LONDON MARKET OPEN: British American Tobacco Falls After Guidance Cut

(Alliance News) - Stock prices in London opened lower on Tuesday with British American Tobacco ...

Alliance News 9 June, 2020 | 8:50AM
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(Alliance News) - Stock prices in London opened lower on Tuesday with British American Tobacco weighing on the large-cap index after the tobacco company cut its annual revenue forecasts.

The FTSE 100 index was down 21.26 points, or 0.3%, at 6,450.30 early Tuesday. The mid-cap FTSE 250 index was down 44.72 points, or 0.3%, at 18,092.18. The AIM All-Share index was up 0.2% at 894.92.

The Cboe UK 100 index was down 0.4% at 10,920.90. The Cboe 250 was up 0.1% at 15,747.76, and the Cboe UK Small Companies up 0.3% at 9,991.68.

In mainland Europe, the CAC 40 in Paris was up 0.2% while the DAX 30 in Frankfurt was flat.

In the FTSE 100, AVEVA Group was the best performer, up 6.3% after it reported a sharp spike in annual profit, driven in large part by a rise in Subscription revenue.

The Cambridge-headquartered engineering & industrial software firm posted a GBP92.0 million pretax profit for its year ended March 31. This is almost twice the prior year's GBP46.7 million profit figure.

This resulted primarily from an 8.8% increase in AVEVA's revenue to GBP833.8 million from GBP766.6 million, thanks largely to a 45% increase in Subscription revenue to GBP316.8 million from GBP218.2 million. Maintenance revenue was up 3.8% at GBP201.7 million.

AVEVA declared a final dividend per share of 29.0 pence, maintained from financial 2019. AVEVA said this reflects confidence in its "resilience, strong balance sheet position and ongoing cash generation" as well as "prudence" in the face of a global economic crisis.

Gold miners Fresnillo and Polymetal International were up 1.9% and 1.8% respectively, tracking spot gold prices higher.

The precious metal was trading at USD1,698.04 an ounce Tuesday, up from USD1,691.14 late Monday.

At the other end of the large-cap index, British American Tobacco was down 2.8% after the tobacco firm said earnings are likely to grow more slowly than previously expected due to the effects of the coronavirus pandemic in emerging markets and from a lack airport duty-free sales.

In emerging markets, BAT noted the coronavirus pandemic has had a "more pronounced" negative effect than in the US and other developed markets. The company pointed to the South African government's ban on tobacco sales continuing longer than expected as hurting sales.

As a result, BAT now expects about a 3% headwind to constant currency revenue in 2020 from the pandemic. The Rothmans and Dunhill cigarette maker is now guiding for constant currency adjusted revenue growth between 1% to 3%, down from previous guidance of 3% to 5% growth.

"Inevitably, any downgrades to revenue will be frowned upon by investors and the initial share price reaction is slightly negative. Over the last year, however, the price has outperformed the blue-chip benchmark, having risen by nearly 4%, as compared to a 12% decline for the wider FTSE 100, thus displaying some of its defensive qualities," said Interactive Investor's Richard Hunter.

The Japanese Nikkei 225 index closed down 0.4% on Tuesday. In China, the Shanghai Composite closed up 0.5%, while the Hang Seng index in Hong Kong is up 1.5%.

The pound was quoted at USD1.2715 Tuesday morning, up from USD1.2689 at the London equities close on Monday.

UK Prime Minister Boris Johnson will talk his cabinet through his plans for easing the country's lockdown on Tuesday after officials on Monday reported the lowest number of daily Covid-19 deaths since restrictions were imposed.

The euro was quoted at USD1.1264, down from USD1.1294 after Germany recorded the largest month-on-month decline in exports in April since the introduction of foreign trade statistics in 1950, Destatis said.

Germany exported goods to the value of EUR75.7 billion in April, down 24% on the prior month. Exports decreased by 31% year-on-year. The Federal Statistical Office also reported imported goods to the value of 72.2 billion euros in April, down 17% month-on-month and down 22% year-on-year.

Against the yen, the dollar was quoted at JPY107.97, down from JPY108.61.

Brent oil was priced at USD41.10 a barrel Tuesday morning, flat from USD41.14 late Monday.

The economic events calendar on Tuesday has eurozone GDP readings at 1000 BST. In addition, the US Federal Reserve's two-day monetary policy meeting gets underway on Tuesday, with a rate decision due on Wednesday.

By Arvind Bhunjun;

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Fresnillo PLC 1,303.13 GBX 0.71 -
AVEVA Group PLC 4,594.00 GBX 1.98 -
British American Tobacco PLC 2,538.00 GBX 1.87
Polymetal International PLC 2,016.00 GBX 0.20 -

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