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FTSE 100 stocks endure a refund as supermarket Morrison falls

FTSE 100 stocks bagged a net loss on Thursday after supermarket chain WM Morrison fell on an uncertain outlook
london skyline
Morrison leads the decliners as outlook less sunny
  • FTSE 100, 250 down

  • Pound falls 0.2% against the US dollar to $1.2148

  • Sterling is down 0.2% against the euro to 1.1518 euros

 

FTSE 100 stocks bagged a net loss on Thursday after supermarket chain WM Morrison (LON:MRW) fell on an uncertain outlook.

The blue-chip index ended down 0.3% at 7314 after various failed attempts to come up for air.

The biggest decliner, Morrison, was down 6.6% to 230.8p. As so often, strong financial performance is cast aside as investors look to the future. That was the case for this stock today.

Helped by a strong fourth quarter, Morrison grew annual like-for-like (LFL) sales and underlying profits before tax for the first time in five years and declared a 3.85p final dividend to celebrate.

LFL sales jumped 2.5% in the three months to 29 January, lifting the year's total to 1.7% and turnover up 1.2% to £16.3bn.

Having achieved more than £1bn cost savings, and identifying even more for the current year, underlying PBT rose 12% to £337mln, at the upper end of the £330m-£340m range guided by management and beating the £326mln consensus forecast from the start of the year.

But chief executive David Potts admitted, rather candidly, that uncertainties lay ahead “especially around the impact on imported food prices if sterling stays at lower levels.”

Miners were the next batch of decliners on the blue-chip index, led in second place by BHP Billiton (LON:BLT) down 5.8% to 1249.5p, Anglo American (LON:AAL) down 4.6% to 1149p, Glencore (LON:GLEN) down 3.7% to 307p, and Antofagasta (LON:ANTO) down 3.1% to 754.5p.

Among the FTSE 250 mid-caps, which fell 0.2% to 18,891, the biggest decliner was Domino’s Pizza (LON:DOM) down 13.2% to 342p after the chain reported a slowdown in sales at the start of the year.

Like-for-like sales in the UK rose by 1.5% in the first nine weeks of 2017, compared with 10.5% growth a year earlier.

The news overshadowed Domino's Pizza's full-year results, which showed that underlying pre-tax profits had risen by 17% last year to £85.7mln.


1530 GMT - FTSE 100 huffs and puffs but it’s still in the red

  • FTSE down 32 points to 7,302

  • IFS says Chancellor was right to up NI contributions

  • Aviva the biggest riser, Morrisons the biggest faller

  • ECB holds interest rates

 

Gone are the days when a Chancellor could move markets it seems. The FTSE 100 huffed and puffed this afternoon but it still couldn’t break even. In fact, it couldn’t really do much at all.

The blue chip index recovered some of its losses from earlier on but was still down 32 points to 7,302 shortly after 3pm.

The biggest faller among the big boys was WM Morrisons Supermarkets PLC (LON:MRW) which plummeted 6% to 231p despite posting a rise in dividend, profits and like-for-likes.

If you’re a bit puzzled as to why the shares took such a beating, analysts reckon it could be because investors fear that this is the “top of the cycle” for the supermarket.

Mirroring the FTSE 100, miners haven’t been able to drag themselves into the black this afternoon with the mixed outlook coming from China, their biggest buyer.

The likes of BHP Billiton plc (LON:BLT) (down  5% to £12.63), Fresnillo PLC (LON:FRES) (down 1.5% to £13.57) and Antofagasta PLC (LON:ANTO) (down 3% to 757p) all weighed on the index throughout today.

The declining oil price weighed on super major Royal Dutch Shell PLC (LON:RDSB) which was down 2% to £21.83, although the cheaper ‘black gold’ was actually helping airliners.

Easyjet PLC (LON:EZJ), up 4% to 9788p, and International Consolidated Airlines PLC (LON:IAG), up 4.5% to 572p, also likely benefitted from the Chancellor’s fairly upbeat report on the post-Brexit UK economy.

