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LONDON MARKET PRE-OPEN: Vodafone And Meggitt Tweak Full-Year Guidance

(Alliance News) - Stocks in London are set to open higher on Tuesday, following on from gains in ...

Alliance News 12 November, 2019 | 7:43AM
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(Alliance News) - Stocks in London are set to open higher on Tuesday, following on from gains in Asia overnight, with international focus on an appearance by US President Donald Trump at an economics event later in the day, while locally eyes will be on UK employment figures.

In early UK company news, Vodafone raised its earnings outlook for the current financial year, Meggitt upgraded its revenue guidance but cautioned that its margin will be towards the lower end of its forecast range, and B&M European Value Retail recorded a sharp slide in interim profit on an impairment.

IG says futures indicate the FTSE 100 index of large-caps to open 15.06 points higher at 7,343.60 on Tuesday. The FTSE 100 index closed down 30.84 points, or 0.4%, at 7,328.54 on Monday.

In the US on Monday, Wall Street ended broadly lower, with the Dow Jones Industrial Average ending flat, the S&P 500 down 0.2% and the Nasdaq Composite 0.1% lower.

Despite the lacklustre US session, stocks in Asia posted gains Tuesday. In Tokyo, the Nikkei 225 index closed up 0.8%. In China, the Shanghai Composite ended 0.2% higher, while the Hang Seng index in Hong Kong is up 0.5%.

"Investors could remain skittish ahead of President Trump's appearance at the New York Economic Club on Tuesday. This speech could be the main event this week, especially if the president dangles any tangible details about his upcoming meeting with President Xi of China. Likewise, any commentary on the expiring Section 232 auto tariff reprieve will garner significant attention," said Stephen Innes, market strategist at AxiTrader.

Elsewhere, the economic events calendar on Tuesday has UK unemployment data at 0930 GMT and ZEW economic sentiment surveys for the eurozone and Germany at 1000 GMT.

FXStreet consensus sees the UK unemployment rate steady at 3.9% in September, while annual average earnings growth, both including and excluding bonuses, is also expected to remain firm at 3.8%.

"This week will be a key battleground for the political parties with any data weakness likely to be seized upon by the opposition that the UK economy is set to slow even further, while fairly decent numbers will be used to portray the current incumbents as safe stewards of the economy over the next five years," said Michael Hewson at CMC Markets.

The data comes as Nigel Farage faces calls to not field Brexit Party candidates in Labour marginals after he abandoned plans to contest those held by the Tories at the last election.

Farage's announcement on Tuesday was welcomed by UK Prime Minister Boris Johnson, who said it was recognition that only the Conservatives could "get Brexit done". But opposition parties said the move showed the Tories and the Brexit Party were now "one and the same".

Sterling was quoted at USD1.2865 early Tuesday, flat on USD1.2867 at the London equities close on Monday.

In early UK company news, Vodafone raised its outlook for the current financial year.

Revenue for the half-year to September 30 came in at EUR21.94 billion, up 0.4% from EUR21.85 billion a year ago. The firm's pretax loss narrowed to EUR511 million from EUR2.85 billion a year ago, largely due to an impairment of EUR3.50 billion booked in the comparative period.

Adjusted earnings before interest, tax, depreciation and amortisation was EUR7.11 billion, up 2.7% from EUR6.92 billion a year ago.

Organic service revenue was up 0.3% in the first half as the second quarter returned to growth, of 0.7%, following a 0.2% fall in the first three months of the financial year.

Vodafone now expects adjusted Ebitda of EUR14.8 billion to EUR15.0 billion for the current financial year, previously seen between EUR13.8 billion and EUR14.2 billion, implying organic growth of 2% to 3%.

This new guidance includes a EUR800 million benefit from the Liberty Global acquisitions in Germany and Central Europe and Vodafone's disposal in New Zealand - excluding this, the company is still on track to achieve the upper half of its original guidance range.

"I am pleased by the speed at which we are executing on the strategic priorities that we announced this time last year. This is reflected in our return to top-line growth in the second quarter, which we expect to build upon in the second half of the year in both Europe and Africa," said Chief Executive Nick Read.

