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Weekly review

By Josh White

Date: Friday 24 Sep 2021

(Sharecast News) - The FTSE 100 ended the week 87.84 points higher, closing at 7,051.48 on Friday.
Equity view

Facilities management company Mitie Group lifted annual profit guidance after a strong second quarter boosted by the award of more Covid-19-related contracts and a return to office work after lockdowns. The group, which provides services from Covid testing sites to office security, said it expected operating profit before other items to be £145m - £155m, despite an expected slowdown in revenue from pandemic work.

Avon Protection said on Friday that the US Defense Logistics Agency (DLA) has extended a body armour contract with the group. The DLA has exercised the first of the two one-year extension options under the DLA Enhanced Small Arms Protective Inserts (ESAPI) contract. This extends the contract to 22 September 2022 and triggers a minimum order value for the option year of $19m.

The Competition and Markets Authority said on Friday that it has decided to investigate CVS Group's completed acquisition of Quality Pet Care, which trades as The Vet. The watchdog, which has made an initial enforcement order, said it is inviting comments.

AstraZeneca said on Friday that positive high-level results from the 'PROpel' phase 3 trial showed 'Lynparza', or olaparib, in combination with abiraterone, demonstrated a statistically significant and clinically meaningful improvement in radiographic progression-free survival (rPFS) versus standard-of-care abiraterone, as a first-line treatment for men with metastatic castration-resistant prostate cancer (mCRPC), with or without homologous recombination repair (HRR) gene mutations. The FTSE 100 pharmaceuticals giant said that at a planned interim analysis, the independent data monitoring committee found that the trial met the primary endpoint of rPFS in men with mCRPC who had not received treatment in the first-line setting, including with new hormonal agents (NHAs) or chemotherapy.

Reckitt Benckiser said trading so far in the second half was in line with its expectations after warning in July that demand for cleaning products had peaked. The maker of Dettol and Cillit Bang said it was confident that annual like-for-like net revenue growth would be 0-2% with an adjusted operating profit margin of 22.7-23.2%.

Independent hospital group Spire Healthcare said it had bought an 87% stake in the operating assets of the Claremont Private Hospital in Sheffield for £15.7m in cash from Aspen Healthcare. Spire added it had agreed a long-term lease with Aspen Healthcare's owner, NorthWest Healthcare Properties REIT, on market based terms.

Gambling software developer Playtech reported a rise in first-half profit on Thursday as it said a strong online performance helped to offset longer-than-expected retail closures in Italy. In the six months to 30 June, adjusted pre-tax profit from continuing operations was up 246% to €27m, while reported pre-tax profit came in at €278.1m versus a loss of €19.2m in the same period a year ago. Revenues dipped 4% to €457.4m.

Royal Mail said it expected a rise in first half profits despite rising costs as the pandemic-driven boom in parcel delivery from online shopping continued to drive revenue growth. The letter and parcel carrier said revenues climbed 8.2% to £5.1bn in the five months to August. It added that it expects upward pressure on costs in both its British and international businesses due to tight labour markets and inflationary pressures. Group first-half adjusted operating profit was forecast in a range of £395m - £400m.

Covid-19 vaccine producer Oxford Biomedica swung to a profit in the half year on the back of a surge in revenues through its partnership deal with AstraZeneca and announced that Serum Institute of India has agreed to invest £50m in the group in return for a 3.9% stake in the company. The company on Wednesday said operating core earnings rose to £27.1m from a £0.4m loss. Revenue increased by 139% to £81.3 m. On a pre-tax basis profit for the six months to June 30 amounted to £19.2.m, compared to year-on-year losses of £6.1m.

Flutter Entertainment said on Wednesday that a legal dispute with the Commonwealth of Kentucky has now been settled in full, as it updated investors on its Australian division, Sportsbet. The dispute relates to the original award of damages made in 2015 against The Stars Group, which was acquired by Flutter for $6bn in 2019. Flutter said it has agreed to pay $200m to the Commonwealth of Kentucky in addition to the $100m previously forfeited to settle the dispute.

Halma reported "strong progress" in its first half in a trading update on Wednesday, with its financial performance ahead of the board's expectations, while revenue growth and return on sales exceeded expectations and historic levels. The FTSE 100 safety products company said order intake had been ahead of both revenue this year and of order intake for the same period last year.