While it was a fairly low-key day (i.e. not a lot happened at all), one of the afternoon’s late risers was Paddy Power Betfair plc (LON:PPB).

The bookie was slaughtered earlier this week after a disappointing set of results, but it seems some bottom-fishing investors were taking a punt (excuse the pun) on things improving.

There’s been a lot of furore over Philip Hammond’s decision to raise National Insurance contributions for the self-employed in his Budget yesterday.

The rise will see millions of self-employed workers pay an average of £240 a year more and the move has been criticised by some commentators.

Anyway, Spreadsheet Phil was right to take the action he did according to the Institute for Fiscal Studies, which said the current system needed reform.

"It distorts decisions, creates complexity and is unfair," it said.

"A tax system which charges thousands of pounds more in tax for employees doing the same job as someone else needs reform," the IFS said.

It’s not been a good day if you work at John Lewis.

Staff at the department store, and its Waitrose sUBSidiary, have had their bonuses cut for the fourth year in a row.

The company held back on a pay-out of profits for more than 86,000 of its workers after it cited an “increasingly uncertain market this year”.

 

1.15pm...Airlines flying high

The FTSE 100 has been in the red for almost all of the morning and that trend has continued into the afternoon.

The blue chip index is down 59 points to 7,275 shortly after 1pm.

The miners were still in a lull on a less-than-upbeat outlook from China, while the supermarkets continued their downfall after disappointing results from WM Morrisons Supermarkets PLC (LON:MRW).

Royal Dutch Shell PLC (LON:RDSB) was down in the doldrums despite taking another step towards hitting its US$30bn disposal target after it sold a number of projects in Canada to Canadian Natural Resources for US$8.5bn.

The news probably would have been better received had oil prices not taken a downward turn in the last couple of days and shares were down 3.5% to £21.50.

It was better news for the airlines which were actually benefitting from lower oil prices, one of their major costs.

Easyjet PLC (LON:EZJ) was up almost 4% to 974p, while International Consolidated Airlines Group PLC (LON:IAG) gained 2.5% to 562p.

Yesterday’s relatively upbeat report from the Chancellor on the state of the UK economy will only have added to the view that people’s wallets haven’t been hit as hard as forecast post-Brexit. Well, so far at least.

Down in the small caps, Nautilus Marine Services PLC (LON:NAUT) was shipping water after annual results showed another hefty loss of US$6.5mln (US$26.7mln).

It was harsh maybe on the company, which has undergone a total transformation into an oilfield services group over the past year.

But a comment that Nautilus has sufficient financial strength and working capital to survive a continued downturn in the offshore services market in 2017 suggested it may be a while before the full benefits of the new direction start to show through.

Shares sank 19% to 13.92p.

On a more positive note, ‘smarter plastic’ products developer Symphony Environmental Technologies plc (LON:SYM) continued its recent surge as it moved into the black last year.

The company, which specialises in making plastic products more environmentally friendly, had signalled back in January a profit was likely and confirmed it this morning, announcing a profit of £123,000 for 2016, versus a loss the year before of £2.3mln.

Shares have tripled in a month and were at it again this morning, adding 11% to 9p.

The fallout from yesterday’s rather uneventful spring Budget continues.

Chancellor Philip Hammond didn’t have much new or interesting to say, but one economist has highlighted what he thinks we should be talking about with regards to the tax-free dividend allowance.

Elsewhere, the European Central Bank – as expected – kept interest rates on hold at record lows despite calls from some commentators to rein in monetary stimulus.

 

10.15am...Miners and supermarkets continue to weigh on FTSE

The FTSE has broken below the 7,300 mark for the first time since the end of February.

Shortly after 10am, the blue chip index was down 35 points to 7,298.

Supermarkets and miners were the the main culprits weighing heavy on the FTSE this morning.

WM Morrisons Supermarkets PLC (LON:MRW) slumped more than 4% despite posting its first profit and like-for-like sales growth for five years.

