Micro Focus shares hit; U.K. cabinet set for reshuffle
U.K. stocks were little changed Monday, with shares in retailers and home builders losing ground and keeping London's blue-chip benchmark near the prior session's record high.
What the market is doing: The FTSE 100 index edged up fractionally to 7,724.59, not far off from an all-time closing high of 7,724.22 hit on Friday (http://www.marketwatch.com/story/ftse-100-powers-to-fresh-record-as-dow-25000-inspires-european-stock-rally-2018-01-05). Last week, the benchmark rose 0.5%.
The pound traded at $1.3540,down from $1.3569 late Friday in New York.
What's driving the market: Some retail stocks were under pressure after baby-care products retailer Mothercare PLC released a profit warning. That comes on the heels of last week's profit warning from department store chain Debenhams and a report from the British Retail Consortium (https://brc.org.uk/news/2017/december-discounts-spur-shop-price-slide) that showed U.K. store prices fell 0.6% in December (https://brc.org.uk/news/2017/december-discounts-spur-shop-price-slide) year-over-year, as retailers offered discounts at the beginning of the Christmas month.
Investors will also watch for developments from the U.K. political front as U.K. Prime Minister Theresa May reportedly signaled that she is in the process of reshuffling her cabinet (http://www.bbc.co.uk/news/uk-politics-42597785). On Sunday, May said in a BBC interview that she's aiming to reach a post-Brexit transition deal with the European Union by the end of March.
Corporates: Off the FTSE 100, Mothercare shares (MTC.LN) sank 25% , after the retailer said comparable sales for the 12-week period to Dec. 30 fell both in the U.K. and internationally and its overall group performance has fallen short of expectations. (http://www.marketwatch.com/story/mothercare-christmas-sales-fall-warns-on-profit-2018-01-08)
"Going forward, we are not anticipating any improvement in the short-term market conditions for the U.K. and on this basis the adjusted group profit for the year is likely to be in the range of GBP1 million -- GBP5 million," said Mothercare in a statement.
In the retail group, stock in Marks & Spencer Group (MKS.LN) (MKS.LN) fell 0.7% and Kingfisher PLC (KGF.LN) was little changed. But Next PLC (NXT.LN) , which last week raised its yearly guidance (http://www.marketwatch.com/story/nexts-online-sales-get-a-boost-from-cold-weather-2018-01-03), was up by 1.1%.
Among home builders, Persimmon (PSN.LN) lost 0.9%, Barratt Developments PLC (BDEV.LN) fell 0.9% and Taylor Wimpey PLC (TW.LN) gave up 1.3% after Halifax said U.K. home prices fell 0.6% in December on a month-over-month basis (https://static.halifax.co.uk/assets/pdf/mortgages/pdf/December-2017-House-Price-Index.pdf), marking the first fall since June. Price growth slowed to 2.7% annually in 2017, it said.
Micro Focus International PLC (MCRO.LN) tumbled 15% after the software maker said six-month revenue fell on constant-currency terms and a key profit metric, adjusted EBITDA, was lower by 4.1% "as we put operational improvement plans on hold while working on the completion of the HPE Software transaction." The company acquired Hewlett Packard Enterprise Co.'s (HPE) software business for $8.8 billion last year.
Micro Focus also expects a decline in revenue for the year ending Oct. 31, 2018, and said Chief Financial Officer Mike Phillips will move to a new role (http://www.marketwatch.com/story/micro-focus-2018-profit-bets-boost-from-hpe-buy-2018-01-08) of director of mergers and acquisitions.
What strategists are saying: "Clearly Mothercare et al are up against it and the update does not bode especially well for the retail sector ahead of an important week of releases. Overnight Visa/IHS data shows a significant slowdown in spending in December which meant 2017 saw a fall in spending for the first time in 5 years," said Neil Wilson, senior market analyst at ETX Capital, in a note.
(END) Dow Jones Newswires
January 08, 2018 06:56 ET (11:56 GMT)