LONDON MARKET PRE-OPEN: Imperial Brands Cuts Payout But DCC Hikes

(Alliance News) - Stock prices in London are seen opening higher on Tuesday following a strong US ...

Alliance News 19 May, 2020 | 7:49AM
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(Alliance News) - Stock prices in London are seen opening higher on Tuesday following a strong US close on Monday due to hopes for a vaccine to treat coronavirus and a further easing of lockdown measures around the world.

In early company news, tobacco firm Imperial Brands cut its interim dividend after reporting a fall in profit. Irish support services firm DCC said it continues to trade robustly despite the ongoing coronavirus uncertainty, raising its own payout.

IG futures indicate the FTSE 100 index is to open 23.51 points higher at 6,072.10. The blue-chip index closed up 248.82 points, or 4.3%, at 6,048.59 Monday.

Imperial Brands cut its dividend after reporting a drop in interim profit as the tobacco firm said Covid-19 has only had a small effect on the business so far.

For the half-year ended March 31, revenue rose to GBP14.67 billion from GBP14.39 billion last year, but pretax profit fell 23% to GBP785 million from GBP1.02 billion. Operating profit fell 20% to GBP925 million.

Imperial Brands cut its interim dividend by 33% to 41.70 pence from 62.56p last year.

Looking ahead, Imperial expects coronavirus-related factors to have a low single-digit impact on earnings per share.

Joint chief executives Dominic Brisby and Joerg Biebernick said: "Our enhanced focus on tobacco has driven stronger in-market execution and an improved share performance, with gains in most of our priority markets. We have reduced our next generation products spend following the poor returns on investment last year and this, together with recent weaknesses in the vapour category, has resulted in lower [next-generation products] revenue.

"Overall, Covid-19 has so far had only a small impact on trading but we expect this to be more pronounced in the second half due to continued pressures on our duty-free and travel retail business, changes in consumption patterns including down-trading and a reversal of some first-half inventory build."

DCC said it delivered a resilient annual performance amid the uncertainty created by the Covid-19 pandemic.

For the financial year ended March 31, revenue slipped 3.1% to GBP14.76 billion from GBP15.23 billion in financial 2019 and pretax profit by 4.9% to GBP311.5 million from GBP327.4 million the year before. However, adjusted operating profit rose 7.3% to GBP494.3 million from GBP460.5 million.

Despite the mixed performance, DCC raised its total dividend 5.0% to 145.27 pence from 138.35p.

"Overall, DCC has traded robustly in April and the early weeks of May and has been significantly profitable in the period. Relative to initial expectations at the beginning of April, the performance of the Group has been better than anticipated, albeit behind the prior year. The group continues to be active from a development perspective and in recent days the Irish LPG business acquired an all-island electricity business, as it continues to grow its natural gas and power offering, while the US LPG business completed a small bolt-on acquisition," DCC said.

In the US on Monday, Wall Street ended sharply, with the Dow Jones Industrial Average up 3.9%, S&P 500 up 3.2% and Nasdaq Composite up 2.4%.

The Japanese Nikkei 225 index closed up 2.0%. In China, the Shanghai Composite is up 0.6%, while the Hang Seng index in Hong Kong is up 1.9%.

On Monday, US biotech firm Moderna reported "positive interim" results in early testing of a vaccine candidate, with some experts suggesting that if all goes well it could be in use by the end of the year.

In addition, investors were optimistic over a gradual return to some semblance of normal in key markets, with major tourist attractions in Italy and Greece reopening, top-tier football back in Germany and the "Big Three" Detroit automakers, General Motors, Ford and Fiat Chrysler resuming manufacturing.

"Optimism around economies reopening and a coronavirus vaccine is driving higher equities, oil prices, and weaker USD. The incomprehensible stimulus support means positive news triggers an asymmetric positive response in markets compared to a sell-off in risk via negative news. This dynamic is becoming more entrenched in market sentiment as Western Europe and the US loosen mobility restrictions," AxiCorp's Stephen Innes said.

The pound was quoted at USD1.2201 early Tuesday, lower than USD1.2221 at the London close Monday.

The UK unemployment rate edged lower in the three months to March, the Office for National Statistics said on Tuesday.

The unemployment rate in the UK decreased to 3.9% in three months to March, as the lockdown in the UK came into effect, down from the three months to 4.0% in February. Market consensus estimates had expected the latest jobless rate to rise to 4.4%.

The ONS noted the jobs report was based on interviews that took place throughout the period from the start of January to the end of March. "Consequently, most interviews relate to the period prior to the implementation of coronavirus social distancing measures," it said.

The euro was quoted at USD1.0914, up from USD1.0892.

France and Germany proposed Monday a EUR500 billion fund to finance the recovery of the EU's economy from the devastation wrought by the coronavirus crisis.

Putting aside past differences and seeking to prove that the Franco-German core of Europe remains intact, President Emmanuel Macron and Chancellor Angela Merkel announced the unprecedented package after talks by video conference.

Against the yen, the dollar was quoted at JPY107.38, flat from JPY107.39.

Brent oil was quoted at USD34.84 a barrel Tuesday morning, lower than USD35.48 late Monday. Gold was quoted at USD1,735.01 an ounce, firm from USD1,729.70.

The economic calendar has eurozone construction output at 1000 BST with the German ZEW survey due at the same time. US Federal Reserve Chair Powell will testify before Congress at 1500 BST.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Imperial Brands PLC 1,272.50 GBX -0.27
DCC PLC 7,090.00 GBX 3.78 -

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