UK water industry stocks are rallying in early trade on Thursday after the three UK listed firms – Severn Trent (SVT), United Utilities (UU.) and Pennon (PNN) – see their business plans win watchdog approval.

That sends sector share prices rallying having removed a hefty unknown for investors, led by the 1.5% rise at United Utilities to 832p, the UK’s largest water company.

The industry had submitted complex documents showing their ambitions and objectives for the next regulatory price control period, running from 2020 to 2025. While Ofwat sent seven out of 10 UK suppliers back to the drawing board, Severn Trent, United Utilities and Pennon, which runs South West Water, have all been given the thumbs-up to plans that will result in them cutting water bills by up to £70 a year.

Severn Trent and Pennon stock rise 1.4% and 1% respectively to £19.77 and 766p.

Also carrying the blue-chip FTSE 100 index higher on Thursday is oil giant Royal Dutch Shell (RDSB) and spirits firm Diageo (DGE).

Royal Dutch Shell has reported a 47% increase in fourth quarter profit to $5.5bn (approximately £4.1bn), lifted by rising gas, oil and liquefied natural gas prices. The energy giant also said that full year profits jumped 80% to $23.3bn.

Diageo reported interim pre-tax profits up from £2.2bn to £2.6bn in the six months to 31 December 2018. Sales increased to £10.3bn from £9.9bn in the comparable six months.

Diageo, the alcoholic drinks maker of Johnny Walker among other brands, says that the direct financial impact from Brexit ‘will not be material’.

The FTSE 100 has opened 0.66% higher at 6,987.54.

GROWTH/CASH BLOT ON BT LANDSCAPE

Going the other way, telecom’s giant BT (BT.A) is among the leading losers on the FTSE 100 today despite posting 20% rise in pre-tax profits to £2.1bn for the nine months to 31 December 2018.

While outgoing chief executive Gavin Patterson says he is ‘handing over the business with good momentum’ to successor Philip Jansen, investors are more concerned about another period of no growth and weakening cash flow dynamics.

Revenue for the nine months fell 1% to £17.5bn while normalised free cash flow declined by £210m to £1.74bn. Net debt also soared, increasing by nearly £2.2bn to £11.1bn.

BT shares slump 2.6% to 227.85p, less than half the level of three years ago.

A takeover battle may yet emerge for plastic packaging firm RPC (RPC) after US industry peer Berry Global admitted that it is mulling making a rival offer for the UK company. RPC had previously recommended that shareholders accept  £3.3bn offer from private equity firm Apollo Global.

RPC shares rally 4% to 797.2p, roughly 2% higher than the 782p per share tabled by Apollo.

STAFFLINE PROBE ON PROFIT CONCERNS

Recruiter Staffline (STAF:AIM) has come clean after a day of intrigue on Wednesday by revealing invoicing and payroll issues that forced the company to delay its full year results yesterday.

An investigation has been started and while management has expressed its belief that auditing has been done correctly, results will not be published until the probe has been completed.

Staffline shares remain suspended at 670p having crashed from £10.00 on Wednesday before the suspension was implemented.

The recent US government shut down is squeezing order flow at defence contractor Avon Rubber (AVON), spooking investors and dragging on the share price. While its military business has started the new financial year well events in Washington has slowed workloads coming from the US in its law enforcement and fire operations.

Avon Rubber shares slump more than 9% to £11.50, the FTSE All Share’s biggest loser in early trade on Thursday.

INVESTORS LESS IMPRESSED BY UNILEVER

Sales at Unilever (ULVR) fell by 5.1% to €50.9bn (£44.56bn) over the full year but pre-tax profits grew to €12.3bn from €8.1bn in the previous 12 months.

The consumer goods giant, whose brands include Marmite and Dove, said that underlying sales increased by 3.1% when stripping out its spreads business which it is selling to private equity firm KKR for €6.8bn.

Unilever shares fall 2.5% to £39.645.

And finally, the chief executive of online white goods seller AO World (AO.) is stepping down after two years in the role. Steve Caunce is leaving with ‘immediate effect’ and will be replaced by founder John Roberts.

Caunce, who has been with the business for 13 years, is said to want to take on less demanding business roles as he looks to re-balance his lifestyle. AO World has for consistently failed to make a profit.

AO World shares fall 2% to 122.2p, about a third of their level from 2014 highs.

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Issue Date: 31 Jan 2019