In a volatile day’s trading, leading shares ended marginally higher, helped by a raft of well received company results but unsettled by a warning on valuations from the US Federal Reserve chair.
Among those supporting the market Sage jumped 39.5p to 536p after the accountancy software group said revenues rose 6.2% and profits 4.9% in the first six months and it was on track to meet its full year targets.
But analysts at Credit Suisse were undewhelmed:
Management notes that the one-offs in the first half [in areas like Malaysia] are unlikely to reoccur, consequently, management leaves 2015 expectations broadly unchanged at 6% organic growth and 28% margins, As a result, we do not expect material forecast changes. This leaves the shares on a 2015 PE of 19.1 times. Following underperformance all year, this no longer looks extreme, but we continue to see a lack of catalysts that justify a re-rating. Hence we stay at underperform.
Imperial Tobacco was another company to benefit from a positive outlook statement. The maker of Gauloises and Lambert & Butler cigarettes reported a 5% decline in underlying first half underlying tobacco sales, but said it was on track to meet its targets for this year. Overall revenues fell 4% to £12.1bn, as consumers continue to cut back on smoking for health and budget reasons. It also saw falling volumes in Iraq due to the “deteriorating political and security situation.”
Imperial, which fell sharply on Tuesday after a negative note from Nomura, responded to the update with a 55p rise to £31.75. It expects to complete its $7.1bn purchase of certain brands from a combined Reynolds American and Lorillard when that deal passes anti-trust hurdles, and said it was open to taking more brands if that was required by regulators. Martin Deboo at Jefferies said:
The imminent decision from the Federal Trade Commission on their US acquisition...is the principal sensitivity from here. The Lorillard share price is voting for a 92% probability of completion, so event risk is apparently low. Should Imperial triumph, bulls will savour the low entry multiple, cost synergies and the tax and financing benefits. Those of a more cautious hue, like us, will worry about the challenge of reversing the fortunes, quickly, of what are some of the fastest-declining brands on the US market.
Overall the FTSE 100 finished 6.16 points higher at 6933.74 but lost much of its early gains after a poor US private payroll figure caused concern about the state of the world’s biggest economy, ahead of the non-farm payroll numbers on Friday.
Comments from Fed chair Janet Yellen that equity valuations were “generally quite high” and could be potentially dangerous also did some damage. On Wall Street the Dow Jones Industrial Average was down sharply after Yellen spoke but had fallen just 40 points by the time London closed.
Investors were also inclined to caution ahead of the UK election, and amid worries about Greece defaulting, despite the country paying €200m it owed to the International Monetary Fund and talks with its creditors continuing.
Sainsbury slid 8.7p to 266.3p after it reported a £72m loss after property write-offs, but engineering group GKN climbed 1.9p to 349.9p after its update.
Among the mid-caps SuperGroup soared 74p to £10.71 as fourth quarter sales rose 11.6% and the fashion group said it was on track for full year profits of between £60m and £65m.
