Shares round-up: Rolls-Royce, SSE, Diageo, Currys

Rolls-Royce Holdings (LSE:RR.) and AstraZeneca (LSE:AZN) today kept the FTSE 100 index near record territory in a session when SSE (LSE:SSE) faded after results and a Guinness briefing failed to inspire Diageo (LSE:DGE) shares.

The top flight remains 1% short of the all-time high of 8871.31 set in early March, with the unchanged performance aided by demand in the aerospace and defence sector as Rolls and BAE Systems (LSE:BA.) broke new ground by rising 11.8p to 829.4p and 38.5p to 1,835p respectively.

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Advances by other heavyweights, with AstraZeneca up 58p to 10,476p and British American Tobacco (LSE:BATS) ahead 24p to 3312p, also helped the FTSE 100 to consolidate its recent gains against a backdrop of weaker trading on Wall Street.

In contrast to the top flight, the FTSE 250 index declined sharply after UK-focused sentiment was shaken by a bigger-than-expected spike in inflation to 3.5%.

Fears that this will mean interest rates stay higher for longer overshadowed another profit upgrade by Currys (LSE:CURY), having forecast a surplus of £162 million for the year to 3 May.

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The new guidance, which followed an acceleration in like-for-like sales growth to 4%, compared with the City consensus of £144 million prior to a previous upgrade in early April.

The retailer’s shares are up 75% in the past year, buoyed by expectations that its revival will be capped with the resumption of dividend payments with results on 3 July.

In the FTSE 100, mortgage affordability concerns caused by higher living costs and the elevated interest rate outlook dealt a setback to homebuilding stocks as Barratt Redrow (LSE:BTRW) fell 11.3p to 465.3p and Persimmon (LSE:PSN) weakened 24.5p to 1363.5p.

The fallers board also featured the renewables giant SSE, which surrendered an initially positive reaction to annual results to later stand 38.5p lower at 1,760p.

Adjusted earnings per share at 160.9p was slightly ahead of consensus and the company reiterated guidance for 175p-200p in 2026/27. The dividend of 64.2p a share rose by 7%, in line with the 5-10% growth target and including 43p for payment on 18 September.

The biggest surprise in the results concerned a £3 billion or 15% reduction in five-year investment expectations to around £17.5 billion.

This includes £1.5 billion less capital expenditure in renewables, where the company has seen a significant growth in installed capacity and output over the last few years.

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In 2024-25, the Viking wind farm and a full-year contribution from the Seagreen offshore wind farm helped SSE overcome variable weather conditions to report an 18% rise in output.

SSE said the changes to its investment spending plans reflected macroeconomic conditions and delays in the planning process. As a result, it is unlikely to meet its goal of 50TWh renewable generation output by 2030.

Analysts at Jefferies said the reduction in the capital expenditure programme, with its further orientation towards regulated grids, should be taken positively as it would ease any market concerns about SSE's balance sheet.

Diageo shares also fell 5p to 2,132p, representing a lacklustre reaction to Monday’s robust third-quarter update and a Guinness briefing for investors and analysts held in Dublin yesterday.

The event at St James Gate and hosted by chief executive Debra Crew highlighted the company’s commitment to the iconic brand after recent speculation that it may be sold.

Bank of America, which has a price target of 2,450p, said investors will have come away convinced that Guinness still has significant growth potential, supported by Diageo’s brand building and marketing capabilities.

It added: “Over the last 10 years, Diageo has turned Guinness from a brand that had strong heritage and distinctive quality, but that was barely growing, arguably tired and over-indexed to older male consumers, into a 'hot' brand, appealing across genders and age groups.”

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UBS also has a Buy recommendation on the stock, noting a price target of 2,650p in the wake of Monday’s third-quarter update. Diageo reported organic net sales growth of 5.9% and disclosed a $500 million (£372 million) cost savings programme as part of a wider plan to boost cash flow and margins.

The Swiss bank said the strategy reminded it of 2015, when after two consecutive years of zero organic revenue and peak negative investor sentiment Diageo outlined a 100 basis point margin target over 2017-19. It ultimately delivered 200 basis points.

UBS said: “Ultimately, a topline growth acceleration is key for a re-rating as it was back then, but we think there is plenty of self-help potential to support earnings/free cash flow in the interim, which we think is enough for the stock at current valuation.”