Interactive Investor

Popular FTSE 100 trio among day’s biggest losers

27th July 2023 15:07

by Graeme Evans from interactive investor

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These closely followed blue-chip stocks have had a day to forget as investors react negatively to latest results. One of them is down over 15% this session.

Shell refinery in Rotterdam 600

A bigger-than-expected fall in Shell (LSE:SHEL) profits today diluted the impact of improving shareholder returns to leave the oil giant alongside BT Group (LSE:BT.A) among the FTSE 100 laggards.

Shell dropped 29.5p to 2367p, in contrast to an improvement for BP (LSE:BP.) after its rival benefited from a three-month high for the price of Brent crude at more than $83 a barrel.

The biggest decline of the blue-chip session came from St James's Place (LSE:STJ), which slumped 179p to its lowest level since October at 1004p after £3.4 billion of net inflows in half-year results came in 15% short of the City consensus.

The pressure also reflected the margin impact of a decision to cap annual management charges on bond and pension investments with a duration longer than 10 years.

The next biggest faller in the FTSE 100 index was SSE (LSE:SSE) due to its shares trading without the right to its next dividend payment, followed by Barclays (LSE:BARC) after its interim results.

BT Group struggled even though chief executive Philip Jansen reported a strong start to the financial year as revenues rose 4% to £5.2 billion and earnings improved 5% to £2 billion.

He said Openreach is now 44% of the way through its full fibre build, with net additions of 383,000 taking the network take-up rate to 32%. Inflation-linked price rises have supported the consumer division, leading to an improvement in broadband average revenues per user of 5% to £42 and postpaid mobile up 9%. Churn rates remain stable.

Jansen, who recently announced his intention to step down as boss, said: “We continue to drive transformation across the group, and while there remains much to do it’s clear that our strategy is working and BT Group is set up for success.”

However, the performance failed to shake off ongoing City fears that BT will have to cut its dividend to avoid a big jump in debt costs.  The shares were 160p in April but stood at 123p this afternoon after falling 3.7p in another poor session for the telecoms sector.

Shell’s decline, which keeps shares near where they were at the start of the year, came as second-quarter profits of $5.1 billion (£3.9 billion) fell by 56% on last year’s record level and by 9% more than the City had expected.

The miss was driven by upstream earnings of $1.7 billion (£1.3 billion), which were 12% below consensus because of the greater impact of maintenance at high margin fields. The chemicals and products division was the other source of disappointment as earnings of $450 million (£350 million) came in 38% below the City’s forecast.

Analysts at UBS also noted that maintenance will have a greater negative impact than expected in the third quarter, leaving production guidance 7% below consensus.

The developments cast a cloud over the company’s ongoing push to increase shareholder distributions to 30-40% of cash flow from operations through the cycle, up from 20-30%.

This will include the 18 September payment of a 15% higher second-quarter dividend of $0.331 (0.26p), which new boss Wael Sawan pre-announced at a New York briefing last month. This compares with $0.47 before the pandemic resulted in a 66% reduction to $0.16 through the first cut to the award since the Second World War.

Since then cash flows have been given a significant boost from the surge in oil and gas prices,  enabling Shell to rebuild the dividend and repurchase more of its shares.

Sawan expects a $3 billion (£2.3 billion) buyback programme for the next three months and at least $2.5 billion (£1.9 billion) to be announced alongside November’s third-quarter results.

He said: “As we deliver more value with less emissions, we will continue to prioritise share buybacks, given the value that our shares represent."

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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