Vodafone declared an interim dividend of 4.50 cents, down 7.0% from the 4.84c paid out a year before.

Broadcaster ITV said its performance in the first nine months of the year was as expected, with the FTSE 100 constituent set to deliver its full-year guidance.

Total advertising revenue was up 1% in the third quarter, at the top end of guidance. The fourth quarter is expected to deliver a result somewhere between flat to 1% higher, and total advertising revenue should be down 2% across the full-year.

For the nine months, Broadcast & Online revenue was down 3% to GBP1.46 billion, with ITV total advertising down 3%, as guided, and online revenue up 23%. ITV Studios revenue was up 1% to GBP1.12 billion.

"ITV's overall performance for the first nine months of 2019 was as we expected, and although the economic environment continues to be uncertain, we are making good progress in executing our strategy," said Chief Executive Carolyn McCall.

Engineer Meggitt upgraded its revenue guidance for 2019 as it reported stronger than expected trading in the third quarter, though was more cautious on its margin.

The firm posted organic revenue growth of 11% in the third quarter, driven by all end market segments and a particularly strong performance in Defence.

As a result, Meggitt now expects organic revenue growth for the full-year between 6% to 7%, versus guidance of 4% to 6% previously. However, its operating margin is expected towards the lower end of its guided 17.7% to 18.2% range.

"While we expect good top line growth for the full year, margin progression will be constrained by mix effects, the grounding of the 737MAX and, as discussed at the half year, pressures across our internal and external supply chain driven by the unprecedented ramp up in new aircraft production," Meggitt explained.

Commercial property investor and manager Land Securities reported a swing to loss for it first half as it reported "unsettled" market conditions.

Revenue for the half to September 30 was GBP369 million, down from GBP378 million a year ago. The company swung to a pretax loss of GBP147 million from a profit of GBP42 million, largely due to a GBP304 million net deficit on the revaluation of investment properties.

EPRA net asset value per share was 1,296 pence at the end of September, down 3.2% from 1,339p a year ago.

Looking ahead, Landsec said it expects the retail market to remain challenging due to company voluntary arrangements and administrations. Real estate fundamentals in London are "sound", however.

"Landsec had a good first half, delivering resilient results in unsettled market conditions...We have been proactive in the tough retail market, maintaining high occupancy and protecting income," said Chief Executive Robert Noel.

"With a general election next month and the UK's proposed exit from the EU further delayed, we remain alert to market risks. However, Landsec enters the next six months with confidence; we're in a strong financial position, have an exciting development pipeline and are agile enough to seize value-creating opportunities as we see them," he added.

B&M European Value Retail reported strong third-quarter sales, though profit was hit by an impairment.

Revenue for the half to September 29 was up 22% to GBP1.90 billion, while B&M UK stores revenue was up 14%, including like-for-like sales growth of 3.7%.

"Trading so far in Q3 has seen continued solid LFL sales growth in the B&M UK stores business and it is well placed for the 'golden quarter' trading," the company said.

B&M's pretax profit, however, dropped 71% to GBP32.2 million due to a GBP59.5 million impairment charge related to Jawoll, its German unit. On its German operations, the company said it is undertaking a strategic review to determine the future of the business after a "continued disappointing financial performance".

B&M held its interim dividend at 2.7p per share.

"We have delivered a solid overall first half performance driven by our core B&M UK stores business which constitutes 86% of Group sales. Our existing stores performed consistently well through the last two quarters, generating half year LFLs of 3.7%. The current crop of new stores also achieved especially strong results. The core business has made a solid start to the second half of the financial year," said Chief Executive Simon Arora.

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
ITV PLC 143.30 GBX 1.60 -
Meggitt PLC 639.60 GBX -0.09
B&M European Value Retail SA 383.30 GBX 0.63 -
Land Securities Group PLC 940.40 GBX 0.60 -
Vodafone Group PLC 144.26 GBX -1.25

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