FTSE 100 movers: Ferguson and Royal Mail lead declines

London's FTSE 100 index had dropped 0.3% by mid afternoon on Tuesday, led lower by Ferguson on the back of results and Royal Mail's profit warning a day earlier.

Ferguson fell despite proposing to 're-base' its dividend upwards 10% and lift its final payout 21% ahead of last year, as the plumbing products supplier highlighted its "excellent cash generation and a strong balance sheet". However, reported pre-tax profits fell to $1.1bn from $1.42bn as tough trading conditions continued in the UK, a $122m impairment charge was taken on its stake in Swiss associate Meier Tobler Group and the outlook revealed that the new financial year since 1 August has started well, but that September was a bit slower than August. With the shares having gained 27% over the past 12 months, profit taking was being cited by some traders, while others bemoaned a lack of share buyback.

Analysts at Liberum said these were strong results from the company formerly known as Wolseley, with underlying trading profit up 15% to $1.51bn, in line with consensus forecasts, with the US business the main driver of improvement with organic sales growth and improved operating margins. "The UK was a bit worse than expected and the other lines a bit better."

Royal Mail was down for the second day after a shock profit warning the previous afternoon, slashing its full year profit guidance on the back of lower letter volumes, a dip in parcel profits and slower progress with cost cutting since resolving industrial action in March as productivity had improved just 0.1% so far.

Analysts at RBC Capital Markets were among the many frowning at the numbers on Tuesday, questioning the likelihood that Royal Mail can achieve productivity targets if the current year is just 0.1%. "With wage increases agreed, plus set potential working week cuts, then over 2019-2020 labour productivity needs to rise around 8%-9% cumulative over the next two years. RMG will now need to run even harder to stand still... Therefore to get back on track, without stamp price increases higher than anticipated, the company will need to work even harder. To us, this is ambitious and we see a high risk that the impact of the present miss becomes hard to claw back from."

RBC and JPMorgan Cazenove both cast doubt on the future of the progressive dividend.

Just Eat was among the main fallers in the wake of Deliveroo results the day before. Investors are concerned about Deliveroo's expansion plans, having spent £100m developing its business last year.

Standard Chartered was continuing the decline begun the day before when Bloomberg reported that the Asia-focused bank could be fined $1.5bn by US authorities over Iran sanctions, 50% larger than the previous estimate of $1bn.

Morgan Stanley said it did not think StanChart had made any provisions for a new fine, with the figure of $1.5bn representing around 55 basis pints of risk-weighted assets or 4% of tangible book value, leaving CET1 at 14%. "This will still be strong but may raise questions over pace of dividend increase for 2018e," analysts said.

Lower US yields, on the back of Italian government debt worries, were good news for utilities, sending defensive stocks including SSE and United Utilities to the top of the leaderboard, along with Imperial Brands and British American Tobacco, who were also benefitting from the weakness in the pound.

Oil giants BP and Shell were on the front foot as Brent crude hovered around $85 a barrel.

Shell also gave the green light to proceed with a major liquified natural gas (LNG) project in Canada where it has a a 40% working interest. Construction will start immediately with first LNG expected before the middle of the next decade.

Market Movers

FTSE 100 (UKX) 7,472.63 -0.31%
FTSE 250 (MCX) 20,288.90 -0.55%
techMARK (TASX) 3,491.67 -0.37%

FTSE 100 - Risers

SSE (SSE) 1,142.00p 1.29%
Imperial Brands (IMB) 2,672.00p 1.21%
United Utilities Group (UU.) 712.40p 1.08%
Evraz (EVR) 574.00p 1.02%
Shire Plc (SHP) 4,589.50p 1.01%
Sainsbury (J) (SBRY) 319.80p 0.98%
BHP Billiton (BLT) 1,685.60p 0.91%
British American Tobacco (BATS) 3,528.50p 0.73%
Reckitt Benckiser Group (RB.) 7,079.00p 0.64%
BP (BP.) 598.50p 0.54%

FTSE 100 - Fallers

Ferguson (FERG) 6,135.00p -6.03%
Royal Mail (RMG) 369.10p -5.70%
Just Eat (JE.) 641.60p -4.04%
Johnson Matthey (JMAT) 3,491.00p -2.92%
Melrose Industries (MRO) 194.30p -2.68%
Ashtead Group (AHT) 2,380.00p -2.38%
Pearson (PSON) 869.80p -2.09%
Smiths Group (SMIN) 1,490.00p -1.72%
Standard Life Aberdeen (SLA) 299.90p -1.51%
Informa (INF) 745.20p -1.48%

FTSE 250 - Risers

Saga (SAGA) 135.73p 4.01%
Premier Oil (PMO) 143.83p 2.66%
LondonMetric Property (LMP) 184.10p 2.51%
Ferrexpo (FXPO) 204.20p 2.05%
Energean Oil & Gas (ENOG) 598.00p 2.05%
Hochschild Mining (HOC) 161.55p 1.76%
Centamin (DI) (CEY) 105.60p 1.64%
Polymetal International (POLY) 614.00p 1.62%
Hunting (HTG) 816.38p 1.54%
Spire Healthcare Group (SPI) 149.00p 1.43%

FTSE 250 - Fallers

Thomas Cook Group (TCG) 55.05p -5.49%
Ashmore Group (ASHM) 353.40p -3.65%
Virgin Money Holdings (UK) (VM.) 367.50p -3.44%
CYBG (CYBG) 308.80p -3.38%
Indivior (INDV) 187.05p -3.21%
Equiniti Group (EQN) 250.00p -3.10%
IP Group (IPO) 126.40p -2.77%
TalkTalk Telecom Group (TALK) 116.40p -2.68%
Spirax-Sarco Engineering (SPX) 7,165.00p -2.45%
OneSavings Bank (OSB) 400.20p -2.39%