LONDON MARKET PRE-OPEN: BAT Expects Revenue At High End Of Forecast

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

Alliance News 9 December, 2020 | 7:51AM
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(Alliance News) - Stock prices in London are seen opening higher on Wednesday following a positive US close, as investors remain hopeful a last-minute Brexit deal can be salvaged.

In early company news, Dunhill and Rothmans cigarette maker British American Tobacco raised its revenue expectations, as it anticipates the hit from Covid-19 to be less than first feared. Accounting software provider Sage Group sold its Polish business. Housebuilder Vistry Group said it is considering reinstating dividends for 2020.

IG futures indicate the FTSE 100 index is to open 29.68 points higher at 6,588.50. The blue-chip index closed up 3.43 points, or 0.1%, at 6,558.82 Tuesday.

BAT said it was maintaining 2020 guidance as it seeks to transform its business, by switching to cigarette alternatives. The company is investing more in its New Category business and now has around 13 million non-combustible product consumers.

For 2020, BAT expects constant currency adjusted revenue growth to be at the high end of the guided 1% to 3% range. It also anticipates a reduced hit to earnings as a result of Covid-19 of 2.5%, from 3.0% previously.

Further, BAT expects a strong performance in its US business, with continued cigarette value share growth, up 40 basis points year-to-date and group cigarette volume is expected to be ahead of the industry.

"We are continuing to increase investment in our three New Categories of potentially reduced-risk cigarette alternatives, capitalising on our momentum, while continuing to deliver on our financial commitments," said Chief Executive Jack Bowles. "We are confident about the future for BAT and are committed to our 2025 New Category revenue ambition of GBP5 billion."

Sage Group said it has entered into an agreement for the sale of its Polish business to funds advised by Mid Europa Partners for GBP66 million, and the sale is expected to complete in early 2021.

Grocer Tesco said the conditions for the sale of its businesses in Thailand and Malaysia CP Retail Development have been satisfied following the formal notice of approval from the Office of Trade Competition Commission in Thailand.

Tesco said that, combined with the approval received from the Ministry of Domestic Trade & Consumer Affairs in Malaysia in November, means there are no further conditions outstanding and the disposal is expected to complete on or around December 18. As previously announced, Tesco intends to return GBP5 billion of the proceeds to shareholders via a special dividend.

Vistry Group said it would consider reinstating its dividend as it expects to deliver annual pretax profit at the top end of the guided range of GBP130 million to GBP140 million.

Vistry confirmed that it expects to have a net debt position as at December 31, greater than GBP40 million, with the possibility of a modest net cash position. This has been driven by continued strong trading, low cancellations and good cash management it said.

In November, Vistry confirmed its intention to resume dividend payments earlier than previously expected with an interim payment payable next November in respect of 2021 with a 2.5 times dividend cover and a progressive policy thereafter. However, given the strong cash performance and accelerated deleverage, Vistry said it will consider reinstating a "modest" final dividend in respect of 2020.

The housebuilder also said it repaid furlough grants obtained as a result of the pandemic and has not benefitted from any UK government schemes related to supporting the business and employees.

UK Prime Minister Boris Johnson will travel to Brussels on Wednesday to try to reach a breakthrough on a post-Brexit trade deal over dinner with European Commission President Ursula von der Leyen.

The prime minister and the EU chief will continue their talks in person after the UK Government dropped controversial plans that would have allowed ministers to break international law. The olive branch came after the two sides reached an agreement on the implementation of the Withdrawal Agreement divorce deal as time rapidly runs out to the end of the transition period on December 31.

Meanwhile, Brussels' chief negotiator Michel Barnier warned EU foreign ministers that he now believes a no-deal departure is more likely than a trade agreement being brokered in time, the PA news agency understands.

But both sides set the stage for a potentially make-or-break meal in Belgium on Wednesday.

The pound was quoted at USD1.3371 early Wednesday, up from USD1.3360 at the London equities close Tuesday.

The euro was priced at USD1.2134, up from USD1.2111. Against the yen, the dollar was trading at JPY104.15, flat from JPY104.14.

Brent oil was quoted at a USD48.88 barrel Wednesday morning, lower from USD48.98 at the London equities close Tuesday. Gold was trading at USD1,860.78 an ounce, down from USD1,869.75.

In the US on Tuesday, Wall Street ended at record highs, with the Dow Jones Industrial Average up 0.4%, S&P 500 up 0.3% and Nasdaq Composite up 0.5%.

The White House unveiled a USD916 billion stimulus proposal on Tuesday in a final dash to break a months-long deadlock over new aid for the coronavirus-stricken US economy before President Donald Trump leaves office in January.

US Treasury Secretary Steven Mnuchin announced the plan, which he said includes "money for state and local governments and robust liability protections for businesses, schools and universities."

Those elements have been key sticking points in negotiations between Democratic and Republican lawmakers. The new proposal is slightly larger than a USD908 billion compromise unveiled by a bipartisan group of senators last week.

In addition, the US Food & Drug Administration on Tuesday issued a positively-worded briefing document saying the Pfizer-BioNTech Covid-19 vaccine is safe and effective, raising expectations the regulator is poised to grant emergency approval.

Also Tuesday, AstraZeneca became the first Covid-19 vaccine maker to publish final-stage clinical trial data in a scientific journal, confirming the vaccine works in an average of 70% of cases. The move came after a mass vaccine rollout in the UK.

"Ordinarily, [the vaccine rollout] would be the main focus, along with the news that the AstraZeneca, Oxford vaccine was confirmed as being between 62% and 90% effective, however, these are not ordinary times. That said, the news did help push the S&P 500 above 3,700 to a new record high, along with the Nasdaq, with hopes of a new USD916 billion economic aid package from US lawmakers also helping on the margins, against a backdrop of rising US coronavirus cases," said CMC Markets analyst Michael Hewson.

"Asia markets were able to put aside any doubts about any political failures and trade broadly higher with markets here in Europe set to also edge higher on the open," Hewson added.

The Japanese Nikkei 225 index ended up 1.3%. In China, the Shanghai Composite closed down 1.1%, while the Hang Seng index in Hong Kong is down 0.9%.

China's consumer prices dropped more than expected in November on falling food costs, with a key gauge turning negative for the first time in 11 years due to pork prices, according to official data released.

The consumer price index, a key gauge of retail inflation, fell 0.5% on-year due to a high base of comparison in the same period last year, said Beijing's National Bureau of Statistics.

This continued a recent slide driven by easing prices of pork - a staple meat in the world's second-largest economy whose prices rocketed after an African swine fever outbreak ravaged stocks.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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