LONDON MARKET MIDDAY: FTSE 100 Slides As Pound Hits Seven-Month High

LONDON (Alliance News) - The FTSE 100 remained in the red as Wednesday's session progressed, with ...

Alliance News 27 February, 2019 | 12:10PM
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LONDON (Alliance News) - The FTSE 100 remained in the red as Wednesday's session progressed, with the pound rising above the USD1.33 mark for the first time since July to hamper the overseas earnings-heavy index.

Also dragging on the UK's headline stock index was Marks & Spencer on plans to raise GBP600 million and cut dividend payout, as it agreed a UK online grocery joint venture with fellow FTSE 100 constituent Ocado.

The FTSE 100 was 52.55 points lower, or 0.7%, at 7,098.57 at midday on Wednesday. The mid-cap FTSE 250 was down 131.11 points, or 0.7%, at 19,139.57, while the AIM All-Share index was down 0.7% at 906.94.

The Cboe UK 100 index was down 0.8% at 12053.61, while the Cboe UK 250 was down 0.8% at 17082.62 but the Cboe UK Small Companies was up 0.1% at 11143.04.

"The implications of a potential delay in Brexit and the pound's new found strength are working against the FTSE this morning and even though several blue chips like ITV, Weir Group and homebuilder Taylor Wimpey turned in good results, this was not enough to stem the tide," said Fiona Cincotta, senior market analyst at City Index.

Sterling was quoted at USD1.3324 early Wednesday, up from USD1.3263 at the London equities close on Tuesday to trade around its best level in seven months.

UK Prime Minister Theresa May has issued a plea to members of Parliament to back a Brexit deal, telling Parliament to "do its duty" ahead of another series of votes this evening on the government's negotiating strategy.

May accepted for the first time on Tuesday that the UK may not leave the EU on March 29, offering MPs a chance to vote to delay Brexit if her deal is rejected again next month.

Though, writing in the Daily Mail, May said Parliament's "absolute focus should be on working to get a deal and leaving on March 29" – and reiterated her opposition to delaying Britain's departure.

MPs will vote on the prime minister's negotiating strategy for Brexit and a series of amendments on Wednesday evening, ahead of another "meaningful vote" on May's Withdrawal Agreement next month.

As well as the stronger pound, Marks & Spencer was weighing on the FTSE 100 as it revealed plans to raise GBP600 million via a rights issue to fund a online food delivery joint venture with Ocado.

M&S also said it will rebase its dividend by 40% to a "sustainable level". M&S expects to pay a 7.1p final dividend in respect of its current financial year, down from 11.9p last year.

Ocado shares, meanwhile, gained 4.7% on news of the deal.

M&S will pay GBP750 million to Ocado for a 50% stake in the joint venture, comprising GBP562.5 million upfront in cash with a deferred payment of GBP187.5 million.

"I have always believed that M&S Food could and should be online. Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth," M&S Chief Executive Officer Steve Rowe said.

The joint venture, trading as Ocado.com, will combine M&S's branded food and beverage range with Ocado's own label and third-party products.

"For both parties the deal makes sense, and is a positive move that will enable future growth. The dividend cut is a sting in the tail for M&S investors however," commented Laith Khalaf at Hargreaves Lansdown.

ITV was trading 4.6% lower at midday as it reported earnings growth for 2018 but guided to a single-digit decline in advertising revenue in the first four months of 2019.

Total external revenue rose 2.6% to GBP3.21 billion in 2018, in line with analyst expectations, with total revenue up 3.0% to GBP3.76 billion from GBP3.66 billion in 2017.

Advertising revenue climbed 0.8% to GBP1.80 billion from GBP1.78 billion in 2017, while non-advertising revenue was up 5.2% to GBP1.97 billion.

Pretax profit increased by 13% to GBP567 million from GBP500 million the year before. Adjusted pretax profit declined 4.1%, however, to GBP767 million from GBP800 million in 2017. According to consensus forecasts, ITV was expected to report adjusted pretax profit of GBP750 million, so ITV slightly beat this consensus.

Looking ahead, ITV said economic and political uncertainty continues to hit demand for advertising "as expected", with total advertising forecast to be down 3% to 4% over the first fourth months of 2019.

