25th Feb 2016 12:17
LONDON (Alliance News) - The spotlight has been on UK corporate earnings Thursday, with Lloyds Banking Group and RSA Insurance Group both raising dividends and helping propel the FTSE 100 higher in the process.
RSA Insurance Group led the gainers in the blue-chip index, with shares up 12%. Lloyds Banking Group was the second best performer, up 9.8%. Fellow financial stocks Royal Bank of Scotland, Prudential and Barclays also were among top gainers. The FTSE 350 banks sector index was up 5.1%.
At midday, the blue-chip FTSE 100 index traded up 2.3%, or 131.24 points, at 5,998.42.
The FTSE 250 index was up 1.7% at 16,389.31, and the AIM All-Share was up 0.2% at 688.64.
European stocks also were performing well, with the CAC 40 index in Paris up 2.0% and the DAX 30 in Frankfurt up 1.1%.
Inflation data for the eurozone from Eurostat showed the consumer price index rose by less than the initial estimate. Inflation edged up to 0.3% year-on-year in January from 0.2% in December, slower than the 0.4% estimated initially. However, it marked the fourth consecutive rise in prices for the eurozone.
The sharp turn around in US stocks on Wednesday was not set to continue at the New York open Thursday. Futures indicated the Dow Jones Industrial Average, S&P 500 and Nasdaq 100 all down 0.1%.
RSA Insurance reported a 43% jump in annual operating profit, beating analyst expectations, and raised its full-year dividend to 10.5 pence from 2.0p the prior year.
Operating profit before tax rose to GBP523 million in 2015, RSA said, up from GBP365 million at actual exchange rates and from GBP334 million at constant currency. Analysts had expected operating profit of GBP481.0 million for the year, according to company-compiled consensus estimates.
Numis analyst Nick Johnson said the beat to consensus was mainly driven by the underwriting performance. RSA's combined ratio, a measure of underwriting profitability, improved to 96.0% for the group's core business from 98.8% in 2014. The ratio also beat consensus, which expected 97.1%. A ratio of under 100% represents underwriting profitability.
Lloyds Banking lifted its payout to shareholders and declared a special dividend in a return of capital, even as the bank's 2015 profit took a dent from a new GBP2.1 billion charge for the payment protection insurance scandal.
The state-backed lender lifted its dividend for the year to 2.25 pence per share from 0.75p in 2014, and declared a special payment of 0.5p in addition. Pretax profit fell to GBP1.64 billion in 2015 from GBP1.76 billion in 2014.
Underlying profit, which excludes asset sales and the cost of PPI provisions, rose to GBP8.11 billion from GBP7.76 billion. The total PPI provision for the year was GBP4.0 billion, up from GBP2.2 billion in 2014, including a fourth-quarter charge of GBP2.1 billion.
Despite also lifting its dividend, Capita led the fallers in the FTSE 100, down 5.6%. The outsourcer said it is looking for organic revenue growth of at least 4.0% in 2016, as the the company's annual pretax profit was hit by impairment charges.
Pretax profit fell to GBP112.1 million in 2015, from GBP292.4 million in 2014. Capita lifted its dividend for the year as a whole to 31.7 pence from 29.2p. On an underlying basis, which is stated before the cost of business exits and other items, pretax profit rose to GBP585.5 million from GBP535.7 million.
In addition, Capita revealed that Chairman Martin Bolland wants to step down by the end of the calendar year. The appointment of a successor before then would allow him to step down earlier. External headhunters have been appointed to find a successor to Bolland, who has been chairman since January 2010 and a board director since 2008.
In London's mid-cap FTSE 250 index, shares in Serco Group soared 17%. The outsourcer said its pretax loss narrowed significantly in 2015 as the costs of its restructuring eased, but reiterated its guidance for revenue and underlying profit to fall again in 2016.
Serco, which has suffered significant writedowns on the value of its contract book in recent years, said its pretax loss narrowed significantly in the year to GBP69.4 million from GBP990.5 million as the severity of the one-off charges it had to book eased substantially.
Revenue fell to GBP3.18 billion from GBP3.60 billion as the group closed out onerous contracts, but Serco said its pipeline of bid opportunities increased by around GBP1.5 billion against the end of 2014 to GBP6.5 billion. Operating costs also fell, broadly in line with the decline in revenue.
National Express Group was also a top mid-cap performer, up 9.2%, after it said a lack of exceptional costs meant its pretax profit nearly doubled in 2015, as revenue increased thanks to positive performances across the business.
The rail and bus services provider said its pretax profit rose to GBP124.4 million in the year to the end of December, an 87% rise on the GBP66.5 million it posted the year earlier, when it was hit by one-off costs.
Revenue rose 2.8% to GBP1.92 billion from GBP1.87 billion, driven by good trading in National Express's bus and coach operations in the UK and US, along with the start of new rail contracts in Germany and a bus deal in Bahrain.
Events planning, marketing and communications group UBM said it expects continued good growth in 2016 following a "transformational" 2015, as it focuses on its 'Events First' strategy, investing in new events and rationalising its portfolio.
UBM reported a pretax profit from continuing operations of GBP119.6 million, up from GBP101.6 million a year before, on revenue of GBP769.9 million, up from GBP550.5 million. Shares in the company were up 6.8%.
In economic news, the second estimate for fourth quarter UK GDP showed the economy expanded in-line with the initial reading, according to data published by the Office for National Statistics.
Gross domestic product grew 0.5% quarter-on-quarter, unrevised from the preliminary estimate issued on January 28. It was slightly faster than the 0.4% expansion seen in the third quarter. On a yearly basis, GDP expanded 1.9%, also unrevised from the previously published estimate.
Economists from Lloyds Bank said the GDP reading demonstrates a loss of momentum for the UK economy.
"Today's data reinforce the contrast between growth in 2013 and 2014 – averaging around 0.7% per quarter – and its slower pace in 2015, averaging 0.5% per quarter. That slower growth momentum over the course of 2015 questions whether the rate of absorption of the economy's spare capacity is sufficient to result in meaningful upward pressure on domestic costs," Lloyds said.
Still ahead in the economic calendar for Thursday, US initial and continuing jobless claims are due at 1330 GMT, as is US durable goods orders data. US housing price index is due at 1400 GMT, while EIA natural gas storage data are due at 1530 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
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