The UK’s leading stocks rallied through the late morning session on Tuesday as investors were lifted by positive earnings reports and the recent spate of takeover deals. In total the value of global merger and acquisition (M&A) deals this month is approaching $150 billion, the highest level in almost a year, suggesting companies are becoming more confident in their outlook.
The benchmark FTSE 100 had risen by more than 1% by 12.30pm, lifting the index to 6,087.92, its highest since 24 August, led by retail and consumer stocks. The mid-cap FTSE 250 was also firmer, adding around 0.6% to 17,785.60 thanks to gains in industrial stocks.
On the currency markets the pound resumed its upward trend against the dollar, topping $1.2912, while in the energy markets Brent crude oil futures stabilised around the $40 level. Meanwhile, gold prices climbed to $1,942.30 per ounce.
Online grocery delivery firm Ocado (OCDO) reported a 52% rise in revenues in the third quarter to 30 August, marking a further acceleration from the second quarter growth rate of 40% as more customers switched to buying groceries online.
There was also positive news on sales of Marks & Spencer (MKS) products on Ocado’s retail platform with 98% of customers buying M&S goods. According to Melanie Smith, chief executive of Ocado Retail, ‘Excitement around the launch of M&S products has increased the average basket by around five items and is driving strong forward demand including our biggest ever forward order day, on the day of launch’.
The firm raised its forecast for full year group earnings before interest, taxes, depreciation and amortisation (EBITDA) to at least £40 million compared with the analyst consensus of £26 million and a top estimate of £34 million.
Ocado shares topped the list of FTSE leader board, up 5.4% to £24.83 while M&S shares gained 4.55% to 109.38p.
The company now expects to post a small adjusted operating profit for the first half along with a net debt/EBITDA position of just two times, well within its September banking covenants.
Meanwhile it has seen ‘significant interest’ from potential buyers for its North American businesses as it seeks to rationalise its portfolio.
The shares lost some of their earlier momentum but remained around 5% higher at 42.9p.
Building materials group Marshalls (MSLH) saw earlier modest gains wiped out through the morning after the company reported a big hit to revenues and earnings in the first half to June. Operating profits before restructuring costs fell to just £3.5 million from £39 million a year ago.
However, trading has improved with revenues in August back to prior-year levels and all manufacturing sites now open. Meanwhile, the firm has completed its restructuring programme and expects to reduce its fixed costs by some £12 million per year on top of operational efficiencies.
But investors were left feeling nervous about full year expectations, sending the stock close to 4% down to 648.5p.
Environmental products group Polypipe (PLP) also posted a big fall in first half revenues and earnings followed by a sharp recovery in July and August with the business ‘tracking well ahead’ of the operating scenario set out in May.
The firm said it was ‘encouraged by the trading performance so far’ and the medium-term fundamentals in its markets remain ‘as strong as ever’, although in order to conserve cash it would pass on the interim dividend and take a decision on the final dividend next May. Polypipe shares responded positively, adding more than 5% to 430p.
Defence technology group Chemring (CHG) saw its share price ease off morning gains of 7% but stayed more than 4% in positive territory at 261.5p after it upgraded its annual profit guidance on the back of a buoyant order intake.
Chemring said its adjusted operating profit for the year through October was expected to be towards the upper end of current analyst expectations of £47 million to £53 million.
Security company G4S (G4S) eased back 1.6% to 179.5p after it rejected a takeover approach at 190p per share from Canada's Garda World Securities, describing it as 'highly opportunistic' and 'significantly' undervaluing the company.
Construction support group Mountfield (MOGP:AIM) tumbled 37% to 0.6p, having posted a fall in first-half profit after a rise in revenue was more than offset by shrinking margins caused, in part, by a large loss-making contract.
Citing a weaker order book, Mountfield also forecast a 'significant' drop in profit for the full year.
Smart meter installer Smart Metering Systems (SMS:AIM) rose 4.8% to 660.4p after it posted a large first-half profit, having benefited from an asset disposal, and said it would up its dividend by 10% a year.
Smart Metering Systems said it intended to pay a dividend of 25p per share for the 2020 financial year, paid in four instalments starting October, with annual increases of 10% thereafter until the 2024 financial year.
Events and data analytics company Bonhill (BONH:AIM) gained 5% to 7.74p on announcing that it continued to trade ahead of expectations after implementing cost-saving measures that boosted margins.
Bonhill , however, reported wider first-half losses as revenue fell after live events were cancelled or postponed in the wake of the coronavirus pandemic.