UK stocks built on their previous day’s gains as mining companies rose on robust results from Anglo American (AAL), thanks to rising demand and tight supply, and talk of mergers and acquisitions (M&A) resurfaced.
The FTSE 100 index of leading stocks added 18 points or 0.3% to 6,677 led by mining and packaging shares, while banks and house builders gave up some ground.
The pound climbed above $1.41 at the same time as Brent crude oil futures pushed above $67.50 per barrel, creating headwinds both for exporters and manufacturers. Meanwhile, gold remained mired below $1,800 per ounce.
COMPANY NEWS
Anglo American (AAL) cited ‘robust demand’ and tight supply of key commodities for its steady performance last year, with earnings before interest, taxes, depreciation and amortisation (EBITDA) down just 2% to $9.8 billion.
Chief executive Mark Cutifani pointed to the firm’s strong cash returns, 17% return on capital employed (ROCE) and 72c per share dividend as proof of the business’s resilience. Shares gained 4.2% to a new five-year high of £29.60.
Packaging firm Mondi (MNDI) reported an 8% fall in full year sales to €6.66 billion and a 24% drop in underlying operating profits to €925 million due to ‘significantly lower average selling prices’ across its key pulp and paper products.
However, it flagged ‘strong order books supporting price increases in most packaging and pulp grades’. There was also market speculation that the firm was eyeing a bid for rival packaging firm DS Smith (SMDS).
Mondi shares dipped 1.2% to £17.80 while DS Smith shares jumped 9% to 418p, making them the best performers in the FTSE.
Shares in defence contractor BAe Systems (BA.) rose 0.9% to 500p after the firm posted a small rise in full year revenues and underlying EBITDA and confirmed its earnings targets for 2021.
‘With a strong year behind us against a challenging backdrop of the global pandemic, we look forward to another year of top line growth, with a year of margin expansion and good cash flow’, said chief executive Charles Woodburn.
Outsourcer Serco (SRP) saw its shares jump 8% to a six-month high of 139p after the firm posted a 20% rise in full year revenues to £3.88 billion and a 36% rise in underlying trading profit to £163 million.
Chief executive Rupert Soames said the firm’s performance was ‘all the more impressive as it follows strong growth in 2019 and underlines the momentum behind Serco’s return to financial health’. He also lifted current year guidance after a strong start in January and February.
POCKETS OF WEAKNESS
Utility group Centrica (CNA) recorded a smaller full year loss for last year than the previous year despite the impact of Covid on the economy and warmer weather. Losses from continuing operations were £362 million against £763 million.
However, the firm said it would pass the 2020 dividend and would only return cash to shareholders ‘when it is prudent to do so’. Shares sold off 2.9% to 52p in response.
Emerging market focused banking group Standard Chartered (STAN) posted a 57% drop in full year pre-tax profits to $1.6 billion and a 340 basis points or 3.4% fall in return on tangible equity to just 3%.
Chief executive Bill Winters remained upbeat, saying ‘the outlook is bright’ and setting an ambitious target to rebuild returns on equity. However, investors were less convinced, sending the shares down 4.4% to 487p.
Shares in Hikma Pharmaceuticals (HIK) were the worst performers in the FTSE, falling 5% to £22.83 despite the firm reporting a 6% rise in full year revenues, reflecting growth in all of its businesses, an 11% rise in core operating profits, and a full year dividend of 50c per share against 44c the previous year.
Food-to-clothing conglomerate AB Foods (ABF) announced that revenues and profits for its Grocery, Sugar, Agriculture and Ingredients businesses would be ahead of last year and above expectations in the first half to the end of February.
However, it also warned that store closures have cost its Primark business an estimated £1.1 billion in lost sales, meaning first half revenues will be in the region of £2.2 billion, while operating profits are likely to be marginally positive. After initially trading lower, shares inched higher by 1% to £24.62.
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