St James's Place was down 3.1% as it sounded caution on its flows outlook for 2019.

The wealth management firm ended 2018 with GBP95.55 billion funds under management, in line with company guidance and a 5.3% increase on 2017's closing GBP90.75 billion funds under management.

St James's said net inflows increased 8.1% to GBP10.28 billion from GBP9.51 billion in 2017, with gross inflows increasing 7.5% to GBP15.70 billion, in line with the company's guidance.

St James's said its business continues to perform well relative to the industry, though "challenging external factors, like those currently being experienced, are not in our control and the pace of fund flows has moderated compared with last year".

"I would note though that the inflows for the same period last year represent a very strong comparative and March typically accounts for around 50% of the first quarter's flows," Chief Executive Andrew Croft added.

FTSE 250-listed Playtech rose 4.2% as it entered a long-term partnership agreement, lasting until 2025, with blue-chip bookmaker GVC Holdings.

Under the deal, Playtech will provide its services and products to all GVC brands, in both existing and new markets. No financial details were disclosed.

GVC owns one of the largest online betting and gaming business worldwide, while Playtech is a provider of technology services to the gambling industry.

GVC shares were flat at midday.

Also among the gainers was engineer Weir, up 4.1% as it posted growth in adjusted profit.

On an adjusted basis, from continuing operations, Weir's pretax profit rose 22%, and 26% in constant currency, to GBP310.1 million in 2018.

However, statutory pretax profit from continuing operations fell to GBP86.1 million from GBP198.6 million a year prior.

Weir booked GBP224.0 million of exceptional items and intangibles amortisation for 2018, it said, compared to just GBP56.3 million the year prior.

Some of Weir's exceptional costs included costs related to its ESCO Corp acquisition, restructuring, as well as a GBP45.0 million reduction in the value of its Flow Control business.

However, keeping the FTSE 250 in the red were double-digit declines for both Metro Bank and Ted Baker.

Metro Bank sunk 19%, as the lender Tuesday afternoon said it has entered a standby underwrite agreement to raise GBP350 million.

Then, after the market close, the challenger bank posted an adjusted pretax profit of GBP50 million, up from GBP20.8 million the year before, in line with guidance at the end of January. Prior to January's update, analysts had expected a profit of GBP59 million.

Net interest margin fell by 12 basis points in the year to 1.81% from 1.93% a year prior, while Metro Bank's common equity tier one ratio fell to 13.1% from 15.3% in 2016.

Fashion retailer Ted Baker slid 11% after the firm said it expects pretax profit for its recently ended financial year to be lower than the year before due to foreign exchange movements, system upgrades and warehouse transitions.

The fashion retailer expects pretax profit for the year ended January 26 to be in the region of GBP63 million, before costs related to House of Fraser, the acquisition of No Ordinary Shoes and the ongoing independent external investigation into Chief Executive & Founder Ray Kelvin.

In mainland Europe, the CAC 40 in Paris and the DAX 30 in Frankfurt were down 0.3% and 0.6%, respectively.

In the US, stocks are headed for a lower start with the Dow Jones seen down 0.3% and both the S&P 500 and Nasdaq called off 0.2%.

In the economic calendar on Wednesday, US goods trade balance and durable goods orders are both at 1330 GMT. Later are US pending home sales and factory orders, both at 1500 GMT.

Also on Wednesday will be the results of the quarterly FTSE index review after the market closes, with John Wood Group and GVC Holdings seen slipping out of the FTSE 100 to be replaced by Phoenix Group Holdings and Just Eat.

Stockbroker AJ Bell is set to join the FTSE 250 after floating in London last year, while retailers Superdry and Halfords face relegation.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar Rating
Weir Group PLC 1,474.52 GBX -2.51
Playtech PLC 402.90 GBX -0.96 -
St James's Place PLC 1,086.50 GBX -1.09 -
Metro Bank PLC 504.00 GBX -3.91 -
Ocado Group PLC 1,147.93 GBX -0.05 -
Ted Baker PLC 835.00 GBX 1.40 -
ITV PLC 106.85 GBX -0.56 -
Marks & Spencer Group PLC 204.20 GBX -2.67 -
GVC Holdings PLC 622.40 GBX -1.21 -
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