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LONDON MARKET PRE-OPEN: William Hill Bets On US With Eldorado Deal

LONDON (Alliance News) - Stocks in London are set to open lower on Wednesday ahead of the last in ...

Alliance News 5 September, 2018 | 7:37AM
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LONDON (Alliance News) - Stocks in London are set to open lower on Wednesday ahead of the last in a trio of UK Purchasing Managers' Index readings for August.

The UK services PMI, due at 0930 BST, is expected to improve to 53.9 from 53.5 in July. This follows weaker-than-expected readings on manufacturing and construction activity earlier in the week.

In pre-market UK company news, William Hill confirmed it has entered into a partnership with Nasdaq-listed Eldorado Resorts to expand its offering in the US, Barratt Developments reported a full-year rise in profit, and Berkeley Group backed its guidance ahead of its annual general meeting later on Wednesday.

IG says futures indicate the FTSE 100 index of large-caps to open 22.56 points lower at 7,435.30 on Wednesday. The FTSE 100 index closed down 0.6%, or 46.74 points, at 7,457.86 on Tuesday.

Sterling was quoted at USD1.2847 early Wednesday ahead of the services data, higher than USD1.2823 at the London equities close on Tuesday.

"European markets underwent another day of declines yesterday as emerging market turmoil and trade concerns combined to keep investors on the back foot," said CMC Markets chief market analyst Michael Hewson.

Hewson continued: "The main preoccupation for investors continues to be on whether the US is serious about arriving at some form of deal with Canada over NAFTA in the wake of President Trump's tweets at the weekend, that it wasn't and isn't a political necessity to get a deal."

US President Donald Trump tweeted over the weekend that there was "no political necessity to keep Canada in the new NAFTA deal" after US and Canadian officials failed to reach an agreement on trade last week.

"If we don't make a fair deal for the US after decades of abuse, Canada will be out. Congress should not interfere with these negotiations or I will simply terminate NAFTA entirely & we will be far better off," he added.

In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average closing marginally lower, the S&P 500 down 0.2% and Nasdaq Composite also shedding 0.2%.

Amazon.com on Tuesday became the second US company to reach the USD1 trillion valuation mark, around a month after Apple Inc reached the milestone.

Its shares hit the USD2,050.50 level during Tuesday's session to, briefly, give its stock a value of USD1 trillion. Amazon shares have risen more than 70% this year, and 600% over the past five years.

In Asia on Wednesday, the Japanese Nikkei 225 index closed down 0.5%. In China, the Shanghai Composite is down 1.1%, while the Hang Seng index in Hong Kong is 2.1% lower.

Overnight, the latest survey from Caixin showed the services sector in China grew at a slower than expected rate in August.

The country's PMI came in at 51.5, a 10 month low and missing expectations for 52.6, as well as being down from 52.8 in July. However, the score remained above the line of 50, which indicates expansion in the sector.

The composite index fell to a five-month low of 52.0 in August from 52.3 in July.

To come are services PMI readings due from France, Germany and the eurozone 0850 BST, 0855 BST and 0900 BST respectively.

Also in the eurozone are retail sales at 1000 BST, while in the US are MBA mortgage applications at midday London time, followed by the US trade balance at 1330 BST and the Redbook index at 1355 BST. The Bank of Canada releases its latest interest rate decision at 1500 BST.

In the UK on Wednesday, Brexit Secretary Dominic Raab will be grilled by MPs over progress in exit talks later as the government's plans face mounting criticism.

The minister will appear before the European Scrutiny committee after Brexit preparations were branded "incompetent" by former Bank of England governor Mervyn King, who warned the government had been left without a credible bargaining position.

Raab told MPs on Tuesday that leaving the EU without a withdrawal agreement would offer "opportunities" to the UK, but he insisted an agreement with Brussels was "within our grasp".

However the EU's chief negotiator, Michel Barnier, has warned he is "strongly opposed" to the UK proposals, which he claimed would undermine the European project and the single market.

On Tuesday, German chancellor Angela Merkel told business leaders in the country that she could not fully rule out no deal "because we still have no result" from the talks.

UK housebuilder Barratt Developments said early Wednesday that revenue and profit rose in an "outstanding" financial year, as its upped its dividend.

