Stocks retreat despite the raise in earnings in the UK

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Shadrach   in Stocks & Shares

Last updated: 09 January 2020, 04:06 GMT


The shares in the UK continued to go downhill after yesterday afternoon’s sudden market reversal, with the FTSE 100 index dropping 0.7% to 7,275 despite several upbeat corporate reports.

The selling appeared to be broad-based with just beverages, healthcare, pharmaceutical and utility indices posting gains.

EARNINGS GO UNREWARDED

The first half results in line with forecasts and maintained its full year profit outlook were delivered by Aerospace and defence contractor Babcock (BAB).

In terms of highlights, the firm’s combined order book and pipeline grew 10% since March to £34 billion, its highest ever level, thanks to major contract wins including the Royal Navy’s Type 31 frigate. Despite the positive update, shares dipped 1% to 539p.

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Financial software provider Sage (SGE) reported healthy growth in like-for-like sales for the full year to 30 September with an impressive 10.8% increase in like-for-like recurring revenues, giving it good visibility for the coming year.

The figures excluded Sage Brazil and Sage Pay, which are being held for sale. Sage Pay, the firm’s payments processing unit, is being sold to US Bancorp for £232m with Sage expected to report a profit of £180m on the deal. Shares brushed off the news, slipping 3% lower to 720p.

Travel-based convenience-food retailer SSP Group (SSPG) also served up a strong set of full year results with sales, margins and profits expanding at a healthy clip thanks to higher numbers of rail and air passenger numbers in the US and continental Europe.

As well as rewarding shareholders with a 16% increase in the total dividend for the year, representing a 40% payout ratio, the firm announced a share buyback of up to £100m. Shares failed to respond however, falling 2.7% to 637p.

RETAIL BLUES

DIY retailer Kingfisher (KGF) was the worst performer in the FTSE 100 which posted a third quarter trading update that shows no instant improvement in its UK or French businesses.

Like-for-like sales were down 1% in the UK and Ireland in the quarter, slightly worse than the first half, while Screwfix delivered respectable like-for-like growth of 3.7%. However French sales continued to disappoint, down 6.1% on a like-for-like basis. Kingfisher shares dropped 7.5% to 193p, just above their recent 5 year lows.

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FOOD & DRINKS BRING RELIEF 

Mitchells & Butler (MAB), a food-led pub group reported a 16.5% increase in full year operating profits and a 10.7% increase in pre-tax profits as it managed to outperform the wider dining-out sector.

Like-for-like sales continued to outstrip the market in the first few weeks of the new financial year in spite of the conditions that remained ‘challenging’, and cold wet weather kept some punters away. Shares rose up to 6.5% to a new 12-month high of 475p.

Due to a slowdown in the UK ‘pff-trade’, soft drinks purveyor Fevertree (FEVR:AIM) trimmed its full year sales guidance to between £266m-£268m. And that is quite below market expectations

Sales in the ‘on-trade’ such as bars and restaurants, continued to grow and increase in sales in the US experienced ‘strong growth’ with full year revenues expected to beat previous estimates.