LONDON MARKET OPEN: Stocks Higher; Investec Climbs On Demerger Plans

LONDON (Alliance News) - Stocks were higher in London early on Friday, with Investec's stock ...

Alliance News 14 September, 2018 | 8:34AM
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LONDON (Alliance News) - Stocks were higher in London early on Friday, with Investec's stock surging as it announced plans to demerge and publicly list its Asset Management arm.

In the large cap index, Whitbread was higher after a broker rating upgrade, while pub chain JD Wetherspoon was lower in the mid cap FTSE 250 after warning on costs going forward.

The FTSE 100 was 0.4% higher, or 27.06 points, at 7,308.57 early on Friday. The FTSE 250 was up 0.4% as well at 20,321.07, and the AIM All-Share was 0.1% higher at 1,098.55.

The Cboe UK 100 was up 0.5% at 12,388.65, the Cboe UK 250 up 0.4% at 18,467.77, and the Cboe UK Small Companies flat at 12,205.23.

Whitbread, which recently announced the sale of its Costa Coffee business to Coca-Cola, was 1.0% higher in the FTSE 100 index as JPMorgan raised it to an Overweight rating from Neutral.

Pharmaceutical giant AstraZeneca was 0.5% higher as it said the US Food & Drug Administration has approved Lumoxiti, a treatment for adults with relapsed or refractory hairy cell leukaemia.

In the FTSE 250, Investec was the big winner, 12% higher, after the Anglo-South African firm said interim profit is expected to be ahead of last year and announced plans to demerge and publicly list its Asset Management business.

Following the conclusion of a review, the company said there are "compelling" linkages between its Specialist Banking and Wealth & Investment business. However, there are "limited synergies" between both of these divisions and Investec Asset Management.

Therefore, the board has decided to demerge and publicly list the asset management unit. The demerger is expected to complete within the next twelve months. It is intended that the asset management business will be listed on the London Stock Exchange with an additional listing in Johannesburg.

In a separate pre-close update, Investec said that, though its first half saw "macro challenges" in both South Africa and the UK, operating profit for the period is expected to be above last year.

Against this backdrop, the Asset Management business is expected to report results ahead of the prior period, while the Wealth & Investment business is expected to report results behind last year.

Sirius Minerals was 3.3% higher as it said it has amended its minerals royalty agreement with Hancock British Holdings.

Under the new terms, Hancock has agreed to a drawdown relating to the USD250 million royalty component of the royalty agreement, with the proceeds provided no later than next Wednesday.

The USD50 million equity component, Sirius said, will come once stage two financing commitments are obtained. Sirius said the royalty drawdown provides sufficient liquidity to fund the project into the second quarter of 2019, when it will then need stage two financing.

JD Wetherspoon was 1.3% lower. The pub operator said sales for the 52 weeks to July 29 rose 5.0% year-on-year on a like-for-like basis though warned on costs going ahead.

Pretax profit, before exceptional items, increased 4.3% to GBP107.2 million, though the increase was 6.2% excluding an extra week in the pub chain's prior financial year. After exceptional items, pretax profit climbed 17% to GBP89.0 million, and this was a 19% rise excluding the comparable's extra week.

Revenue for the year came in at GBP1.69 billion, 2.0% higher year-on-year. Like-for-like bar sales rose 5.1%, accelerating from the year prior's 3.1% growth, while food sales were also up 5.1%, slightly slower than the prior year's growth of 5.7%.

Wetherspoon's final dividend is 8.0 pence per share, giving a total payout of 12.0p, flat year-on-year.

The company said it was "a year of progress", and said in the six weeks to September 9 like-for-like sales have risen 5.5%, a "reasonable" start to its new financial year.

Wetherspoons did say, however, that tax as well as labour and interest costs will be higher going forward, and the firm will need like-for-like sales growth of around 4.0% in its new financial year to meet the profit figure reported on Friday.

Merchant banker Close Brothers was 0.6% up as it announced it has sold its Retail Finance arm to Swedish payment services firm Klarna Bank for an undisclosed sum.

The sale, Close Brothers said, is part of its plan to exit the unsecured retail point of sale finance market. The business sold has a loan book of GBP66 million.

Elsewhere in London, shares in distribution firm Connect Group slumped 16% as it warned results for its year ended August 31 will be below expectations due to "challenging trends" during the period.

Parcel freight conditions are difficult, Connect said, while it expects to make an unspecified provision in its recently ended year related to its current restructuring.

In the US on Thursday, Wall Street ended higher, with the Dow Jones Industrial Average ending up 0.6%, the S&P 500 up 0.5%, and the Nasdaq Composite up 0.8%.

In China on Friday, the Shanghai Composite closed 0.2% lower, while the Hang Seng index in Hong Kong is up 1.0% in late trade. The Nikkei 225 index in Tokyo closed 1.2% higher.

Retail sales in China spiked 9.0% on year in August, the National Bureau of Statistics said on Friday. That topped forecasts for an increase of 8.8%, which would have been unchanged from the July reading.

The bureau also said industrial production advanced an annual 6.1% - matching forecasts and up from 6.0% in the previous month. Fixed asset investment in China was up 5.3% on year, shy of expectations for 5.6% and down from 5.5% a month earlier. Finally, the surveyed jobless rate came in at 5.0%, down from 5.1% in July.

Both the Bank of England and the European Central Bank held their interest rates on Thursday, as expected by economists, with the former's update described as "uneventful" by CMC Markets UK's David Madden.

The Monetary Policy Committee, led by Governor Mark Carney, voted nine to zero to keep the key rate unchanged at 0.75%.

The governor of the Bank of England has, however, warned ministers house prices could crash by more than a third in the event of a disorderly, no-deal Brexit.

Mark Carney briefed Theresa May and senior ministers on the Bank's planning for a "cliff-edge" break with the EU at a special Cabinet meeting on Thursday to review the government's no-deal preparations.

It is understood he warned house prices could fall by up to 35% over three years in a worst-case scenario, as sterling plummeted and the Bank was forced to push up interest rates.

According to reports, he compared the fall-out from such a chaotic departure to the 2008 global financial crash.

Sterling was quoted at USD1.3116 early Friday from USD1.3101 at the London equities close on Thursday.

Still to come in Friday's economic calendar is eurozone trade balance figures at 1000 BST and US retail sales at 1330 BST. In addition, Carney will give the annual Whitaker lecture at the Irish central bank at 1100 BST in Dublin.

By George Collard; georgecollard@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Wetherspoon (J D) PLC 1,313.27 GBX -1.11 -
Connect Group PLC 37.82 GBX 0.19 -
Investec PLC 473.00 GBX -0.27 -
Close Brothers Group PLC 1,502.00 GBX 0.07 -
Sirius Minerals PLC 19.70 GBX -0.91 -
Whitbread PLC 5,052.00 GBX -1.21 -
AstraZeneca PLC 6,350.00 GBX 1.21
About Author Alliance News

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