Revenue for the year to June 30 grew 4.8% to GBP4.87 billion, as pretax profit rose 9.2% to GBP835.5 million. Gross margin strengthened by 70 basis points to 20.7%, and total completions rose 1.1% to 17,579.

The company raised its dividend for the year by 5.0% to 43.8 pence from 41.7p paid the year before. The year's payout comprises a 26.5p ordinary dividend and a 17.3p special dividend.

"The group has had another outstanding year delivering a strong operational and financial performance, and our highest volumes in a decade," said Chief Executive David Thomas.

Thomas continued: "Our continued focus on operating efficiencies and margin initiatives is starting to deliver and we have today announced new medium term operational targets reflecting our confidence in the business going forward. The group starts the new financial year in a good position with a strong balance sheet, healthy forward sales and robust consumer demand supported by a positive mortgage environment."

These targets include completion growth of 3% to 5% per year over the medium term, with new land acquisitions at a minimum 23% gross margin and return on capital employed to come in at least at 25%.

Peer Berkeley Group, ahead of its annual general meeting, said market conditions in London and the south east of England have remained "consistent" in the first four months of its new financial year with that reported at its annual results in June.

Pricing has remained robust with demand for "good quality, well located" homes. However, the company said that London continues to be "constrained" by high transaction costs and economic uncertainty, amplified by Brexit.

The housebuilder nonetheless backed its long-term guidance, and said it is finding opportunities to invest and acquired five new sites in the four months to the end of August.

William Hill said it has entered into a partnership with Nasdaq-listed Eldorado Resorts for digital and land-based sports betting and online gaming in the US.

Eldorado is a "a major casino group", said William Hill, with 21 properties across 11 states and a customer base of 23 million people. Eldorado's pending acquisition of Tropicana Entertainment will further extend this.

Under the agreement, the FTSE 250-listed company will become Eldorado's exclusive partner to provider digital and land-based sports betting services as well as online gaming. As a result, William Hill's reach now extends to 13 states where sports betting is either legal or sports betting bills are tabled.

Eldorado will receive USD50 million in William Hill shares, representing a 1.6% stake, a 20% stake in William Hill US and a share of profit "attributable to its licences". William Hill US will retain 80% of this combined business.

The move from William Hill comes after a loosening of US sports betting regulation in May by the Supreme Court. London-listed peers such as GVC Holdings and Paddy Power Betfair have already moved to capitalise on the US market, with the former entering a joint venture with MGM Resorts International and the latter combining its Betfair US unit with US fantasy sports operator FanDuel.

Private equity funds advised by BC Partners and Angus Ball sold 44.8 million shares in Sabre Insurance Group at a price of 260p each via an accelerated bookbuild, raising gross proceeds of GBP116.4 million.

The sale, first announced after the market close on Tuesday, sees BC Partners dispose of its entire holding in Sabre while Angus Ball continues to own a 1.8% stake in the insurer.

Barclays Bank acted as sole global coordinator and bookrunner in connection with the offering. Shares in Sabre closed down 5.1% at 260.00 pence on Tuesday.

Miner BHP Billiton said it has acquired Guyana Goldfields's minority stake in London and Toronto-listed SolGold for GBP27.4 million. SolGold is the majority owner and operator of the Cascabel copper-gold project in Ecuador.

BHP will buy all of the 103.1 million SolGold shares, a 6.1% stake, held by Guyana Goldfields at a price of 25.592 pence per share, a 20% premium to SolGold's closing price in London on Tuesday of 21.35p.

BHP Chief Executive Officer Andrew Mackenzie said the deal would see the FTSE 100 miner gain "exposure to a high-quality copper exploration project in Ecuador, which is a highly prospective location for BHP."

The stock closed 2.6% lower overnight in Australia.

In the afternoon, at 1500 BST, are August traffic statistics from British Airways parent International Consolidated Airlines.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Sabre Insurance Group PLC 309.50 GBX 0.16 -
Barratt Developments PLC 658.60 GBX -0.87 -
William Hill PLC 164.55 GBX -1.58 -
Berkeley Group Holdings (The) PLC 4,563.00 GBX 0.11 -
BHP Billiton PLC 1,729.00 GBX 1.08

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