LONDON (Alliance News) - UK equities started higher on Wednesday, benefiting from a soft pound, while education publisher Pearson, facilities management firm Mitie Group, and Mr Kipling cake baker Premier Foods all issued profit warnings.
Pearson was the worst performer in the FTSE 100, down 23%, after it said it has withdrawn its operating profit target for 2018 and warned on its outlook for 2017, though it said its results for 2016 will meet its expectations.
Pearson said its operating profit for 2016 will meet its guidance, despite an "unprecedented decline" in its North American higher education courseware business in the fourth quarter of the year. This will be offset by the restructuring Pearson undertook last year, the cost savings from which will be a little ahead of plan, it said.
Pressures on the North American higher education courseware business have forced the group to rebase its expectations for 2017, on the assumption these woes will not abate. Pearson said it will accelerate is shift to a digital business model in the division, investing another GBP50.0 million in doing so, and will increase its participation in the courseware rental market.
Mitie Group said it has booked further one-off charges on the contracts on its books, a move which will take another lump out of the firm's profit for its current financial year.
The company had issued a profit warning in September, hit by less high-margin work for its facilities management business and by the impact of a local authority budget squeeze on its units handling maintenance work and homecare services for local councils.
Since then, Mitie said its board has met to consider the trading outlook for the remainder of the year to the end of March. Its Property Management and Technical Facilities Management divisions have been hit by client deferrals and investment plan delays, meaning some work for these units will be pushed into Mitie's 2018 financial year.
Underlying operating profit for the year to March 31 will be between GBP60.0 million and GBP70.0 million, down from GBP128.9 million a year before. Mitie shares were down 11%, making it the worst performer in the FTSE 250.
Premier Foods was down 15% after it said it suffered weak sales in the third quarter of its financial year and trimmed its trading profit expectations by 10%.
Premier Foods said the majority of its brands, which also include Bisto gravy and Homepride cooking sauces, grew their market share in the quarter to the end of December, but overall sales were down 1.0% for the period. This is despite sales in December rising 4.5%, the company said.
As a result, Premier Foods anticipates trading profit for the year to the end of March 2017 will be around 10% lower than its previous expectations, hit not only by the sales weakness but by input cost inflation driven by a weaker pound.
The FTSE 100 was up 0.1%, or 7.62 points, at 7,228.00. The blue-chip index was helped by a slight easing of the pound to USD1.2335 just after the London stock market open on Wednesday, having reached a high of USD1.2416 after the equities close on Tuesday.
Sterling had sharply appreciated during UK Prime Minister Theresa May's Brexit speech on Tuesday as it offered more clarity on the UK's position and as the PM confirmed that both Houses of Parliament will vote on the final Brexit deal.
The FTSE 250 was down 0.1% at 18,221.11 and the AIM All-Share was up 0.1% at 812.69.
The BATS UK 100 was flat at 12,216.74, the BATS 250 index was down 0.1% at 16,575.43 and the BATS Small Companies was down 0.3% at 10,987.81.
In Europe, the CAC 40 in Paris was flat and the DAX 30 in Frankfurt was up 0.2%.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.4%, the Shanghai Composite ended up 0.1% and the Hang Seng in Hong Kong closed up 1.1%.
In other UK corporate news, Burberry Group, up 0.7%, reported growth in revenue in the third quarter of its financial year thanks to a big boost from the weak pound, as it said full-year profit will be in line with market expectations.
The luxury fashion retailer said retail revenue in the three months to December 31 grew by 22% year-on-year to GBP735.0 million, helped by sales made overseas in foreign currencies when translated back into sterling, which has weakened significantly since the UK's vote to leave the European Union.
Burberry said it continued to see an "exceptional performance" in the UK and an improvement in France, leading to double-digit percentage growth in the region of Europe, the Middle East, India and Africa, while the Asia Pacific region returned to growth thanks to "acceleration" in mainland China and an improvement in Hong Kong.
The Americas saw a low single-digit percentage decline, however, as demand from domestic and travelling luxury customers remained "uneven".
Ladbrokes Coral Group said it expects profit in 2016 to increase in line with market consensus and management expectations, despite seeing poor sporting results in the second half of December.
Betting giant Ladbrokes, which last year bought rival Gala Coral, said proforma group operating profit will be in the range of GBP275 million and GBP285 million in 2016, comprising GBP101 million at Ladbrokes and GBP179 million at Coral.
This compares to a proforma group operating profit of GBP235 million in 2015, comprising GBP80.6 million at Ladbrokes and GBP154 million at Coral. The stock traded up 2.6%.
Still in the economic calendar, there are consumer price index readings from the eurozone at 1000 GMT and the US at 1330 GMT. The UK jobs report is due at 0930 GMT, US MBA mortgage applications are at 1200 GMT, and US industrial production is at 1415 GMT. US Federal Reserve Chair Janet Yellen will speak in San Francisco at 2000 GMT, and the API weekly crude oil stock is at 2130 GMT.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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Burberry (BRBY)
Pearson (PSON)
Premier Foods (PFD)
Mitie (MTO)