ETX Capital’s Neil Wilson said investors might be worried that today’s results could represent the “top of the cycle”.

“Worries about declining basket sizes, fading consumer spending health and margin pressure from a still bitter supermarket price war are weighing heavily,” said the market analyst.

Morrisons’ share price was down to 237p this morning, and it dragged its peers with it.

Fellow ‘Big Four’ constituent Tesco PLC (LON:TSCO) was down 1.5% to 185p, while J Sainsbury plc (LON:SBRY) shed a similar percentage to trade at 262p.

Miners were also down today on mixed outlook from China; the biggest consumer of commodities and raw materials in the world and miners’ main customer.

BHP Billiton plc (LON:BLT) (down  6% to £12.45), Fresnillo PLC (LON:FRES) (down 2% to £13.51) and Antofagasta PLC (LON:ANTO) were among the biggest fallers on the FTSE 100.

Domino’s Pizza Group PLC (LON:DOM) was the biggest faller across the FTSE this morning though, down 14% to 340p.

The firm posted a 14% rise in revenues last year after selling 89mln pizzas, but a fall in year-on-year UK sales growth to 7.5% (from 11.7%) wasn’t quite what investors had hoped for.

On top of that, UBS pointed out that like-for-like sales have only grown 1.5% so far this year, which suggests the downtrend is set to continue.

All of that mooted the impact of Aviva PLC (LON:AV.) which was up 6.5% to 544p after posting decent annual results.

The opening line from chief executive Mark Wilson says it all: “Aviva’s results are simple and clear cut: more operating profit, more capital, more cash, more dividend. And there is more to come.”

"Smarter plastic" products developer Symphony Environmental Technologies plc (LON:SYM) continued its recent surge as it moved into the black last year.

The company, which specialises in making plastic products more environmentally friendly, had signalled back in January a profit was likely and confirmed it this morning, announcing a profit of £123,000 for 2016, versus a loss the year before of £2.3mln.

Shares have tripled in a month and were at it again this morning, adding 11% to 9p.

 

Proactive news headlines

W Resources PLC (LON:WRES) said it may list its copper and gold licences in a separate stock market vehicle as it confirmed it had raised £750,000 of dedicated funding to accelerate the development of the assets.

IGas Energy Plc (LON:IGAS) noted changes to eleven onshore UK licences, after its partner INEOS acquired interests previously held by ENGIE E&P UK (was GDF Suez).

Jubilee Platinum PLC (LON:JLP) is to broaden the range of metals it processes with the addition of a surface copper tailings project in Australia.

The project has projected production of 12,000 tonnes (t) of copper (Cu) at production cost A$3,381/t Cu  (US$2,569/t) compared to a current price of US$$6,000/t

In addition, there is a further 35,000t of copper resources on the surface, while other tenements on the project also have exploration potential. Jubilee expects to be generating cashflow within six months of completing the acquisition.

 

8.50am...FTSE 100 hits reverse gear with miners and supermarket stocks on offer

The retreat of stocks in the US and Asia overnight sparked an early fall in the FTSE 100, which lost 45 points to trade at 7,289.56.

A bumper dividend and promise of a major cash payout from Aviva (LON:AV.) couldn’t change the mood, with caution the watchword ahead of the latest set-piece from the European Central Bank.

Aviva stood out with a 6% rise on an otherwise dour day with the blue-chip index led lower by the miners. They’ve been hit by a mixed outlook for China, the main consumer their output.

Morrisons’ (LON:MRW) lacklustre showing (even after posting a first profit in five years) led to the shares being marked down 6% early doors and dragged the rest of the supermarket sector with it.

Tesco (LON:TSCO) and Sainsbury (LON:SBRY) were on offer.

Former growth stock Domino’s Pizza Group (LON:DOM) was the mid-cap lacking the spicy topping as it fell 13% after sounding the earnings alarm.

 

06.45am ... Weak start predicted ...

