The winners and losers among today's flurry of company results
Financial reports on Thursday reveal how firms have adjusted to higher inflation by seeking to cut costs or increase efficiencies - some with more success than others.
Thursday 1 August 2024 16:50, UK
Oh dear. It's that day of the year that financial journalists - and a great many analysts, too - dread: The day, usually at the end of July or the beginning of August, during which scores of FTSE-100 companies report their financial results at exactly the same time.
There are a number of reasons why this happens every year, including the demand from regulators that companies report their results in a timely manner, the fact so many companies have a December financial year end (so accordingly the end of July and beginning of August is when finance departments have had a chance to tot up half year numbers and auditors sign them off) and the time directors need to rehearse presentations to analysts and the media.
Yet the practice does investors a disservice because analysts and financial journalists - whose ranks are more thinly spread than was once the case - have less time to pore over the numbers and properly assess the prospects for a particular company. It raises the risk of share price anomalies arising as businesses go under-researched.
So what of today's crop of FTSE-100 results?
Time to Shell-ebrate?
The biggest business reporting today is the oil major Shell, which reported adjusted earnings of $6.3bn for the three months to the end of June, down from $7.7bn in the first three months of the year and reflecting weaker refining margins.
The numbers were, though, up 25% on the same period last year - which partly reflected cost reductions implemented by Wael Sawan, Shell's chief executive, who succeeded the long-serving Ben van Beurden at the beginning of last year.
Mr Sawan also announced a share buy-back of $3.5bn and, with the numbers coming in ahead of expectations, shares of Shell have risen by 1.5% this morning.
Today, though, he made the case - as he has for some time - that he believes the company is still under-valued.
Schwimmer's pivot
The next biggest company updating the market today was the London Stock Exchange Group (LSEG), the 12th largest company in the FTSE-100, which again beat expectations.
Adjusted operating profits of £1.6bn for the six months to the end of June were up 9% on the same period last year.
While much attention is invariably focused on the exchange itself, this is a relatively small part of LSEG, which under David Schwimmer, its chief executive of the last six years, has been remodelled into a data and analytics business.
Mr Schwimmer, who took the helm on this day in 2018, pointed out that all parts of the business had enjoyed growth during the period, led by its capital markets division, which grew by 17% and FTSE Russell, its indices business, which grew by 11.5% - as did the group's risk intelligence business.
He also provided an update on LSEG's partnership with Microsoft, launched at the end of 2022 for an initial decade, revealing that the first products developed under the partnership will be available to customers between now and the end of the year. The shares have risen by nearly 4% on the news, valuing LSEG at just over £50bn.
Revving up
Also reporting today are the two titans of British engineering - defence contractor BAE Systems and aircraft engine maker Rolls-Royce.
While both published pleasing results, Rolls was possibly the stand-out performer of all businesses reporting today, with the company's share price surging by more than 10% to an all-time high after it reinstated its dividend today for the first time since the pandemic. Rolls reported an underlying operating profit of £1.1bn for the first six months of the year, up from £673m in the same period in 2023, thanks partly to the resurgence in global air travel.
But Tufan Erginbilgic, the former BP chief executive who succeeded Warren East as Rolls CEO at the beginning of last year, could also point to efficiency improvements across the business and a clutch of new orders.
These included 108 orders alone during the first six months of the year for the Trent XWB-97, part of a family of products that Rolls describes as "the world's most efficient large aero-engine" and the engine that powers the Airbus A350-1000, the aircraft used by - among others - Turkish Airlines, Air France, Qatar Airways, Singapore Airlines, Emirates, Lufthansa and Delta Airlines.
Fleet first
Rolls was not the only engineering giant to upgrade its forecasts for the year. So too did BAE Systems, Europe's biggest defence contractor, which said it now expects sales to grow by 12-14% this year instead of the previously guided 10-12%.
BAE, whose chief executive Charles Woodburn last week spoke with Sky News from the Farnborough Air Show, raised its dividend by 8% and also highlighted a strong initial showing from Ball Aerospace, a key supplier to NASA, whose acquisition was completed earlier this year and was followed by the business being rechristened as Space & Mission Systems.
Highlights during the half included BAE being selected to build Australia's new fleet of nuclear-powered submarines under the AUKUS defence pact, a new £4.6bn contract to deliver three Hunter Class frigates for the Royal Australian Navy and the delivery of two more Typhoon jet fighters to the Qatar Emiri Air Force. The shares have risen 1%.
BAE and Rolls slightly put in the shade a third FTSE-100 engineer reporting today, the aerospace components supplier Melrose, whose shares slipped by 6% after it cut sales forecasts for 2025.
Also reporting today among FTSE heavyweights was Barclays, the last of the big five UK lenders to publish results following updates in the last week or so after Lloyds Banking Group, NatWest, Standard Chartered and HSBC.
Financial fallers
Barclays reported a pre-tax profit of £3.3bn for the first six months of the year, down 9% on the same period in 2023, although this was slightly ahead of expectations.
Barclays also upgraded its guidance to investors on expected returns and announced a new £750m share buy-back, but the shares have fallen by 1% as investors have instead focused on falling returns in the lender's UK corporate banking division.
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Elsewhere in the financial services sector, Schroders, the UK's biggest listed fund manager, has been the biggest blue-chip faller today, the shares falling by 8% despite news that assets under management during the first half of the year rose by 6.5% to £773.7bn.
With the results coming a day after Schroders announced a joint venture with the life and pensions giant Phoenix Group, to invest up to £20bn in unlisted assets during the next decade, investors have instead focused on comments from the company that margins have been under pressure.
Another big player providing an update today was Haleon, the consumer healthcare giant behind brands such as Advil, Sensodyne, Panadol and Centrum, whose shares have rallied by 2% after it reported an 11% rise in adjusted operating profits for the half year, to £1.29bn, while highlighting that sales growth rose during the most recent three months.
Next chapter of the story
Other companies reporting today whose shares have been lifted by their results included Next, which is up 8% after raising its profit outlook for the year after reporting better-than-expected sales during the 13 weeks to last Saturday, while the medical equipment supplier Smith & Nephew - a company that has had its fair share of ups and downs over the last few years - is up 5% after reporting a 19.5% rise in half year operating profits to $328m.
Mondi, the paper and packaging group, saw its shares rise by 2.5% as investors looked past a drop in half year operating profits to focus on an upbeat trading statement - in which the management highlighted a number of price increases across its paper grades that it expects will stand it in good stead during the second half of the year.
These updates provide valuable snapshots of how a host of important companies are trading - but, across so many sectors and operating in so many different countries in plenty of cases, it is hard to generalise about what they say about either the global or the UK economy.
One binding factor in a lot of the statements, though, is how companies have adjusted to higher inflation in their businesses by seeking to cut costs or increase efficiencies.
How they respond to lower inflation and, with it, lower UK, US and Eurozone interest rates will, perhaps, be the story of the next six months.