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Strong Next sales lift FTSE but Barclays disappoints

29 July 2020

(Update) FTSE 100 wrestles with quarterly earnings reports as strong sales at Next offset poor results from builder Taylor Wimpey and Barclays. Perpetual Income & Growth leaps 6% on proposed merger with Murray Income.

The FTSE 100 fought for gains this morning amid a mixed bag of quarterly earnings reports, with strong sales at Next (NXT) offsetting poor results from house builder Taylor Wimpey (TW) and Barclays (BARC) bank.

The main index rose 23 points, or 0.3%, to 6,153 led by high street stalwart Next, which jumped 9.1%, or 480p, to £57.41 as second quarter sales declined less than feared.

James Grzinic, analyst at Jefferies, said there was ‘much to like’ in the results, but added the ‘uncertain consumer fortunes and limited impact on mid-term forecasts means we remain agnostic on the shares at close to high relative multiples’.

Smurfit Kappa (SKG) advanced 6.7%, or 168p, to £26.50 as the packaging group benefited from the surge in online shopping during the pandemic.

Taylor Wimpey slid 7.4%, or 9p, to 123p, after swinging to a first half loss of £30m as overheads increased due to reduced productivity and its Covid-19 response. Liberum analyst Marcus Cole remained ‘cautious on the shares’ and was looking for evidence ‘that the margin can progress’. 

The news dragged down rivals Barratt Developments (BDEV) and Persimmon (PSN) and unwound gains made yesterday on reports of government plans to extend the Help to Buy scheme. 

Barclays bank declined 3.3%, or 3p, to a two-month low of 108p as half-year profits plunged 58% to £1.3bn due to increased provisions for bad loans.

Richard Hunter, head of markets at Interactive Investors, said the results ‘mirrored’ US banks whose gains in investment banking had been wiped out by strengthening reserves against debt arrears. 

However, he said performance was ‘relatively robust’ overall and the bank was ‘preparing for the worst while hoping for the best’. 

The ‘mid cap’ FTSE 250 index slid 0.4%, or 78 points, to 17,199, weighed down by a 12% slide in Cineworld (CINE). 

Global markets were generally subdued ahead of a meeting of the US Federal Reserve, which comes as American deaths from Covid-19 approach 150,000.

Perpetual Income leaps

Perpetual Income & Growth (PLI ) jumped 6% or 13p to 231.2p, pleasing long-suffering shareholders with a proposed merger with rival Murray Income (MUT ), off 11.5p or 1.5% at 758.5p. The UK equity income trust served notice on Invesco in April, prompting the departure of fund manager Mark Barnett.

Analysts at JPMorgan Cazenove were impressed. ‘In the round, we view this as being a better option for PLI shareholders than a simple manager change within the existing corporate structure, since it should lead to a more immediate value uplift, and MUT is a very good choice of partner, in our view.’

Oakley Capital Investments (OCI ) jumped 10p or 4.6% to 228p the media and tech-focused private equity fund of funds reported 4% growth in the portfolio in the first half of the year, despite the heavy fall in its stake in publisher Time Out (TMO). 

Liberum said: ‘We believe the NAV update is ahead of market expectations. Valuations appear to have held up well, despite the outbreak of Covid-19.’ It noted the strong balance sheet with 38% or £262m of its £691m net assets in cash.

Merian Chrysalis (MERI ) gained 2.5p or 2.5% to 124.5p on a 12% premium over net asset value as it confirmed a £20m gain selling some of its stake in forex specialist Transferwise, now valued at $5bn, 43% more than a year ago, after a new funding round backed by Baillie Gifford among others. The sale lifts MERI’s cash for reinvestment to £55m.

Draper Esprit (GROW), down 3p or 0.6% at 516.9p, took the opportunity to sell its remaining stake in Transferwise, adding £3m to NAV. The private equity fund has added a further £12m or 10p to NAV from the latest $225m funding round by UiPath which valued the robotics software provider at $10.2bn.

Artemis Alpha (ATS ) dropped 10.5p or 3.9% to 259p on a 16% discount as annual results showed fund manager Kartik Kumar continues to rationalise the former ‘best ideas’ fund with unlisted stocks cut to 8.3% of the portfolio. Net asset value fell 11.3% in year to 30 April, outperforming the 16.7% decline in the FTSE All Share.

Aberforth Smaller Companies (ASL ) added 2p or 0.35% to 850p after the value-style portfolio, which stands on an 11% discount, revealed a 39% share price slump and 35.9% drop in net asset value in the six months to 30 June, but said valuations were highly attractive and fund managers had raised their personal stakes in the trust.

Brunner (BUT ) dipped 12.8p or 1.6% to 774.25p on an 11% discount after the global growth trust, focused on quality growth stocks, reported a 5.9% drop in NAV for the six months to 31 May, slightly worse than the 5.4% decline in its 70% FTSE World ex-UK and 30% FTSE All-Share benchmark.

Residential Secure Income (RESI ) firmed 1.2p or 1.3% to 92.6p as it removed the ‘material valuation uncertainty’ clause over its portfolio, reported 99% rent collection in the second quarter and declared an unchanged quarterly dividend of 1.25p and reaffirmed its 5p target for the current financial year.

 

 

 

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