UK stocks opened moderately lower on Tuesday amid a mixed bag of earnings updates that included market-pleasing numbers from BP (BP.) and Direct Line (DLG) that were offset by a profit slump at Diageo (DGE). At 8.30, the FTSE 100 was off 0.24% at 6,018.15.
Oil major BP rallied 5.6% to 296.8p, despite cutting the dividend for the first time in a decade, after reporting a record $6.7 billion second quarter loss, although this included $9.2 billion of impairment charges pinned on falling oil prices that had already been flagged to investors.
BP declared a dividend of 5.25 cents for the second quarter, down 50% from the previous quarter, and said the dividend reset would remain fixed at this level, although chief executive Bernard Looney insisted ‘our performance remained resilient, with good cash flow and - most importantly - safe and reliable operations’.
BP also outlined plans to sharply reduce its oil and gas output by 2030 and boost its renewable power generation under Looney’s strategy to ‘reinvent’ BP in line with a global transition to low carbon energy.
Drinks giant Diageo (DGE) slipped 6.2% lower to £27.01 after serving up a worse than expected 8.4% drop in organic sales for the year to June, as the Johnnie Walker-to-Smirnoff maker’s second half was dampened by COVID-19.
However, Diageo did maintain the final dividend at 42.47p, bringing the full year dividend to 69.88p, a year-on-year increase of 2%.
EasyJet (EZJ) ascended 8.5% to 550.1p as the low-cost carrier announced it will expand its flight schedule in the fourth quarter following higher-than-expected demand, while reporting a third quarter performance in line with expectations.
The budget airline notched a load factor of 84% in July, as destinations like Faro and Nice remained popular with customers.
Elsewhere, Babcock International (BAB) tumbled 14.4% to 247.5p after the engineering services outsourcer scrapped the final dividend for the year March and reported a fall in profit on lower revenue for a COVID-19-impacted first quarter to June.
Insurer Direct Line (DLG) was marked up 6.1% to 326.5p after it declared an interim dividend of 7.4p, up from 7.2p last year, alongside a further special dividend of 14.4p to replace the cancelled 2019 final dividend.
The uptick in the proposed payout came as the company reported that profit slipped on higher costs in the first half of the year.
Rotork (ROR) rose 6.7% to 305p even as the industrial flow control equipment manufacturer posted a 4.3% fall in first-half profit after sales were hit by COVID-19 related disruptions to production facilities.
While Rotork did not declare an interim dividend, investors were heartened as it reinstated its previously deferred 2019 final dividend of 3.9p.
Roadside assistance play AA (AA.) accelerated 12.2% higher to 28.1p after confirming it is in talks with ‘a number of parties in relation to a wide range of potential refinancing options’.
Three of these parties have approached AA regarding possible cash offers which would involve ‘a significant amount of new equity capital being injected’ into the company to reduce its debt.
