UK markets found it difficult to make headway through the morning session on Tuesday with investors spooked by a fresh wave of Government restrictions as Covid cases rise.
Pubs and restaurants face 10pm curfews from Thursday, Prime Minister Boris Johnson insisted today, while millions of British workers are again being advised to work from home if possible, sparking new concerns for jobs in the already hard hit leisure, hospitality and travel industries.
At 12.30pm, the benchmark FTSE 100 index had managed to claw its way to modest 0.2% gains to 5,815.26, nipping in the bud any hopes of a stiff bounce after yesterday’s huge sell-off.
The mid-cap FTSE 250 nudged 0.07% lower.
Despite the decidedly ‘risk-off’ mood in markets, the pound gained against major global currencies, while Brent crude rose and gold slipped.
BETTER EARNINGS
In company news, DIY retailer Kingfisher (KGF) announced strong first half results for the period ended 31 July with organic turnover down just 1% thanks to a 164% increase in online sales, which have more than doubled as a proportion of group revenues.
Adjusted pretax profits were up 23% to £415 million and free cash flow was over £1 billion thanks to higher operating profits and a steep drop in working capital. As a result, the firm’s net debt to EBITDA ratio halved to just one, well below the medium-term target level. Shares responded positively, gaining 9% to 289p.
Drinks maker AG Barr (BAG) soared 17% to 435p after the company posted a relatively positive first half update with revenues down 7.6% but the firm’s value share of the UK soft drinks market rising.
Adjusted first half earnings were up 19.4% to £16.6 million while the operating margin rose strongly to 15.1% helped by cost control measures. The firm is holding fire on dividends but is confident of meeting its full year earnings targets.
JOBS AT RISK
Premier Inn owner Whitbread (WTB) reported that 98% of its hotels had reopened by the end of the first half and that trading was ahead of the market thanks to strong demand in tourist locations.
Its restaurant performance had also been helped by the Eat Out to Help Out scheme with August UK total sales (accommodation and food and beverage) down 38.5% on last year.
However, the firm said that with market demand expected to remain low in the medium terms it was looking to lay off up to 6,000 people or 18% of its total workforce in order to cut costs.
Whitbrtead shares recovered earlier 5% loses to trade almost flat at £20.955.
Travel operator TUI (TUI) posted a downbeat trading statement for the year to 30 September with summer booking down 83% and average selling prices down 19%.
The firm said it had ‘been impacted by continuous changes in travel advice by various governments across our markets’ over the last month, meaning it has had to cut capacity and the number of destinations it serves.
It also confirmed it would lay off up to 8,000 staff in order to reduce its annual overhead costs by 30%, adding to the number of people losing their jobs. Shares added 3% to 280p.
HIGHER CLAIMS
Insurer Beazley (BEZ) doubled its estimate of the cost of Covid claims from $170 million to $340 million net of reinsurance as major events and conferences continue to be cancelled.
The firm said ‘we made a number of assumptions including that events would resume in September this year which would lead to a normalisation in the levels of contingency claims. Given the evolving status of Covid-19 we no longer expect this to be the case.’ Shares fell 13% to 339p.
Information services provider and events company Euromoney Institutional Investor (ERM) shed 1.0% to 793p, even as it forecast an adjusted pre-tax profit ahead of market expectations, thanks to higher subscription revenue.
Euromoney, however, also warned of further pressure on its events business due to likely cancellations owing to the pandemic.
Generic drug maker Hikma Pharmaceuticals (HIK) slumped 4.4% to £24.73, owing to a delay in the regulatory approval of its generic form of GlaxoSmithKline's (GSK) respiratory drug Advair.
Residential development and regeneration specialist Sigma Capital rallied 15% to 113p on news that it had formed a joint venture with EQT Real Estate (EQT) to deliver new homes for private rental in Greater London.
The venture was being supported by UK government agency Homes England and was targeting establishment of an initial portfolio of around 3,000 homes with a value in excess of £1 billion.
Sports, leisure and mobility equipment retailer Tandem (TND) fell 5% to 361p, even as it posted a rise in first-half profit and doubled its dividend to 3.12p per share, as demand for bicycles jumped during the pandemic.
Revenue growth, however, had been limited to 6% due to weaker free-on-board orders from national retailers.
