London open: Stocks edge lower with BP, Diageo earnings in focus
London stocks edged lower in early trade on Tuesday following strong gains in the previous session, as investors sifted through results from the likes of BP and Diageo.
At 0900 BST, the FTSE 100 was down 0.2% at 6,021.58.
Diageo was the worst performer on the FTSE 100 as the drinks company proposed an unchanged final dividend and reported a 15% drop in underlying annual profit caused by the Covid-19 crisis. Operating profit before exceptional items for the year to the end of June fell to £3.49bn from £4.12bn as net sales dropped 9% to £11.8bn.
Babcock fell sharply as the aerospace and defence company said first-quarter underlying revenue fell 11% from the same period a year ago, while underlying operating profit slumped 40%.
Workspace provider IWG was under the cosh as it posted a widening of its first-half losses, while Spectris slid despite saying it had performed better than it expected in the first half and reinstating its dividend.
Centamin lost its shine even as the gold miner hiked its interim dividend by 50% after first-half profit more than tripled as the price of gold soared.
On the upside, BP was the top gainer despite halving its quarterly dividend for the first time in a decade as it swung to a $6.7bn second quarter loss as the coronavirus pandemic slammed demand for oil.
Richard Hunter, head of markets at Interactive Investor, said there were "glimmers of hope through these dark clouds for BP".
"In reshaping its business by disposing of non-core assets and reducing capital expenditure where possible, there are some immediate signs of improvement. The net debt figure has reduced in the quarter by $10.5bn to stand at $40.9bn. Although this leaves the current gearing figure at 33.1%, well in excess of its targeted range of 20% to 30%, it nonetheless represents an improvement from 36.2% at the end of the first quarter.
"Meanwhile, extra headroom has been secured, partly by some new bond issuance, with the access to liquidity figure now standing at $47bn, as compared to $32bn three months prior. For the quarter, a strong contribution from its oil trading unit mitigated some of the pain being felt elsewhere. With an eye to the future, BP has an enlarged presence in alternative energies, with wind and solar power in particular becoming areas of focus."
He said the positive share price move reflects appreciation of the steps being taken, and at pace, such as the dividend reduction. "At the same time, it is also possible that much of the sting had already been taken out of the price, given the company’s immediate prospects being limited in the current environment," he added, pointing to a decline of 47% over the last year compared to a drop of 19% for the wider FTSE 100.
Elsewhere, Melrose Industries rallied after amending its financial covenants to give the company "considerable headroom and flexibility".
EasyJet flew higher after saying it expects to report a smaller loss for the third quarter of the year than the third and that it is expanding its flight schedule. The budget airline now expects to fly around 40% of planned capacity in the fourth quarter, up from the 30% previously expected.
Car insurer Direct Line was up after it lifted its dividend and declared a special "catchup" payout to make up for cancelling its 2019 disbursement, as it reported a fall in profits.
Rotork gained as it reported a 4% decline in first-half profit as revenues were dented by the Covid-19 pandemic, but reinstated its previously-deferred final dividend for 2019.
FTSE 100 - Risers
BP (BP.) 297.00p 5.68%
Melrose Industries (MRO) 93.18p 5.62%
International Consolidated Airlines Group SA (CDI) (IAG) 172.15p 5.07%
Rolls-Royce Holdings (RR.) 240.20p 4.25%
BT Group (BT.A) 101.00p 3.04%
Royal Dutch Shell 'A' (RDSA) 1,172.40p 2.54%
Royal Dutch Shell 'B' (RDSB) 1,127.20p 2.40%
Land Securities Group (LAND) 596.60p 2.16%
WPP (WPP) 605.60p 2.12%
NATWEST GROUP PLC ORD 100P (NWG) 113.25p 1.98%
FTSE 100 - Fallers
Diageo (DGE) 2,705.50p -6.09%
Fresnillo (FRES) 1,234.50p -3.18%
Rentokil Initial (RTO) 537.20p -2.47%
Ocado Group (OCDO) 2,095.00p -2.10%
Intertek Group (ITRK) 5,506.00p -2.06%
AstraZeneca (AZN) 8,592.00p -2.00%
Avast (AVST) 584.50p -1.76%
Hikma Pharmaceuticals (HIK) 2,176.00p -1.76%
Intermediate Capital Group (ICP) 1,366.00p -1.73%
Next (NXT) 5,454.00p -1.62%
FTSE 250 - Risers
easyJet (EZJ) 547.20p 7.89%
Direct Line Insurance Group (DLG) 325.90p 5.95%
Rotork (ROR) 300.60p 5.18%
TUI AG Reg Shs (DI) (TUI) 301.40p 4.69%
SSP Group (SSPG) 215.00p 4.47%
Calisen (CLSN) 173.30p 4.40%
BlackRock Smaller Companies Trust (BRSC) 1,292.00p 4.03%
Just Group (JUST) 46.30p 3.95%
Future (FUTR) 1,442.00p 3.89%
Royal Mail (RMG) 174.50p 3.62%
FTSE 250 - Fallers
Babcock International Group (BAB) 245.30p -15.12%
IWG (IWG) 216.80p -3.90%
Polypipe Group (PLP) 395.50p -3.42%
Spectris (SXS) 2,565.00p -2.99%
Centamin (DI) (CEY) 202.80p -2.27%
Plus500 Ltd (DI) (PLUS) 1,169.50p -1.89%
Games Workshop Group (GAW) 9,125.00p -1.88%
Pets at Home Group (PETS) 302.60p -1.82%
IMI (IMI) 1,064.00p -1.57%
Genus (GNS) 3,432.00p -1.32%