Interactive Investor

Shares round-up: BAE, Shell, Rentokil, Severfield

Markets have reacted badly to today's results deluge, despite some much-needed cheer for income hunters.

30th July 2020 14:22

Graeme Evans from interactive investor

Markets have reacted badly to today's results deluge, despite some much-needed cheer for income hunters.

A confidence sapping batch of corporate earnings sent investors running for cover today, despite BAE Systems (LSE:BA.) and Rentokil (LSE:RTO) Initial signalling a return to the dividend-paying ranks.

Lloyds Banking Group (LSE:LLOY), Anglo American (LSE:AAL) and Royal Dutch Shell (LSE:RDSB) were among stocks weighing on the FTSE 100 index, which sank back to the 6,000 threshold with a fall of more than 1.5%.

The mood was no better in Europe, where German car maker Volkswagen posted a first-half loss and cut its dividend to highlight the widening gap to the industry's new market leader, Nasdaq-listed Tesla.

Lloyds spooked the wider banking sector after results from the UK-focused lender contained a bigger-than-expected provision for bad debts, causing its shares to slide 8% to just 26p. NatWest Group (LSE:NWG), which reports figures on Friday, was down 6% to 105.3p.

A whopping second quarter loss from Royal Dutch Shell was at the right end of City expectations, but shares in the market heavyweight still dropped 3% to 1,150p after a 60% fall in underlying earnings. The update sent BP 4p lower to 289.8p ahead of its results next week.

Anglo American was down 4% as it cut its dividend by more than half to 28 US cents. The move was in line with its established policy of paying out 40% of underlying earnings, a figure which in the first six months of the year fell by 39% to US$3.3 billion.

Production fell 11% as a result of various lockdown restrictions, although the new owner of Sirius Minerals pointed out that it was now back at 90% capacity across its portfolio. A 16% fall in revenues came despite strong performances in Brazilian iron ore and Chilean copper.

There was better news elsewhere for income seekers, with BAE Systems announcing it will pay the deferred 2019 dividend of 13.8p a share in September. An interim dividend for the first half of this year of 9.4p a share will also be paid in November, as long as there's no major deterioration in trading conditions.

Announcing an 11% fall in half-year earnings to £895 million, CEO Charles Woodburn said: “Assuming no significant Covid-19 resurgence, we expect a good second half to the year. Demand for our capabilities remains high.” Shares were 4% higher today.

Rentokil Initial also expects to pay a dividend in relation to its 2020 performance, a pledge that has followed a big surge in demand for hand sanitisers, disinfection and deep clean services.

There was no pay-out with today's half-year results, mainly due to pest control and washroom operations being hit by the temporary closure of hospitality and leisure sites.

But having repaid the Bank of England's Covid Corporate Financing Facility, the group expects to spend at least £100 million on acquisitions over the rest of this year as it targets new markets and services in the hygiene sector.

Chief executive Andy Ransom added: “While the Covid-19 pandemic is far from over and our thoughts remain with everyone affected, at Rentokil Initial we have moved from the crisis phase into the recovery phase.” Shares in the FTSE 100 company rose 2% to another record high of 557p, having been as low as 335p in March.  

Private equity firm 3i Group (LSE:III) paid its shareholders 17.5p a share earlier this month, with today's trading update offering no cause for concern about future pay-outs.

Its net asset value per share increased to 858p at the end of June, from 804p in March, after robust performances from the bulk of its portfolio. This includes the European discount retailer Action, which has seen a very “impressive recovery” since re-opening stores in May.

3i shares opened 4% higher before later settling a penny stronger at 885.2p.

There was also positive news from structural steelwork company Severfield (LSE:SFR), which told investors that it would now be able to pay a dividend of 1.8p a share for the year to March. A decision on the pay-out was put on hold in June's full-year results, when the company said it wanted greater visibility on the impact of Covid-19.

As well as the dividend, which is due to be paid on September 11, Severfield said almost all furloughed staff had returned to work and that it would not be claiming under any employee-related support packages including the Coronavirus Job Retention Scheme.

Shares were 1% higher at 58p but remain close to their lowest level since 2016.

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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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.