FTSE slips before UK rate meeting but Direct Line and InterContinental climb
Leading shares are slipping back following recent disappointing economic data – the latest being poor construction figures – and continuing weakness during the oil price.
But Direct Line and InterContinental Hotels have bucked the downward trend after their latest updates.
Insurer Direct Line has jumped 8% to 383.8p as first half profits fell 5% to 316.9m after lower investment gains along with a new levy to chop insurance costs for houses in flood-risk areas. Nonetheless the figure was over 20% than consensus forecasts, as well as company also claimed it would pay its own dividend of 10p a share atop its interim payout of four.9p a share. Peel Hunt analyst Andreas van Embden said:
Direct Line surprised using an increasing amount of reserve releases, the spine this is one-off but provides strong support to solvency additionally, the dividend. The solvency ratio was really a healthy 184%, well above the usual 150% level following a approval of its partial internal model. It’s allowed the provider to provide an interim special dividend of 10p over the basic dividend per share.
After a poor stock price performance, these results lowers well and whilst guidance is unchanged, 2016 underwriting results may come in at the summit end with the range. At the PE of 14 times, the shares are fairly valued but give a ‘best in class’ dividend yield (around 7%).
UBS analysts said:
A 20% pretax profit beat, an interim special well well before expectations, strong capital position, improved outlook, should be taken well, albeit the shares are usually not cheap on 1.9 times 2016 estimated total net asset value (top end from the historical range).
Direct Lines are the most significant riser in the FTSE 100, but not far behind is rival Admiral which has added 50p to 21.99.
Meanwhile InterContinental Hotels comes to an end 95p at 31.09 after faster development in its global room revenue inside second quarter. Revenue per available room rose 2.5% from the 3 months to June balanced with a 1.5% increasing amount of the earliest quarter. Operating profit rose 2% to $344m. Us president Richard Solomons said:
The fundamentals for our own industry, and for IHG as among the largest branded players, remain compelling…Regardless of the uncertain environment some markets, we remain certain about the outlook through out the season.
Numis analysts said:
Underlying earnings before interest and tax of $344m represented continuing development of 10% and was marginally in advance of consensus expectations of about $331m (Bloomberg). The key drivers were RevPAR expansion of 2.0% and net system growth of 3.6%, in line with medium term guidance. After the return of $1.5bn to shareholders, net debt of $1.8bn was obviously and represents leverage of two.3x EBITDA.
Group RevPAR grew by 2.5% from the second quarter of 2016, faster than +1.5% inside first quarter, and more akin to 2.4% through the fourth quarter of 2015. Part of the improvement reflected a tender Easter. Also weakness in oil producing states in the united states is beginning to annualise: RevPAR in oil producing states fell by 6.3% additionally, the remainder grew +3.7%.
Overall the FTSE 100 has fallen 31.98 points to 6661.97 in advance of this week’s Bank of England rate decision, with growing anticipation associated with a cut, and despite a different Japanese stimulus bundle in an attempt to boost its economy.
With silver and gold prices edging as investors find less risky asset, Mexican yellow metal miner Fresnillo has increased 60p at 19.83 – helped with a positive update – and Randgold Resources has risen 175p to 90.85.
Consumer goods groups were and in demand, with Unilever up 45.5p at 3579.5p and Reckitt Benckiser 80p better at 74.31.
But valve control specialist Rotork has slumped nearly 10% to 193.4p. Its profits were in accordance with expectations but it warned that low oil prices would carry on and affect its performance.
