UK stocks gave back some gains on Tuesday afternoon but still managed to eke out a small gain.
US technology giant Microsoft is due to release its earnings report after the US close with investors expecting continuing growth in its cloud computing division.
At 4.30pm the FTSE 100 index of leading shares was 0.2% higher at 6,654 points, with banks and materials stocks leading and travel-related stocks lagging.
Aero engine maker Rolls-Royce (RR.) issued an unscheduled trading update, warning that it could see a free cash outflow of £2 billion this year if widebody engine flying hours only reach 55% of 2019 levels instead of 70% under its previous assumptions.
The firm reassured that it had plenty of liquidity to meet the ‘challenging near-term market conditions’ and was well-positioned for the future, but investors pulled the rip-cord sending the shares down 2% to 96p, making them the worst performers in the FTSE.
Food-to-go sales were particularly impacted, with revenues down 35% on the year-ago period, although the firm said the effect of the restrictions was less severe than in March 2020 and it was ‘well positioned to build back the business rapidly as trading conditions recover’. The shares eased 3% to 113.8p.
In contrast, shares in soft drinks maker AG Barr (BAG) gained 0.5% to 499p after the firm said revenues and pre-tax profits for the year ended on 24 January would be above its forecasts thanks to better than expected trading from August through November.
Investors seemed happy to overlook the company’s admission that the latest lockdown was having an impact on sales, most obviously in the hospitality and ‘drink-now’ categories.
Personal care company PZ Cussons (PZC) posted a strong set of results for the first half to the end of November, with revenues and operating profits both up just shy of 15% thanks to ‘unprecedented’ demand for its Carex hand wash and sanitiser products.
The firm used the positive first-half momentum to increase its investment in marketing and internal re-organisation, although it admitted it was only at the start of a multi-year programme to boost earnings.
It also cautioned that second-half growth could moderate, and flagged growing ‘upward cost pressure’ in its manufacturing, but investors brushed aside any concerns, sending the shares up 0.9% to 240p.
Also on a positive note, house builder Crest Nicholson (CRST) increased its forecast for pre-tax profits for the year ended last October thanks to a recovery in demand since the spring lockdown, and announced it would resume dividend payments later this year.
The company reported forward sales above last year’s levels in terms of volume and value as of the middle of January, and a higher level of net cash than previously forecast. The shares gained 1.2% to 309.8p.
Meanwhile, brick maker Forterra (FORT) revealed that thanks to stronger than expected trading in the final quarter of last year it also expected 2020 operating and pre-tax profits to be above its previous guidance.
Thanks to the steady improvement in trading through last year’s second half, and ‘recent positive statements from our customers’, the firm said it saw ‘growing cause for optimism’.
However, the impact of the ending of the Stamp Duty holiday and the impending tapering of the Help to Buy scheme on underlying housing demand was still unclear, it said. The shares gained 1.6% to 256p.
JD Sports Fashion (JD.), the self-styled ‘King of trainers’, responded to recent press speculation by confirming that it is ‘exploring additional funding options’, which may include a non pre-emptive capital increase to invest in strategic acquisitions as the fall-out on the high street continues. Its shares dipped 2.9% to 794.4p.