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How did investors react to the latest batch of FTSE 100 results?
We’re bang in the middle of corporate results season with many of the UK’s largest quoted companies issuing their latest financial results.
The main themes have been large earnings beats or misses and investors continuing to be very focused on dividend payments.
THUMBS UP FROM THE MARKET
Lloyds’ (LLOY) shares rose by 2.8% to 69.72p on 21 February despite missing consensus forecasts for its pre-tax profit. Fourth quarter underlying pre-tax profit of £1.9bn was 4% lower than expected.
Investors seem to be more focused on the bank hiking its dividend by 20% to 3.05p and news of a £1bn share buyback programme.
Lloyds’ net interest margin, a key indicator of a bank’s profitability, came in at 2.86% for the full year. It has guided for 2.9% in 2018 which is better than previous consensus forecast of 2.88%.
DIVIDENDS ALSO IN FOCUS FOR BARCLAYS
Shares in Barclays (BARC) rose by 4.4% to 211p on 22 February after declaring a 3p per share dividend for 2017 and saying it would more than double this figure to 6.5p in 2018.
Barclays shows the importance of a payout for investors in banks. The share price rise happened despite it reporting a worse than expected loss per share in the fourth quarter of 2017 at 7.3p versus 4.6p consensus forecast.
Commodities trader-to-mining house Glencore (GLEN) saw its share price rise 5.2% to 404.55p on 21 February after announcing a bumper dividend of $0.20 per share. Full year cost inflation was less than expected. Unit costs were flat in copper, down in nickel and zinc, but up 18% in coal.
Chief executive Ivan Glasenberg says the company’s performance in 2017 was its strongest on record. Net debt fell 31% to $10.7bn which is at the bottom of the company’s $10bn to $16bn target range. Analysts expect the business to remain highly acquisitive.
CENTRICA RELIEF RALLY
British Gas owner Centrica (CNA) enjoyed a 7.5% relief rally to 142.15p on 22 February after keeping its 12p dividend intact and revealing a £500m cost cutting plan by axeing 4,000 jobs.
Investors were relieved the results were not worse at a difficult time for Centrica which is battling to stop rivals from swiping its customers. It also faces a potential energy price cap that could hit profitability. In the year to 31 December 2017, Centrica lost approximately 10% of its customers, totalling 1.38m.
RSA’S PROFIT BOOST
The market was impressed by the better-than-expected profit at insurance firm RSA (RSA) announced on 22 February. Profit growth of 1% to £663m was counter to forecasts for a slump to £639m.
Its Canadian and Scandinavian operations were the stars with its underwriting business in the UK posting a loss. Shore Capital analyst Eamonn Flanagan points to the 5% fall in net tangible asset value as a concern given insurers are often measured against this metric.
PERSIMMON HANDS OVER THE CASH
Another name boosted by its income appeal was housebuilder Persimmon (PSN) which revealed a much-improved dividend package alongside a 25% increase in 2017 pre-tax profit (27 Feb).
With the shares yielding close to 9% on the new payout guidance, they are likely to prove extremely attractive to income-seekers. However, the future direction of the stock is likely to remain in lock-step with the fortunes of a slowing UK house market.
THUMBS DOWN FROM THE MARKET
Half year results were worse than expected for diversified natural resources group BHP Billiton (BLT) on 20 February, triggering a 4.6% share price decline to £14.90.
It reported $11.2bn EBITDA (earnings before interest, tax, depreciation and amortisation) versus a consensus estimate of $11.6bn. Higher commodity prices more than offset higher costs this time round – but analysts are concerned costs will keep going up in BHP’s oil business.
BIG MISS FOR HSBC
Shares in HSBC (HSBA) fell by 3.1% to 737p on 20 February as fourth quarter underlying pre-tax profit of $3.6bn was 8% below expectations.
There was also no growth in the dividend, although analysts hadn’t expected the bank to increase its shareholder reward.
The market was also disappointed with full year results from Royal Bank of Scotland (RBS) on 23 February, sending its share price down 4.8% to 268.4p.
It managed to post a £752m profit for 2017, its first in 10 years and against expectations for material losses. However, the bank faces an impending multi-billion dollar fine from the US Department of Justice over the mis-selling of mortgage-backed securities a decade ago.
TURBULENCE FOR IAG
British Airways owner International Consolidated Airlines (IAG) experienced some turbulence after missing its full year earnings expectations on 23 February, sending its shares down 5.7% to 587.2p.
The airline delivered operating profit of €3.015bn instead of the anticipated €3.046bn following changes to employee bonuses. (DC/TS/DS/LMJ)