Ladbrokes owner Entain said on Wednesday that DraftKings had made a £16.4bn takeover proposal for the sports betting company. US-based DraftKings made an initial approach at 2,500p a share which was rejected, Entain said. The group subsequently upped its offer to 2,800p a share, consisting of 630p in cash and the balance in stock. The latest offer represents a 46.2% premium to Entain's closing share price on Monday.

Compass said fourth-quarter performance was ahead of guidance as diners returned to sports and leisure venues and schools and colleges reopened. Revenue in the three months to the end of September is expected to be about 86% of the same period in 2019 and annual revenue will be about 76% of that year's, the FTSE 100 caterer said. Compass had previously said fourth-quarter revenue would be 80-85% of the 2019 level.

Workspace Group announced the exchange of contracts for the disposal of 13-17 Fitzroy Street in Fitzrovia on Tuesday, for a total of £92m. The FTSE 250 company said the sale of the vacant property was at a discount of 3.2% to the 31 March valuation, and a capital value of £993 per square foot.

Builders merchant Travis Perkins on Tuesday said it was returning the net proceeds from the £325m sale of its plumbing business earlier this year to shareholders through a special dividend and share buyback. Shareholders will get a special dividend of about £79m, representing 35p per share. The share buyback will payout £100m in its first tranche.

Oxford Instruments said on Tuesday that trading for the full year is set to be "slightly" ahead of expectations amid a healthy pipeline, but it also cautioned over supply chain disruptions. In a statement to be made at its annual meeting later in the day, the company said order and revenue growth has been strong in the first five months of the year, supported by positive underlying demand across its markets, and across both commercial and academic customers.

UK energy group SSE said it had made no decision on whether to split off its renewables business after reports that activist hedge fund Elliott Management was pressuring for a breakup of the firm. SSE on Monday said it would provide an update on plans to "further accelerate growth" with its interim results in November, including details of "significantly increased capital investment for the period to 2026".

UK life insurer Prudential said it planned to raise £2bn through a public offer and international share placing on the Hong Kong Stock Exchange. The 173-year-old company said it intended to use most of the proceeds to pay down debt and give it "financial flexibility in the light of the breadth of opportunities to invest for growth in Asia and Africa".

Commercial vehicle rental provider Redde Northgate said on Monday that trading continues to be strong. In an update ahead of its annual meeting later in the day, the company said that following the good momentum seen in the first two months of FY2022, the business has continued to perform strongly across all segments.

Speciality bakery group Finsbury Food reported a jump in full-year profit and revenue on Monday and said it was reinstating its dividend after a strong second-half performance. In the year to 26 June, adjusted pre-tax profit rose 10.2% from the same period a year ago to £15.1m on revenue of £313.3m, up from £306.3m. Adjusted earnings before interest, tax, depreciation and amortisation grew 2.5% to £26.9m.

Economic news

Retail sales grew at the weakest pace since March in the 12 months to September, it was reported on Friday morning, while growth in orders placed with suppliers also slowed. According to the Confederation of British Industry's (CBI's) latest distributive trades survey, however, sales and orders were expected to rise at a faster rate in October.

British Prime Minister Boris Johnson has reportedly approved the relaxation of UK immigration rules to allow more foreign truck drivers into the country to ease shortages at petrol stations and wider economic disruption. The government has faced mounting criticism from retailers and the haulage industry as a shortage of drivers caused by Brexit has led to increased supply chain disruption.

The UK economy stuttered in September, industry research showed on Thursday, as cost pressures mounted and demand eased. The flash reading for September's IHS Markit/CIPS UK manufacturing purchasing managers index was 56.3, down on August's final reading of 60.3 and a seven-month low. It also missed consensus expectations of 59.0. The output index was lower at 51.8 compared to 54.1 a month earlier.

The Bank of England said it expected inflation to peak at more than 4% in 2021 but left monetary policy unchanged as the central bank focused on slowing growth and potential job losses over rising prices. The BoE's monetary policy committee voted unanimously to leave interest rates at a record low of 0.1% and by a majority of 7-2 to continue with its £895bn programme of government bond purchases.

The government is talking to Ofgem about possible changes to the energy price cap, a junior minister has said. Paul Scully, the small business minister, told Sky News that the government has had "lots of conversations...with companies themselves, with Ofgem, in reviewing the price cap. We clearly want to protect customers."

