Group, said it delivered a strong trading performance in the third quarter and entered its peak trading period with confidence.
For the three months to September 30, revenue was GBP507.8 million, up 34% from GBP378.1 million last year and up 86% on 2019.
Looking ahead THG said it remains on target to trade comfortably ahead of expectations set out at the time of its September 2020 initial public offering. Then, THG had guided to 2021 revenue growth of between 20% to 25%. For 2021, THG expects acquisitions to contribute GBP260 million to revenue.
Revenue for its Ingenuity Commerce platform is expected to be between GBP108.0 million and GBP112.0 million in 2022.
Turning to corporate governance, THG has appointed Russell Reynolds Associates to undertake a search for a new independent chair as it seeks to move to the Premium segment of the London Stock Exchange in 2022. Founder Matthew Moulding will cancel his 'golden' share to facilitate the move.
THG also named a Softbank executive to its board as a non-executive director. Andreas Hansson, managing director of SB Management, will join the board immediately. Softbank back in May subscribed for USD730 million in THG shares and signed an collaboration and option agreement.
In the US on Monday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.2%, S&P 500 up 0.5%, and Nasdaq Composite up 0.9%.
Late Monday, Facebook became the latest major US company to unveil strong earnings, posting a USD9 billion profit in the third quarter, in a set of results overshadowed by whistleblower allegations that the social media firm "unquestionably" fuels hate.
The stock closed up 1.3% in New York.
Developments in Washington are being closely followed by markets, after President Joe Biden said Monday he hoped Democrats would strike a deal on two massive spending packages this week.
Both wings of his party have for weeks been haggling over a social spending bill expected to cost a little less than USD2 trillion and an infrastructure bill worth USD1.2 trillion.
He said talks with one of the main obstacles to agreement, moderate Democratic Senator Joe Manchin, "went well". But there is concern that progressives in the House of Representatives who want more spending could now pose a threat to the plan.
Stocks were mixed in Asia amid concerns over a fresh virus outbreak in China, which has left tens of thousands of people in lockdown.
The Japanese Nikkei 225 index closed up 1.8%. In China, the Shanghai Composite was down 0.2%, while the Hang Seng index in Hong Kong was down 0.7%. The S&P/ASX 200 in Sydney ended flat.
"The continued resilience in stock markets is happening despite a backdrop of rising concern about increasing Covid cases in Asia, and the prospect of action by some central banks to rein back on stimulus. The move higher is being helped by rising oil prices driving gains in the oil and gas sector," said CMC Markets analyst Michael Hewson.
"As we look ahead to today's European open, last night's strong finish in the US looks set to translate into a similarly positive start here," Hewson added.
The pound was quoted at USD1.3770 early Tuesday, a whisker lower than USD1.3772 at the London equities close Monday.
The euro was priced at USD1.1605, down from USD1.1612. Against the yen, the dollar was trading at JPY113.96, up from JPY113.68.
Brent oil was quoted at USD86.00 a barrel Tuesday morning, down from USD86.57 late Monday. Gold stood at USD1,805.75 an ounce, marginally lower from USD1,807.93.
The economic events calendar on Tuesday has a US consumer confidence index print at 1500 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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Bunzl (BNZL)
Whitbread (WTB)