London markets gave a muted response to the U.S. Federal Reserve cutting its benchmark rate, for the third time in four months, to a range of 1.5% to 1.75% yesterday, although no further cuts are expected this year. By lunchtime, the dollar had weakened against the pound by about 0.5%, and the FTSE 100 was down by almost 1%.
A weaker dollar knocks down pound revenues and profits for UK companies with lots of US currency sales, and many in the FTSE 100 do, so this makes sense on aggregate. At the individual company level, we had a mixed bag of performances.
Risers
Telecoms company BT communicated in a half-year report that its interim dividend will be maintained at 4.62p per share. However, its share price rose by 0.97% on the news, possibly because investors are happy with BT’s continued success in rolling out 5G and expanding its fibre network, and with its modernisation agenda which is set to deliver £1.1b in annual cost savings.
Specialist digital and print media company Future saw its shares rise by 11% after announcing that it had successfully placed over 8m ordinary shares, raising over £104m in gross proceeds. This will go some way towards paying for its proposed £140m cash acquisition of TI Media, which was reported yesterday.
Future swung into profit in 2017 on the back of impressive revenue growth. Their media content is read by dedicated amateurs and professionals and despite the dilution from the share issues, investors seem confident that more revenue and profit growth is assured.
Fallers
A slew of people had been encouraged by those bizarre adverts to register their PPI claims just before the August deadline, and UK banking giant Lloyds was forced to recognise a near £2.5b PPI charge in its third-quarter results.
As a result, profits were 47% lower than the same time last year and its share price fell by 1.79%. I’m tempted to say that, assuming they have the charge correct, this is a one-off, but I am seriously considering adding an average annual regulatory fine to all my bank valuations.Â
Shares in Crest Nicholson, a housebuilder, crashed by 8.26% after it delivered its first update since the appointment of a new leadership team. Uncertainty relating to Brexit was blamed for a poor sales environment, and the company was forced into a £10m writedown in its London developments to reflect current market values.
Profits for 2019 and 2020 are expected to potentially be £20m and £30m lower than in 2018. The dividend is expected to be maintained until 2021 when the company expects to return to profit growth.
International Airlines Group, which owns British Airways, reported that nine-month 2019 profits were nearly 30% lower than last year, after being hit by a pilots strike in August, higher fuel costs, and a slight decline in passenger revenues. Shares descended by just 0.19% on the news.
Uncertainty is not going away
The FTSE 100 started October at 7,360 and looks to end it pretty much where we began at around 7,330, after an early slump.
Brexit did not happen today but the market knew this already. Instead, there is an extension and an election scheduled for 12 December 2019, and the outcome is anyone’s guess. Markets are going to continue to react to any news that makes one outcome more likely than the other, but I don’t think anyone is entirely sure what outcome is represented in the reactions anymore.