Up to 1.7 million people remained on furlough last month, official data showed on Thursday, just weeks ahead of the scheme coming to an end. According to the Office for National Statistics, the proportion of businesses' workforce reported to be on full or partial furlough stood at 6%, or between 1.3m and 1.7m people, in late August, broadly unchanged from the 1.6m who were on furlough as at the end of July.

UK consumer confidence has fallen as concerns about rising food and energy prices mount, a survey published on Friday showed. The latest GfK consumer confidence index fell five points in September from August to -13.

Downing Street has struck an agreement with CF Industries to restart production of carbon dioxide across its UK sites after talks between the company and business secretary Kwasi Kwarteng. The Illinois-based firm stated last week that it had halted work at its fertiliser plants in Billingham-on-Teesside and Ince on the back of a recent surge in gas prices, shortly after Norwegian company Yara also moved to reduce production at ammonia factories across Europe - including one based in Hull.

UK manufacturing orders rose to their highest for at least 44 years in September but factories struggled to meet demand because of supply problems, a survey showed. Total order books improved further after a strong result in August to post the highest result since the Confederation of British Industry's survey started in 1977. Export orders have improved to their strongest since March 2019, the survey of 273 firms found.

UK public borrowing fell in August as the economy recovered but higher inflation pushed up the cost of public debt, official figures showed. Public sector net borrowing was £20.5bn, down by £5.5bn from a year earlier, the Office for National Statistics said. The reading was slightly lower than the £21.6bn forecast by the Office for Budget Responsibility but it was well ahead of economists' average £15.6bn estimate in a Reuters poll.

International events

German business morale fell for the third month running in September, as manufacturers experienced a "bottleneck recession" due to the supply chain crisis, according to a survey released on Friday. The Ifo institute said problems in the procurement of raw materials and intermediate products "are putting the brakes on the German economy" as its business climate index fell to 98.8 from an upwardly revised 99.6 in August.

China's central bank said on Friday that all activities related to cryptocurrency transactions are illegal and must be banned. The People's Bank of China said in a Q&A posted on its website that it will ban financial institutions, payment groups and internet companies from facilitating the trading of cryptocurrency.

Sales of new US single-family homes rose more than expected in August, according to figures released on Friday by the Commerce Department. New home sales increased 1.5% from July to a seasonally-adjusted annual rate of 740,000. This was comfortably ahead of consensus expectations for a level of 715,000 and marked a four-month high.

Eurozone business growth slowed markedly in September as demand peaked and supply chain problems affected production and deliveries, a survey showed. IHS Markit's flash composite output purchasing managers' index dropped to 56.1 from 59 a month earlier. The reading was a five-month low and fell short of analysts' average forecast of 58.5.

The European Union on Thursday unveiled plans to make USB-C connectors the standard charging port for all smartphones, tablets and other electronic devices, in a move that will hit iPhone maker Apple. More than 10 years in the making, the initiative is designed to slash tonnes of environmental waste and provide €250m in annual savings for users, according to EU officials.

Existing home sales in the US fell in August, with supply remaining constrained and prices accelerating further. According to the National Association of Realtors, existing home sales dropped 2.0% to a seasonally adjusted annual rate of 5.88m units last month as sales fell in all four regions.

The Ifo Institute has slashed its economic growth forecasts for Germany after a hoped-for summer recovery failed to emerge. Publishing its autumn economic forecast, the institute cut its GDP growth expectations for 2021 by 0.8 percentage points to 2.5%, and raised them by the same amount for 2022, to 5.1%.

The International Energy Agency has called on Russia to boost gas supplies to Europe ahead of the coming winter heating season. The Paris-based body - which operates within the framework of the OECD - acknowledged that Russia was fulfilling long-term contracts with its European customers.

US housing starts and building permits both grew last month, driven by a surge in the Northeast region. Housing starts were up 3.9% in August to a seasonally adjusted annual rate of 1.61m units, according to the Census Bureau, bouncing back from a downwardly revised 6.2% drop in July and beating market expectations for a print of 1.55m.

Travel stocks surged on Monday afternoon as it emerged that vaccinated passengers will be able to travel to the US from the EU and UK from November onwards. As things stand, only US citizens, their families, green card holders and those with national interest exemptions can enter the US.

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