Weaker-than-expected second quarter earnings at oil major Shell (RDSB) pushes the UK’s blue chip index into the red in early trading amid a deluge of corporate updates on Thursday.
Alongside Shell, stock market heavyweights BAE Systems (BA.), British American Tobacco (BATS), Diageo (DGE), Lloyds (LLOY) and AstraZeneca (AZN) all updated the market.
Shares in Shell, which make up close to 10% of the entire FTSE 100 index, trade 3.2% lower at £20.37 and the index trades 0.2% lower at 6,740.
Shell’s earnings are down 72% on an underlying basis in the second quarter at $1 billion (£763 million), versus analyst expectations in excess of $2 billion.
Results in the first half of 2016 were always expected to be scrappy after its acquisition of BG Group, which completed in the period.
Lloyds, the UK’s largest retail bank, is also making headlines as it announces £400 million of cost savings in reaction to a more uncertain economic environment.
Underlying earnings declined 5% to £4.2 billion in the first six months of 2016.
‘While the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in future years than previously guided,’ said chief executive Antonio Horta-Osario.
‘We will formally update guidance when we have a clearer view of likely outcomes.’
Shares in Lloyds trade 4% lower at 54p.
Leading the blue chip index in early trading is engineer Rolls-Royce (RR.), up 7.3% to 785p, as chief executive Warren East stands by earnings guidance in 2016 despite a tough start to the year.
Analysts expect full year earnings per share to hit 25p in the year to 31 December 2016. Rolls delivered 4.2p in the six months to 31 June.
Another riser is miner Anglo American (AAL), which advances 4.4% to 834.6p on pre-tax losses falling 81% to $364 million in the six months to 30 June. The company generated $1.1 billion of free cash flow and is on track to reduce net debt to below $10 billion in 2016.
Broadcaster Sky (SKY) rises 4.8% to 930.5p on operating profits improving 12% to £1.5 billion on a 7% rise in revenue during the half year to 30 June. A strong performance across the group and moving into new segments takes the credit.
Johnnie Walker whisky-to-Smirnoff vodka producer Diageo (DGE) raises spirits with a 6p gain at £21.44, on results for the year to June revealing stronger organic growth and robust free cash flow.
CEO Ivan Menezes flags improvements in the performance of Diageo’s scotch and beer portfolios and the return to growth of the US spirits business. He says the drinks giant is primed to deliver a stronger performance in the current year, during which operating profits should receive a £370 million currency boost.
Artificial knee-maker and wound care specialist Smith & Nephew (SN.) moves in the other direction, cheapening 5% to £12.35. Falling demand in China and the Gulf sees first half profits slip 3% to $483 million.
Mike Ashley’s bombed-out Sports Direct International (SPD) perks up 6.4% to 273.9p on preparing to launch a share buyback of up to £89.8 million or around 5% of the sportswear giant's share capital.
Rival JD Sports Fashion (JD.) jumps 21p to £12.57 as the sports, fashion and outdoor brands star says it is positioned to deliver pre-tax profits in the upper half of the £170 million-to-£190 million range, strong trading trends having continued throughout the first half of the financial year to January 2017.
Just Eat (JE.) surges ahead 9.3% to 529p on a strong set of half year results and upgraded earnings guidance for the full year on a mix of trading and currency benefits. International markets are really taking off for the food ordering platform.
Electronics distributor Premier Farnell (PFL) surges 17% to 193p as it receives a 185p counter-offer from industry giant Avnet (AVT:NYSE). Premier was already the subject of a 165p a share cash offer from Datwyler in June.
Film studio Pinewood (PWS:AIM) falls 4.3% to 555p as a proposed takeover is less than the market expected. Venus Grafton has indicated it will pay 560p per share. The board says it would recommend shareholders accept that price should a formal offer be made.
Women’s value fashion retailer Bonmarche (BON) cheapens 4.7% to 111p on a poor first quarter update. Like-for-like sales were down 8.1% over the 13 weeks to 25 June as poor weather clobbered summer clothing sales. Soon-to-depart CEO Beth Butterwick bravely leaves full-year guidance unchanged 'on the assumption that trading conditions normalise through the autumn season.'
Disclosure: A contributor to this story owns shares in BAE Systems, British American Tobacco and Lloyds Banking Group
