The UK FTSE 100 plunged in late trading on Thursday as investors mulled weak earnings from firms like Rolls-Royce (RR.), which underlined the extent of corporate damage inflicted by the coronavirus pandemic.
There was little sign of any impact from a firm start for US stocks, although the anticipated speech from Federal Reserve Chief Jerome Powell brought few surprises. The US Fed on Thursday rolled out an aggressive new strategy to restore the United States to full employment and lift inflation back to healthier levels in a world where weak inflation, low interest rates, and slow growth appear here to stay.
Sterling dipped modestly versus the dollar at $1.3203, close to its recent highs after its best weekly performance since June.
Brent crude oil prices dipped slightly through the day at $45.02 a barrel, but remain close to $46 five-month highs as hurricane Laura forced the closure of most production and refining facilities in the Gulf of Mexico.
Gold on the other hand slipped to $1,9185 per ounce as investors took profits as investors booked gains.
The benchmark FTSE 100 index of leading stocks gave up 0.75% to end the session back below the 6,000 mark at 5,999.99 as gains in leisure and media stocks were offset by declines for banks, miners and energy sectors.
DAMAGE CONTROL AT ROLLS
Aero-engineer Rolls-Royce posted a sharp rebound through Thursday as investors took a sanguine view of half-year results. Having dropped by almost 10% early in the day, the share price recovered to show a mere 1.2% decline at 250p despite posting an underlying loss of £3.2 billion for the first half of the year due to a collapse in revenues at its civil aerospace division as the coronavirus pandemic grounded flights worldwide.
The company said it had agreed £2 billion of new funding and was preparing to sell £2 billion worth of assets including its Spanish unit ITP Aero in order to bolster its balance sheet.
Media giant WPP (WPP) was the best performer in the FTSE, gaining close on 6.5% to 664.4p after it announced it would pay a 10p per share interim dividend despite posting a pre-tax loss of £2.58 billion for the six months to June.
Revenues were down 11.5% on a like for like basis to £5.58 billion during the period, while earnings were impacted by £2.7 billion of impairments as the firm wrote down the value of acquisitions to account for lower industry growth and the effects of Covid.
Rival ad agency M&C Saatchi (SAA:AIM) lost some of its earlier momentum but remained nearly 6% higher at 64.5p after it revealed it had traded ‘well and profitably’ in the opening weeks of the second half with several significant new contracts.
Investors were also reassured by the firm’s net cash position and the news it would report its final 2019 results by the end of next month.
Shares in Paddy Power betting firm Flutter Entertainment (FLTR) lost earlier gains to fade nearly 1% to £124.75 after it reported a 35% increase in half-year earnings, as a jump in the number of ‘recreational customers’ entertaining themselves at home playing poker and gaming online offset a lack of sports events.
Revenues increased 49% thanks to the merger with Stars Group, while adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) reached £684 million.
Shares in building products distributor Grafton (GFTU) gained 4% to 776p despite a 61% fall in first half operating profits from continuing operations as the firm said it had seen a ‘strong recovery’ in the repair, maintenance and improvement (RMI) industry since the end of lockdown.
Recruitment firm Hays (HAS) lost earlier gains to close about half a percentage point down at 116.9p after posting an 11% drop in full year net fee income after a brutal final quarter to the end of June when fees fell 35%. The firm also scrapped its final dividend for the financial year just ended.
Still, investors were heartened that given the collapse in fees in the fourth quarter the firm managed to break even and that it had seen ‘modest signs of improvement’ in permanent hiring since the beginning of July.
TAKEOVER SPEAKS FOR SDL
Language translation software firm SDL (SDL) was the market’s big winner of the day, rallying more than 30% to a record 782p close after accepting an all-share buyout offer that values the business at £854 million. The deal has been struck with technology business RWS (RWS:AIM), which is listed on the AIM junior market.
RWS saw its stock fall 12% to 650p.
Onesavings Bank (OSB) was the day’s biggest mid-cap winner, jumping nearly 16% to 301.4p after reporting a more robust pandemic-hit first-half than anticipated by investors. Statutory profit before tax increased by 10% to £99.3 million while the retail savings bank grew its net loan book 2% to £18.5 billion.
Technical products and services provider Diploma (DPLM) dipped 1.5% to £19.27 despite saying performance had started to recover following coronavirus-led weakness in the third quarter of the year. The period running from April to June 2020 was impacted by the COVID-19 crisis with revenues down 12% on a reported basis and down 21% on an underlying basis.
Cruise operator Carnival (CCL) said it was extending its pause of operations in Australia through December owing to the continued progression of Covid-19.
But the news failed to deter investors, sending the shares charging 5% higher to £10.19.
Anglo Pacific (APF) maintained its dividend despite swinging to a first-half loss as royalty revenue was hurt by the 'significant decrease' in coal prices during the second quarter caused by the COVID-19 pandemic. The share price stayed roughly flat at 105.8p.
Gaming content developer and licensor Gaming Realms (GMR:AIM) secured its first multi-state direct-integration agreement with its existing partner Rush Street Interactive as it continues to focus on increasing its presence in the US.
The news boosted its shares by nearly 3% to 22.7p.