23rd Feb 2016 12:25
LONDON (Alliance News) - Mixed company earnings, with particularly disappointing results from bank Standard Chartered and miner BHP Billiton, left the FTSE 100 trading lower midday Tuesday.
The blue-chip index was down 0.6%, or 38.36 points, at 5,999.37, having recovered slightly in the late morning on a rebound in oil prices. Brent oil was quoted at USD34.74 a barrel at midday, up from its earlier low of USD33.73 a barrel. West Texas Intermediate was at USD33.21 a barrel, up from its earlier low of USD32.43.
The mid-cap FTSE 250 was down 0.1% at 16,268.33, and the AIM All-Share was up 0.3% at 688.41. In Europe, the CAC 40 in Paris was down 0.4%, and the DAX 30 in Frankfurt was down 0.8%.
The declines in Frankfurt came as data from the German CESifo Group showed Germany's business sentiment weakened by more than expected to a 14-month low in February as companies turned pessimistic about their future for the first time in over six months.
The Ifo business confidence indicator fell for the third straight month, to 105.7 in February from 107.3 in January, survey data from the Munich-based institute showed. The index was forecast to drop to 106.8. This was the lowest reading since December 2014, when the score was 105.5.
Futures pointed to a a lower open on Wall Street, with the DJIA and S&P 500 both indicated down 0.2% and the Nasdaq 100 pointed down 0.3%.
Before the opening bell in New York, Home Depot reported fourth-quarter net earnings of USD1.5 billion, or USD1.17 per share, beating analyst consensus of USD1.10. The stock was up 2.6% in pre-market trade.
In UK corporate news, Standard Chartered said it swung to its first annual loss since 1989, with the bank's operating income coming under pressure in 2015 amid a costly restructuring and deteriorating financial markets.
Standard Chartered, which makes most of its money in Asia and emerging markets, said it expects a "subdued" financial performance in 2016.
The bank's USD1.52 billion pretax loss in 2015 came as a surprise to the market, and measured up against a pretax profit of USD4.24 billion in 2014. Its net loss of USD2.36 billion contrasted with the prior year's USD2.51 billion net profit.
"Chinese equity markets have been increasingly volatile, impacting sentiment around the world, and commodity markets have plumbed new lows," Chief Executive Bill Winters said.
Standard Chartered was the worst performer in the FTSE 100, down 5.2% at 413.75 pence, having plunged by as much as 12% to 383.85p shortly after the results were published just after the London market open.
Miners also weighed on the FTSE 100, with BHP Billiton down 3.2%, Antofagasta down 3.3% and Anglo American down 3.1%. The stocks, which derive a large part of their revenue from China, partly were sold after China's central bank cut its daily reference rate for the yuan by the most in six weeks.
In addition, BHP Billiton conceded the current downturn in the commodities market will go on for longer than expected, forcing the Anglo-Australian miner to make a more severe cut to its dividend than expected and step-up its restructuring efforts.
The market was expecting the multi-commodity giant to lop a large chunk off its interim dividend due to the anticipated falls in earnings, but the more than 70% cut was still a lot more than what the market was anticipating, as BHP ultimately posted an enormous pretax loss in the first half.
The miner booked a hefty USD7.45 billion pretax loss in the first half of its financial year to the end of December, swinging from a USD7.69 billion profit a year earlier.
The loss was the result of declining revenue and large impairments related to its petroleum assets and the fatal tailings-dam burst at its Samarco joint venture in Brazil in November. Exceptional items totalled USD8.37 billion in the first half, most of which was expected, with net exceptional items of USD6.13 billion.
At the other end of the blue-chip index, Persimmon shares led gainers, up 4.1%. The housebuilder posted a huge, consensus-beating rise in pretax profit and increased its capital return programme significantly, following a very strong year for the UK housebuilding industry.
Persimmon said its pretax profit for the year to the end of December was GBP637.8 million, up from GBP475.0 million a year earlier, ahead of the GBP605.9 million consensus estimate compiled by Morningstar and the GBP602.0 million predicted by Shore Capital.
