Interactive Investor

FTSE 100 dividend boost and a science-driven rally

Despite a retreat by markets today, there are still plenty of bright spots to raise a smile.

9th June 2020 12:50

Graeme Evans from interactive investor

Despite a retreat by markets today, there are still plenty of bright spots to raise a smile.

A risk-off session was eased for some investors today by dividend cheer at FTSE 100-listed AVEVA (LSE:AVV) and a 55% shares jump for a retailer whose sales have boomed in the lockdown.

Industrial software business Aveva was comfortably the day's best performing blue-chip stock, having confirmed its intention to pay shareholders £46.8 million on 11 August through the award of an unchanged final dividend of 29p.

The fast-growing Cambridge-based company, which replaced Marks & Spencer Group (LSE:MKS) in the FTSE 100 index last summer, surged 4% to 4,196p after it also reiterated its target for a 30% margin at the end of its 2022 year. Shares have recovered 46% from their low of 2,846p seen in March, still some way short of the record high of 5,315p recorded only a month earlier.

Source: TradingView. Past performance is not a guide to future performance.

Aveva was joined on the FTSE 100 risers board by pharmaceutical stocks AstraZeneca (LSE:AZN) and GlaxoSmithKline (LSE:GSK) in a reversal of fortunes from yesterday. Their gains, however, were more than offset by the unwinding of recent progress by stocks most impacted by Covid-19.

With the FTSE 100 index down almost 2% at one point, BA owner International Consolidated Airlines Group (LSE:IAG) fell 4%, while Royal Dutch Shell (LSE:RDSB) was off 3% and Melrose Industries (LSE:MRO) dipped 5%.

The flight from risk was also seen outside the top flight, where shopping owner Hammerson (LSE:HMSO) fell 6% and Aston Martin Lagonda (LSE:AML) dropped 4% after recent gains. The luxury car business was the second most traded stock across the FTSE All-Share, behind only Lloyds Banking Group (LSE:LLOY).

Housebuilders were also cheaper after Bellway (LSE:BWY) reported a 953 drop in the number of homes sold in the period between August and May, compared with a year earlier. Its financial guidance remains suspended, although the resumption of construction programmes should allow the Newcastle-based company to slowly increase its number of completions.

It reported a strong balance sheet and said its forward sales position was “substantial”, with an order book of 6,038 homes worth £1.5 billion. Shares declined 3% to 2,875p, compared with the 3,190p price target held this morning by analysts at UBS.

Other housebuilders were impacted, with Taylor Wimpey (LSE:TW.) and Pearson (LSE:PSON) down 3% and Barratt Developments more than 4% cheaper.

In the FTSE 250 index, technology company Oxford Instruments was one of the star performers after results for the year to March came in better than analysts had expected. A robust performance in the face of recent Covid-19 disruption also encouraged broker Peel Hunt to reiterate its ‘buy’ recommendation and to raise its target price from 1,200p to 1,400p.

JP Morgan Cazenove also went from 1,250p to 1,450p, while Jefferies is at 1,360p. Shares were 2% higher at 1,278p today, compared with 956p in March and February's multi-year high of 1,654p.

Source: TradingView. Past performance is not a guide to future performance.

Oxford enables its industrial customers and those in scientific research communities to image, analyse and manipulate materials down to the atomic and molecular level.

With increasing demand for electric vehicles and digital communications infrastructure, as well as the need for improved energy‐efficient devices, medicines and diagnostic tools, the company is confident that its end markets are resilient and should not be weakened by Covid-19.

It is seeing a short-term impact, however, with cumulative orders 3% lower for the past two months against a weak comparator period, with growth in Asia of 19% offsetting a reduction in Europe and North America of 23% and 7% respectively.

Jefferies said the results made for good reading: “The strategy is working, there is more evolution to come and a strong balance sheet for M&A.”

Online womenswear brand Sosandar provided one of the biggest share price rises in the FTSE AIM All-Share, having reported a revenues jump of 62% year-on-year for April and May. It said this performance was against an industry backdrop where the online clothing market was down 24% in April and with signs that May was also weaker.

The company said it quickly adapted to changing needs during the lockdown as customers sought out comfort, with no social occasions to attend. A number of loungewear items, denim and casual summer dresses sold out in days and were quickly repeated.

The sales improvement came despite a significant cut in marketing expenditure, with the company focused on harnessing its customer database following a previous acquisition drive. The company, which launched in September 2016, had cash of £4.4 million on its books at the end of May. 

Its shares jumped 55% at one point today to almost 14p, before settling 32% higher at 11.6p. 

House broker Shore Capital said:

“This is a reassuring trading update highlighting the ability of the company to quickly pivot from a customer acquisition growth strategy to one of efficiency, utilising the strength of the existing customer database to generate continued revenue.”

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