LONDON MARKET OPEN: FTSE starts week strongly but AB Foods slumps

(Alliance News) - Share prices in Europe opened higher on Monday, with healthy gains in FTSE 100-listed bank stocks helping to lift London's blue-chip index, despite economic growth and inflationary worries hitting sentiment last week.

"Ahead of a busy week for key data reports in both the UK and US, today's calendar is noticeably empty with no releases or central bank speakers of note. That is likely to keep markets' attention focused on the twin issues of delta variant risks and elevated and rising inflation," analysts at Lloyds commented.

The travel & leisure sector in London nudged higher, as plans to launch vaccine passports in the UK have been ruled out. Health Secretary Sajid Javid also said he wants to get rid of PCR tests for travel soon.

The FTSE 100 index was up 28.97 points, or 0.4%, at 7,058.17. The mid-cap FTSE 250 index was up 66.81 points, 0.3%, at 23,800.37. The AIM All-Share index was down 2.02 points, 0.2%, at 1,293.12.

The Cboe UK 100 index was up 0.5% at 702.21. The Cboe 250 was up 0.1% at 21,566.48, and the Cboe Small Companies was flat at 15,470.14.

In mainland Europe, the CAC 40 stock index in Paris was up 0.5% and the DAX 30 in Frankfurt was 0.6% higher. This time next week, the German blue-chip index expands to 40 companies.

Equity markets in Asia were on the back foot earlier Monday but have since managed to notch some gains. The Nikkei 225 in Tokyo closed up 0.2%. In China, the Shanghai Composite ended 0.3% higher, though the Hang Seng Index in Hong Kong was off 1.8%, weighed down by technology stocks. The S&P/ASX 200 in Sydney ended 0.3% higher.

Brent oil was quoted at USD73.36 a barrel early Monday, up from USD72.67 late Friday.

BP and Royal Dutch Shell's A and B stock all were 1.0% higher early on Monday.

The financial services sector also made strides in early dealings. Barclays rose 1.5%, and HSBC was up 0.9%. The duo had both lost 2.4% last week.

Air carriers Wizz Air and Ryanair were up 1.1% and 2.2%, respectively. Revolution Bars was up 1.8%.

Plans to introduce vaccine passports in England for nightclubs and other crowded venues have been scrapped in the latest of the UK government's coronavirus U-turns.

Health Secretary Javid confirmed the proposals "will not be going ahead" on Sunday, just days after ministers had defended the policy to sceptical members of Parliament.

Javid also said he wanted to remove the need for PCR tests for travel "as soon as I possibly can". The Mail on Sunday reported that PCR tests needed prior to travel will be scrapped, with the day two test required when returning from abroad to be replaced by a cheaper lateral flow test

Associated British Foods fell 2.1%, the worst large-cap performer. Its food units and its Primark retail business topped profit expectations in the fourth quarter, despite being hit by the 'pingdemic' in the UK.

AB Foods said fourth-quarter adjusting operating profit in its foods units and at Primark "is anticipated to exceed our expectations". Primark saw sales come in lower than expected, though margins improved, the company explained.

"For the full year, we now expect AB Sugar to deliver an even greater improvement in adjusted operating profit over last year than previously expected and Primark's adjusted operating profit, stated before repayment of job retention scheme monies, to be ahead of last year," the company said.

Group adjusted operating profit for the financial year ending September 18, also before furlough repayments, is expected to top last year's levels, benefiting from an extra trading week.

At AB Grocery, which includes the Twinings tea and Silver Spoon sugar and sweetener brands, annual revenue is expected to rise. AB Sugar will post a 7% annual revenue hike, the agriculture arm AB Agri has seen sales "well ahead of last year", and the Ingredients unit also will post a revenue improvement.

At fast-fashion retailer Primark, sales in the second half of the financial year are expected to come in at GBP3.4 billion.

"Primark's operating profit margin in the second half, stated before the charge for repayment of job retention scheme monies, benefited from a significant reduction in store labour costs and lower store operating costs and is expected to be over 10%," AB Foods explained.

Third quarter like-for-like sales were up 3% on pre-pandemic times but in the fourth quarter, sales have been hurt by lower footfall levels and the spread of the Delta variant.

"In the UK, our sales were affected by the rapid and significant increase in late June and early July in the number of people required to self-isolate following contact tracing alerts - the 'pingdemic'. Data shows that high street footfall was impacted by the caution displayed by many consumers at that time. The self-isolation rules were then eased in early August," AB Foods explained.

In addition, the company cautioned that virus restrictions have slowed its store rollouts and a stronger pound will result in a currency exchange hit of around GBP35 million for the full year.

FirstGroup rose 3.0%, the best performing mid-cap stock. The transport operator said bus passenger volumes have averaged at 65% of pre-virus levels in recent weeks, and FirstGroup expects this figure to rise as schools and universities begin teaching again.

The company, which pledged shareholder returns after selling its First Student and First Transit units, said it will implement a tender offer for its shares.

FirstGroup in July increased its planned payout to investors to GBP500 million from GBP365 million, after receiving more than expected from the sale of the two US units.

In a positive read across, ticketing platform Trainline was up 2.5% and SSP Group, an operator of food outlets such as Upper Crust in travel locations, climbed 1.5%.

London's IPO market picked up again, with Goldman Sachs Group's alternative asset manager Petershill Partners confirmed plans for a Main Market float and Czech payments company Eurowag also announced plans to list.

Eurowag, which provides payments services to the transportation industry, said EUR200 million worth of new and existing shares will be sold in its London Main Market float.

Reuters in May reported the planned float could value Eurowag at over USD2 billion.

"Eurowag has built a large payments acceptance network in Europe integrated with complementary mobility services and is at the forefront of the transformation of the commercial road transportation industry. We are poised for a period of rapid growth and remain committed to improving the profitability of fleets and the well-being of drivers, as well as reducing the industry's carbon footprint," Founder & Chief Executive Martin Vohanka said.

Petershill, meanwhile, confirmed IPO plans, as it eyes raising USD750 million to fund new investments.

Petershill - which will be a standalone company operated by the Goldman Sachs Asset Management team - buys minority stakes in independent alternative asset managers.

The dollar was stronger across the board early Monday in London. The pound was quoted at USD1.3809, down from USD1.3845 at the London equities close on Friday. The euro stood at USD1.1784, down from USD1.1828. Against the yen, the dollar was trading at JPY110.11, up from JPY109.85.

Gold fetched USD1,790.03 an ounce early Monday, down slightly from USD1,795.25 late Friday.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.