The FTSE 100 opened virtually flat at 6,524 as blue-chip stocks took a breather following yesterday’s gains amid surging commodity prices, as a slew of big companies released a mixed bag of trading updates.
The more subdued open today comes after sizeable gains yesterday, with market commentators suggesting we could potentially be in for another commodities ‘supercycle’ like the 2000s, with demand having picked up markedly for a range of metals, oil and even soybeans.
Also weighing on the exporter-heavy weigh index was a rise in the pound, which closed in on a three-year high against the dollar at $1.3787.
OCADO LOSSES NARROW
In company news, online grocery retailer and technology group Ocado (OCDO) fell 4% to £26.38 despite posting a narrower annual loss after its sales were boosted by higher demand for groceries during Covid-19 lockdowns.
Pre-tax losses for the year through 29 November amounted to £44 million, compared to losses of £214.5 million year-on-year, while revenue climbed 33% to £2.33 billion and pre-exceptional earnings before interest, tax, depreciation and amortisation rose 69% to £73.1 million.
Ocado said the loss was driven by a 24% rise in depreciation, amortisation and impairment costs to £168.9 million, primarily due to amortisation related to a software rollout.
Looking forward, Ocado said revenue growth in its retail business was highly dependent on the length of Covid-19 restrictions. For its UK solutions and logistics business, it forecasts double-digit percentage revenue growth, while international solutions revenue from Ocado Smart Platform partners is expected to increase to around £50 million.
Tour operator TUI (TUI) traded effectively flat at 331p having booked a deeper first-quarter loss as the global holiday market continues to struggle during the pandemic.
Winter is typically a quieter period for travel firms anyway, but losses for the three months through December amounted to €813.1 million, compared to year-on-year losses of €105.4 million. Revenue plunged 88% to €468.1 million and underlying earnings before interest and tax amounted to a loss of €698.6 million.
TUI said winter 2020/21 bookings were down 89% as a result of extended travel restrictions across key European markets during November and December.
Summer 2021 bookings, including amendments and voucher rebookings, were down 44% versus summer 2019, chosen as a comparative because it was undistorted by Covid-19, the company said.
MICRO FOCUS SWINGS TO BIG LOSS
Enterprise software group Micro Focus International (MCRO) gained 4.1% to 511.8p despite swinging to a deep annual loss after booking a monster impairment charge and falling sales, as it reinstated its dividend citing a strong cash position.
Pre-tax losses for the year through October amounted to $2.97 billion, compared to a year-on-year profit of $1.47 billion, as revenue slid 10% to $3 billion. The company declared a final dividend of 15.5 cents per share.
This came even as Micro Focus International recorded an exceptional charge related to a goodwill impairment of $2.8 billion. It said the charge was driven by changes in its trading performance and overall environment when compared to original projections produced at the time of the HPE Software acquisition.
Adjusted earnings before interest, tax, depreciation and amortisation fell 14% to $1.17 billion, at an adjusted margin of 39.1%, which the company said was at the upper end of expectations.
BELLWAY LIFTS GUIDANCE
Housebuilder Bellway (BWY) gained 2.8% to £31.14 after it raised its annual guidance on output and margins as ‘strong’ underlying demand boosted homebuilding activity to record levels in the first half of the year.
Housing completions for the full year to 31 July 2021 are now expected to increase to around 9,800 homes, up from 7,522 last year, and the underlying operating margin for the full year is expected to improve by at least 200 basis points, up from 14.5%.
For the six months through 31 January 2021, the company reported record first half volume output with the completion rising 6.3% to 5,656 year-on-year.
Logistics and residential real estate group St. Modwen Properties (SMP) increased 1.4% to 398p despite swinging to a full-year loss, driven by lower revenue and negative asset revaluations.
The company, however, upped its dividend, while citing the strength of its balance sheet and development pipeline. It declared a full-year dividend of 5p per share, up 39% from 3.6p year-on-year.
Pre-tax losses for the year through December amounted to £120.8 million, compared to a profit of £49.5 million year-on-year. Adjusted EPRA earnings fell 43% to £22.1 million, while the company’s net asset value per share fell 12% to 427.7p.
Security firm G4S (GFS) traded almost flat at 260.8p despite delivering ‘strong’ performance in the fourth quarter of the year, underpinned by new and existing business wins.
Revenue was in-line with ‘the trends highlighted at the nine-month stage and PBITA margins held up well, once again demonstrating the momentum and underlying strength of our business,’ the company said.
New and retained contract wins amounted to an annual revenue value of £3 billion compared with £2.5 billion in 2019. The total contract value associated with these wins was £5.5 billion, the company said.
SMALL CAP WRAP
Construction materials distributor Brickability (BRCK:AIM) firmed 7.4% to 71.4p, having upgraded its outlook as ‘strong’ housebuilding activity lifted demand for its products.
Lifestyle brand Joules (JOUL:AIM) rallied 6.3% to 170p following news that it had acquired Garden Trading, a retailer of home and garden products, for up to £12.5 million in cash and shares.
Bicycle and leisure equipment retailer Tandem (TND:AIM) jumped 9.7% to 565p as it guided for a 'materially higher' annual profit after its margins were boosted by increased enthusiasm for cycling during the pandemic.
Advisory and broking group Numis (NUM:AIM) climbed 2.4% to 340p on announcing that its revenue had jumped around 50% in the first fourth months of its financial year, buoyed partly by news on Covid-19 vaccines.