The FTSE 100 is forecast to fall again this morning, extending recent declines in tandem with US and Asian markets as commodity stocks retreat and investors await the latest European Central Bank policy meeting.

Spread betting firm London Capital expects the UK blue chip index to open down about 22 points at 7,310, having closed around 4 points lower yesterday at 7,334.

Overnight, US markets beat a retreat, with the Dow Jones closing 69 points lower impacted by weaker energy stocks as oil prices reversed.

Resources stocks were also big losers in Asian trading today as the dollar firmed, weighing on commodities prices, and as China's annual consumer inflation rate came in weaker than expected at 0.8%.  

Across the Channel, the main focus will be on the ECB policy decision.

Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: “The ECB is expected to maintain the status quo at today’s meeting.

“The bank has already announced to reduce its monthly asset purchases from 80 billion to 60 billion euros starting from next month. The ECB will continue buying assets at least until the end of 2017.

“At his press conference, President Mario Draghi could hint at improved growth dynamics and rising inflation in the Eurozone economy, yet will likely remain supportive of loose monetary conditions due to rising French, Dutch and German election risks.”

On the corporate front, the revival of grocery chain William Morrison Supermarkets PLC (LON:MRW) under new boss David Potts is expected to be underlined by its full-year results today.

The FTSE 100-listed food retailer – ranked number four by sales in the UK – reported a 2.9% increase in its like-for-like sales, excluding fuel and VAT, for the first nine weeks of the fourth quarter - the company’s best performance in seven years.

Morrison’s also forecast that its underlying pre-tax profit for the full-year would exceed market expectations at between £330mln and £340mln, which would be the first increase in profits since 2011.

Aside from food retail, blue chip insurers will also be in focus again, with Aviva PLC (LON:AV.) set to unveil full-year numbers.

Barclays expects Aviva’s full-year operating earnings to hit £2.8bn, driven by 6% growth in UK life insurance as the cost savings from its acquisition of Friends Life in 2015 feed through.

Significant announcements expected Thursday:

Finals: Aviva PLV (LON:AV.), Avacta Group Plc (LON:AVCT), Cairn Homes PLC (LON:CRN), Capital & Regional PLC (LON:CAL), Cineworld PLC (LON:CINE), Countrywide PLC (LON:CWD), Domino's Pizza Group PLC (LON:DOM), DS Smith PLC (LON:SMDS), Morrison Supermarkets PLC (LON:MRW), Old Mutual Group PLC (LON:OML), Ophir Energy (LON:OPHR), Premier Oil PLC (LON:PMO), Restore Plc (LON:RST), Secure Income REIT PLC (LON:SIR), Spirax-Sarco Engineering PLC (LON:SPX)

FTSE 100 ex-dividends today (knocking 5.36 points off index):

BHP Billiton plc (LON:BLT), CRH PLC (LON:CRH), Hargreaves Lansdown PLC (LON:HL.), Land Securities Group PLC (LON:LAND), Persimmon PLC (LON:PSN), Shire Plc (LON:SHP)

Around the markets

  • Sterling: US$1.2155, down 0.1%
  • Gold: US$1,204.5 an ounce, down 0.3%
  • Brent crude: US$50.61 a barrel, up 0.7%

City Headlines

  • BT Group set to appoint Jan du Plessis as chairman – Financial Times
  • Standard Life star fund manager David Cumming quits – Financial Times
  • Rolls-Royce charts £200 million digital course for marine arm – Financial Times
  • Barclay’s new investment banking Chief urges more risk-taking – Daily Mail
  • Akzo Nobel and PPG hold talks on potential $42 billion combination – Financial Times
  • Samsung looking into security of devices after WikiLeaks report – Financial Times
  • High Court approves Premier League crackdown on Kodi streaming piracy – Daily Telegraph
  • The number of female CEOs at the world’s biggest companies is falling – The Independent
  • Pret a Manger: just one in 50 job applicants is British, says HR Boss – The Guardian

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