UK stocks close in the red as Royal Mail, Johnson Matthey market mood negatives fail to get lift from weak US opening

Thu, 21st Nov 2019

UK equity markets ended the Thursday trading session firmly in reverse after a raft of negative corporate announcements cast a pall on the mood of investors. A weak start to trading on major US markets did little to lift spirits on the day that the Labour Party launched its election manifesto. Jeremy Corbyn's pledges to the UK population include plans for £82bn extra on day to day spending, with additional taxes on the wealthy, business and the City, with dividend income firmly in his sights. At the close, the benchmark FTSE 100 index had recovered some of its earlier losses but still ended the day down 31.45 points, or about 0.4%, at 7,231.04. The mid cap FTSE 250 index, seen by many as a better measure for the UK's corporate health, endured an even larger sell-down, 0.6% to 20,352.01. HEADACHES FOR INVESTORS Royal Mail was firmly in the limelight on Thursday despite posting its strongest UK revenue in five years, up 5.1% to £5.2bn. But pre-tax profit continued to decline amid a challenging operational environment. Perhaps the biggest drag on the stock, which fell 14% to 198.45p, comes from the company's warning that it was struggling to keep pace with changing consumer habits through its transformation plan that is aimed at driving greater revenue from parcels both in the UK and overseas amid the continuing decline in letter volumes. Profit margin was 3.2%, down from 3.9% for the same period in 2018, while earnings per share fell to 11.1p, from 13.6p a year ago. The day's biggest FTSE 100 faller was chemicals company Johnson Matthey, down nearly 7% to £29.91, after it announced a fall in first half pre-tax profit. For the six months ended 30 September 2019, pre-tax profit fell 8% to £225m despite a 37% jump in revenue to £6.8bn, pressured by one-off freight costs and manufacturing inefficiencies in its clean air division. Going the other way were shares in British Gas-owner Centrica, which topped the FTSE 100 leader board on Thursday. The stock rallied 9% to 79.32p, their highest since late July, as the embattled energy group posted solid third-quarter performance. The results showed higher margins and growth in its customer base, while at the same time talking up churn caps. It also reported strong trading and optimisation performance in Europe, and an acceleration of cost efficiency delivery, offsetting the impact of outages at two nuclear power stations. Water utilities were also under pressure after Severn Trent revealed underlying profit had declined by 4.3% year-on-year after a programme of infrastructure investment. Shares in the group slipped 1.9% to £22.93. Turnover hit £910m in the six months to the end of September, up by £28.5m, while underlying profit before interest and tax was £286.3m, down £12.8m. The group's underlying basic earnings per share was 68.8p, down 9.7%, which it said reflected lower profits and the loss incurred from a joint venture with United Utilities and Water Plus. EUROMONEY SLUMPS AFTER EARLY GAINS A volatile day was endured by events and exhibitions organiser Euromoney Institutional Investor, which lost its early morning rally gains as investors digested full year results to 30 September. The group said the results were 'slightly' above its expectations as good momentum in its pricing, data and market intelligence products was offset by weakness in asset management. For the year ended 30 September, adjusted pre-tax operating profit rose 5% to £104.6m and revenue increased by 3% to £401.7m. That compared with previous guidance for pre-tax adjusted profit and revenue of £104m and £401m respectively. Euromoney shares ended the day down nearly 7% at £12.24, having jumped around 12% in early morning trade. Housebuilder Countryside Properties reported a rise in pre-tax profit as revenue increased by more than a fifth thanks to a jump in completions, yet its share price declined 1% to 371.8p. For the year ended 30 September 2019, pre-tax profit rose to £203.6m, from £180.7m, on a 21% jump in revenue to £1.2bn. Completions rose 33% to 5,733 homes, but the average selling price fell 9% to £369,000 as the company shifted its geographical focus towards regions outside of London. Bookmaker William Hill's shares reversed earlier losses to nudge 1.59% higher at 181.8p as it reported strong US revenue growth of 60% with new operations in two states so far this year. The betting company said in a trading update for the year to 29 October 2019 that it was trading in line with full year expectations with net revenue up 1% compared to the same period in 2018. Online UK net revenue was up 4%, consistent with the market growth rate. Shares in wealth management group Close Brothers fell by 2% to £14.26 after it said lower activity levels across its markets in the first quarter of the year had kept a lid on growth. Its banking division grew the loan book by 0.9% in the quarter to £7.7bn, driven by commercial, but retail and property loan growth remained broadly flat. Infrastructure company Hill & Smith's stock fell 3% to £13.28 as it reported underlying profit and revenue in the four months through July were ahead of last year, but challenges continued in its Scandinavian business. For the period 1 July 2019 to 31 October 2019, revenue increased by 8% to £243.6m on-year and underlying group operating profit was ahead of the same period last year, thanks to 'strong' performance in its core UK And US markets. Engineer Rotork announced that it expected slightly weaker sales in 2019 compared to 2018 as customers have delayed orders until the New Year, pushing its shares down 4% to 321.6p. In a trading update, the company said new orders improved compared to the third quarter of 2018 but that large project activity remained subdued. OUTSIDE THE FTSE 350 Automation software developer Blue Prism soared more than 30% to £11.62 after posting a return to the stellar growth rates investors have come to expect. The northwest-based business said it anticipates full year to 31 October revenues of at least £98m, including first contribution from its Thoughtonomy acquisition. This is modestly ahead of broker revenue expectations of £97.8m, although the company also expects a 9% increase in losses to £75. Blue Prism's second half was particularly strong with organic exit monthly recurring revenue up from £6.2m to £9.7m. NewRiver REIT's shares declined 5% to 179.8p after the company announced that it grew its cashflow by 3.1% in the period since 1 April 2019. Funds from operations (FFO) hit £26.4m, up from £25.6m. Underlying FFO per share was 8.6p, up from 8.4p. Healthcare investment company Syncona's shares dropped 1.5% to 221p after reporting a 7.2% loss for the six months to the end of September as its portfolio was weighted down by a fall in the share price of Autolus, one of its holdings. Syncona's net assets at 30 September 2019 totalled £1,336.8m, down from £1,455.1m at the end of March. Story provided by StockMarketWire.com

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