Investors also were cheered by Persimmon's decision to further accelerate its capital return programme, as the performance of the business since the programme was put in place in 2012 has been significantly ahead of its expectations. The company will now return 110.0 pence per share in cash to shareholders by the start of April, a massive rise on the 10.0p it had been intending to return under its original plans.
InterContinental Hotels Group rose 3.4%. IHG said it will pay a special dividend to shareholders following the sale of two trophy properties in 2015, in line with its new asset-light approach, as operating profit grew but revenue dipped.
IHG said it will pay a total dividend of 85.0 cents per share, up from 77.0 cents per share a year earlier thanks to the confidence it has on its outlook. This includes a final dividend of 57.50 cents, an 11% year-on-year rise.
In addition to this, IHG declared a USD1.50 billion special dividend, which will be paid by means of a share consolidation in the second quarter. The special dividend is worth about USD6.33 per share. The size of the special dividend was higher than the USD1.0 billion that Numis analysts had forecast IHG would declare and follows the sales of the InterContinental Paris - Le Grand and InterContinental Hong Kong hotels last year.
Subprime lender Provident Financial said it has made a "good start" to 2016, with its Vanquis Bank credit cards business and vehicle finance provider Moneybarn trading strongly and "very satisfactory" collections for its home credit business.
The update on trading in the first few weeks of the year came as Provident reported that pretax profit grew to GBP273.6 million in 2015, from GBP224.6 million in the prior year. The lender increased its dividend for the year as a whole by almost 23% to 120.1 pence from 98.0p.
Provident Financial shares were up 2.8%.
Meggitt was the best performer in the FTSE 250, up 12%. The aerospace and defence components manufacturer expressed confidence in its outlook for 2016 following a tough 2015, marred by a profit warning and demotion from the FTSE 100 index at the end of the year.
In a pre-close update in December, the group confirmed its expectation that negative trends in its markets would continue into 2016, hit by continued weakness in its energy business and sluggishness in aerospace and military sectors.
Though Meggitt still expects the slowdown in oil and gas markets to continue to hit growth in its energy business, on Tuesday it said the outlook for its civil aerospace business is encouraging, with organic growth to be in the low-to-mid-single-digit range for 2016 but with acquisitions to add to revenue growth in the segment.
In addition, Meggitt said military markets are entering a "more benign phase" following years of squeezed defence budgets globally, though the company maintained a relatively cautious stance for 2016 as it will take time for orders to flow through.
Morgan Advanced Materials was up 7.0% after the ceramic products manufacturer said its pretax profit pushed higher in 2015 due to lower one-off charges, but its underlying profit and revenue both fell amid tough market conditions.
Pretax profit for the year was up to GBP59.0 million from GBP31.5 million, mostly as a result of it booking a GBP22.1 million one-off charge in its results in 2015, compared to GBP51.9 million a year earlier. Its underlying pretax profit, stripping out the one-off items, fell to GBP88.2 million from GBP91.6 million as its revenue dipped to GBP911.8 million from GBP921.7 million.
Unite Group was one of the worst mid-cap performers, down 3.0%. The losses were made despite the student accommodation developer saying its pretax profit surged thanks to a big gain made on the valuation of its portfolio and hiked its dividend as it pointed to another robust year for the business.
Unite said its pretax profit for the year to the end of December rose to GBP388.4 million, a massive rise on the GBP108.4 million it made a year earlier after it made a big gain on the valuation of its properties and booked a big profit on its shares of its joint venture projects.
The group said it remains confident on the coming year as student numbers in the UK continued to grow, supported by government policy, and said it remains on track with its plans to convert to real estate investment trust status in early 2017.
Still ahead in the economic calendar, the US Redbook index is due at 1355 GMT, while US consumer confidence and the Richmond Federal Reserve manufacturing index are at 1500 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Anglo AmericanInterContinental HotelsPFG.LBHP Billiton PLCStandard CharteredMGGT.LPersimmonMorgan Advanced MaterialsUnite