LONDON MARKET PRE-OPEN: Ashtead lifts outlook; Ryanair plots growth

(Alliance News) - Stock prices in London are seen cautiously opening higher, despite a weak ...

Alliance News 16 September, 2021 | 6:46AM
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(Alliance News) - Stock prices in London are seen cautiously opening higher, despite a weak handover from Asia, though economic uncertainty is keeping a lid on gains.

In early UK corporate news, equipment rental firm Ashtead posted a first quarter earnings hike and upped its annual outlook. Ryanair lifted its five-year traffic growth forecast. Online retailer Hut Group posted a sharp interim revenue hike but saw its loss widen.

IG futures indicate the FTSE 100 index is to open 11.2 points higher, 0.2%, at 7,027.69. The large-cap index closed down 17.57 points, 0.3%, at 7,016.49 on Wednesday.

"In Europe, we still look set for a positive open, despite the weak lead from Asia, and given the current uncertainty it's hard to escape the feeling that investors are struggling to find a narrative to justify pushing stocks higher," CMC Markets analyst Michael Hewson commented.

"Having got off to a positive start to the week on Monday, the last two days have been disappointing ones for European markets. Yesterday's weakness was driven by a surge in energy prices, which in turn is prompting concerns that rising prices will slow an already fragile recovery, by eroding disposable income for consumers. We could also see business profit margins getting hit as the costs of production, as well as transportation go up."

FTSE 100-listed Ashtead tipped its full-year results to be "ahead of its earlier expectations". In the first quarter to July 31, revenue rose 21% year-on-year to USD1.85 billion from USD1.51 billion. Rental revenue alone rose 22% to USD1.67 billion from USD1.35 billion a year earlier.

Pretax profit surged 74% to USD415.8 million from USD240.6 million.

Two years earlier, so prior to the onset of the pandemic, Ashtead's first quarter pretax profit amounted to USD304.7 million, on revenue of USD1.28 billion. Rental revenue back then amounted to USD1.16 billion.

"The group delivered a strong quarter with rental revenue up 22% over the prior year, but more importantly up 12% when compared with the first quarter of 2019-20, both at constant currency. This reflects continued market outperformance across the business," Chief Executive Brendan Horgan said.

"In the quarter, we invested USD551 million in capital across existing locations and greenfields and USD123 million on five bolt-on acquisitions, adding a combined 29 locations in North America. his investment takes advantage of the ongoing structural growth opportunity that we continue to see in the business."

Looking to the full-year, Ashtead raised group rental revenue guidance. It now expects rental revenue climb of 13% to 16%, up markedly from the previous growth of 6% to 9%.

Ryanair is targetting annual traffic of 225 million passengers by March 2026, up from its previous target of 220 million and the 149 million it carried before the Covid-19 pandemic. It has lifted its five-year traffic growth forecast to 50% from 33% previously.

Ryanair also plans to take delivery of 210 Boeing 737 "gamechanger" aircraft over the next five years.

"These aircraft will deliver industry lowest costs, reduced emissions, and will enable Ryanair accelerate its post-Covid growth, as opportunities open up at primary and secondary airports all over Europe, particularly where legacy carriers have failed or reduced fleet sizes as a result of Covid and state aid," Ryanair added.

Ryanair's annual general meeting will be held on Thursday. It said that, based on proxy votes it has received, all resolutions have been passed.

THG, which trades as The Hut Group, left annual guidance unchanged after posting sharp first-half revenue growth.

In the six months to June 30, revenue rose 42% to GBP958.8 million from GBP675.7 million a year earlier. Revenue was 93% higher than it was two years prior.

However, its pretax loss stretched to GBP81.3 million from GBP49.9 million a year earlier.

THG booked a loss from the revaluation of an option with SB Management, a a subsidiary of new partner SoftBank Group. This non-cash loss amounted to GBP38.1 million.

Back in May, THG said it secured a financial and trading partnership with SBM, under which both parties will explore potential commercial arrangements between each other.

The collaboration comprises a USD730 million subscription by SBM in THG shares as well as an option to subscribe for a 20% interest in THG Ingenuity, which is worth USD1.6 billion, implying an enterprise value of USD6.3 billion.

THG has operations within its Beauty, Nutrition, OnDemand and Ingenuity arms. It owns brands such as online cosmetics company Lookfantastic and wellness unit Myprotein and its Ingenuity e-commerce technology platform has served blue-chip customers such as Nestle, Walgreens Boots Alliance and Procter & Gamble.

THG floated a year ago, raising GBP920 million at 500 pence per share. Closing at 638.50p on Wednesday, shares are now 28% higher than the IPO price.

Elsewhere, London's IPO market received another boost. IP Group investee Oxford Nanopore confirmed plans to float. IP Group has a 14% stake in the company.

Admission is expected in early October. Oxford Nanopore is to raise GBP300 million. Existing shareholders also will sell stock.

The life sciences business announced its intention to float earlier in September.

"We believe Oxford Nanopore is ideally suited to both disrupt existing markets and create entirely new ones. An IPO will be a step on the journey to make our vision a reality, supporting our ambitious growth plans and enhancing our ability to innovate and grow," Chief Executive Gordon Sanghera said at the time.

The IPO would represent a big win for London's Main Market. Biotechnology firms have previously listed on the junior AIM market or have looked to make a mark on the Nasdaq in the US. Vaccitech, which like Oxford Nanopore is a University of Oxford spin-out, opted to overlook London markets entirely to list on the Nasdaq back in April. AIM-listed life science research tools firm Abcam is also Nasdaq-listed.

In New York on Wednesday, the Dow Jones Industrial Average rose 0.7%, the Nasdaq Composite ended 0.8% higher and the S&P 500 added 0.9%.

"This turnaround in the US, hasn't translated into a positive Asia session, which are struggling on the back of concerns over the Chinese economy, as well as regulation," CMC's Hewson added.

The Shanghai Composite was down 0.9% on Thursday. The index had lost 0.2% on Wednesday after retail sales in China came in below expectations, rising just 2.5% in August, well short of the 7% forecast.

The Hang Seng Index in Hong Kong was 1.8% lower, hit by heavy declines in the technology and casino sectors, two industries that have faced government crackdowns.

The Nikkei 225 in Tokyo closed down 0.6%, but the S&P/ASX 200 in Sydney added 0.6%.

Australia's Prime Minister Scott Morrison confirmed Thursday the country has scrapped a AUD90 billion, about USD66 billion, submarine deal with France, instead building nuclear-powered subs using US and British technology.

Morrison also announced that Australia would acquire long-range US Tomahawk cruise missiles for the first time, as it strengthens military defences to counter China's growing influence in the Indo-Pacific region.

The pound was quoted at USD1.3825 early Thursday in London, down from USD1.3840 at the London equities close on Wednesday. The euro faded to USD1.1804 from USD1.1817. Against the yen, the dollar was trading at JPY109.30, down from JPY109.38.

Brent oil was quoted at USD75.53 a barrel early Thursday, down from USD75.75 late Wednesday. Gold was trading at USD1,784.72 an ounce, down from USD1,792.85.

The economic events calendar on Thursday has eurozone trade figures at 1000 BST and US retail sales numbers at 1330 BST.

By Eric Cunha;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Ashtead Group PLC 3,594.00 GBX 2.80
IP Group PLC 70.40 GBX 5.63 -
Ryanair Holdings PLC
THG PLC Ordinary Share 80.16 GBX 5.22 -

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