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London stocks to open lower


Stock prices are expected to be lower amid concerns over the reimposition of lockdowns and fading hopes for a US stimulus package

Stock prices in London are seen opening lower on Thursday amid concerns about the reimposition of coronavirus lockdowns and fading hopes of agreement on a new US stimulus package.

In early company news, Irish budget carrier Ryanair Holdings reduced its winter capacity as coronavirus restrictions plague the travel industry. Delivery chain Domino’s Pizza said it was given a third-quarter boost from the UK government’s value added tax cut and as more customers stayed home. Rothmans and Dunhill cigarette maker British American Tobacco named a new chair.

IG futures indicate the FTSE 100 index is to open 29.06 points lower at 5,906.00. The blue-chip index closed down 34.65 points, or 0.6%, at 5,935.06 on Wednesday.

Domino’s Pizza said it saw a strong performance in the third quarter and expressed confidence in its full year outlook.

For the 13 weeks to September 27, UK & Republic of Ireland system sales were up 19% to GBP342.1 million from GBP288.2 million at the same time last year.

Domino’s highlighted that the UK value added tax rate was slashed to 5% from 20% in July, and this helped franchisees mitigate costs and enabled savings to be passed onto customers. Since the rate change, VAT has boosted reported UK system sales and like-for-like growth, it said.

The pizza chain reported an encouraging UK & ROI delivery performance, with order numbers up 12% and items per order and product mix both “encouraging”.

Looking ahead, Domino’s expects to report full year underlying pretax profit in the range of GBP93 million to GBP98 million, in line with market consensus. The company reported an underlying pretax profit of GBP98.8 million for financial 2019.

We saw a benefit from staycations and the return of live sport on television during the period, although we also saw a headwind as competitors reopened following the national lockdown and, in September, we saw weaker demand in university areas. We were pleased to reopen our collection business, and collection orders were around 60% of the prior year level. We do not expect our collection business to fully recover to prior levels until normal consumer behaviour returns, Domino’s added.

Ryanair Holdings said forward bookings have “materially” weakened in November and December due to increased flight restrictions imposed by EU governments. It will close its bases in Cork and Shannon in Ireland and in Toulouse in France this winter as Covid-19 continues to hurt the travel sector.

In light of the weaker bookings, the Irish carrier further reduced its winter schedule, from November to March – taking capacity down to 40% from 60% of prior year.

Ryanair said with the greatly reduced winter capacity and load factors of around 70%, it now expects full year traffic to fall to 38 million passengers. The airline said this guidance could be further revised downwards if EU government continue to “mismanage air travel and impose more lockdowns this winter”.

It is inevitable, given the scale of these cutbacks, that we will be implementing more unpaid leave, and job sharing this winter in those bases where we have agreed reduced working time and pay, but this is a better short-term outcome than mass job losses. There will regrettably be more redundancies at those small number of cabin crew bases where we have still not secured agreement on working time and pay cuts, which is the only alternative, said Chief Executive Michael O’Leary.

British American Tobacco said Non-Executive Director Luc Jobin will succeed Richard Burrows as chair at the conclusion of the company’s annual general meeting in April. Jobin will be appointed as chair-designate in March. Jobin served as CEO of Canadian National Railway Co and of Imperial Tobacco Canada.

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