Market update: Tesco poor run continues in FTSE 100, Qinetiq slides
10:19 , Graeme Evans
The price cutting plans of Asda kept Tesco and Sainsbury’s under pressure today as the grocers spent another session near the bottom of the FTSE 100 index.
Tesco lost 3% or 10.8p to 328.4p, having fallen 9% on Friday after Asda executive chair Allan Leighton vowed to focus on pricing and availability as part of significant investment back into the business.
Sainsbury’s weakened another 4p to 231p and Marks & Spencer lost 9.5p to 324.9p, adding to declines of 8% and 5% respectively before the weekend.
The retail weakness came as the FTSE 100 index edged 14.15 points higher to 8646.48, reflecting a cautious approach ahead of this week’s flurry of monetary policy announcements.
Members of the US Federal Reserve and Bank of England are expected to keep interest rates on hold on Wednesday and Thursday respectively, with their views on the economic impact of recent tariff developments the major focus.
At the top of the risers board, Phoenix Group surged 6% after the pensions and savings business upgraded guidance alongside annual results.
The company, whose brands include Standard Life and SunLife, said it had reached operating cash generation of £1.4 billion two years ahead of its 2026 target.
Phoenix boosted its potential appeal to income investors by adding that it expects to generate excess cash of £1.1 billion across 2024-26.
It is recommending a 2.6% increase in the final dividend to 27.35p a share, resulting in a total for the year of 54p.
The shares rose 34p to 558p, leaving it well clear of the next best FTSE 100 stock after British Airways owner IAG cheered 5.1p to 288.3p.
Among heavyweight stocks, AstraZeneca fell 116p to 11,878p after announcing a deal worth up to $1 billion to buy Belgium-based cell therapy firm EsoBiotec.
It has forecast revenues growth of 2% for the financial year ending this month, down from the high single digit organic revenue growth seen in January.
Qinetiq said the UK intelligence sector, which represents about 25% of group revenue, has experienced further delays to short cycle contract awards.
It is also taking a one-off charge of £140 million due to the market backdrop and its operational performance in the US.
Shares slumped 110.7p to 413.8p, returning the company’s valuation to near where it was prior to this month’s surge for valuations across the defence sector.
Marshalls eyes return to growth in 2025
09:08 , Graeme Evans
Landscaping and roofing firm Marshalls today said the government’s housebuilding drive and water industry investment has boosted 2025 prospects.
Chief executive Matt Pullen said a rapidly filling order book meant that “I expect to see revenue and profit growth as we go through the year.”
The more upbeat message came as FTSE 250-listed Marshalls reported another year of falling sales and profits for 2024.
Revenues fell 8% to £619.2 million while adjusted pre-tax profits were down 2% at £52.2 million.
Shares fell 5.3p to 238.2p.
Broker Peel Hunt maintained its price target of 340p following the results. It said: “The past couple of years have been challenging, with weaker market volumes and a struggling Landscape business.
“However, we feel market conditions are beginning to improve, and the cost-cutting measures and changes within Landscape should help profits rise, potentially materially.”
The shares of food retailers Tesco, M&S and Sainsbury’s have fallen for another session after confidence was shaken by the results of privately-owned Asda.
Having announced a 3.4% decline in annual like-for-like sales, Asda vowed to focus on pricing and availability as part of significant investment back into the business.
Tesco shares fell 9% on Friday before retreating another 4% or 12.7p to 326.5p in today’s session. M&S lost another 10.3p to 324.1p and Sainsbury’s weakened 5p to 230p, adding to declines of 5% and 8% respectively before the weekend.
Shore Capital points out that Asda’s rivals have “a broader customer set, stronger balance sheets, and a will to remain competitive too”.
It added today: “Time will tell what the outcome is, but we do not see the need to change our earnings forecasts for the listed UK grocers at this time.”
Phoenix shares surge on upgraded guidance
08:26 , Graeme Evans
The FTSE 100-listed shares of Phoenix Group have surged 7% after the pensions and savings business upgraded guidance alongside annual results.
The company, whose brands include Standard Life and SunLife, said it had reached operating cash generation of £1.4 billion two years ahead of its 2026 target.
It now expects to grow the figure by a mid-single digit percentage per year, with the cumulative three-year target up from £4.4 billion to £5.1 billion across 2024-26.
This means Phoenix expects to generate excess cash of £1.1 billion across 2024-26.
Chief executive Andy Briggs said: “Delivery will give us the financial flexibility to reduce our leverage, while also sustaining our progressive dividend for shareholders.
“It also brings us closer to realising our vision to be the UK's leading retirement savings and income business."
Adjusted operating profit increased 31% to £825 million, driven by profitable growth in both Pensions and Savings and Retirement Solutions.
High-yielding stock Phoenix is recommending a 2.6% increase in the final dividend to 27.35p a share, resulting in a total for the year of 54p.
The company, which employs 8500 people and was formed in July 2001 when the MoD split its Defence Evaluation and Research Agency, forecast revenues growth of 2% for the financial year ending this month.
This compares with the high single digit organic revenue growth forecast in a third quarter update in January.
The UK defence sector, which represents 50% of group revenues and has greater exposure to longer duration contracts, has continued to deliver a strong performance.
In the UK intelligence sector, which represents about 25% of group revenue, Qinetiq has experienced further delays to short cycle contract awards.
It is also taking an impairment charge of £140 million at the year-end due to the market backdrop and operational performance in the US.
In addition, Qinetiq has identified a number of one-off exceptional, largely non-cash charges of £35 million-£40 million predominantly in legacy US operations.
It said: “The underlying strength of the group and relevance of our mission critical capabilities positions us well for long-term growth.
“However, tough near-term trading conditions that we referred to in our third quarter trading update have persisted.
“This has affected short cycle work in our UK Intelligence and US Sectors resulting in further delays to a number of contract awards. In addition, recent geopolitical uncertainty has impacted our usual fourth quarter weighting to higher margin product sales from the US.”
Qinetiq shares opened 16% or 81.4p lower at 443.1p, having risen by a third in the past month.
AstraZeneca is to acquire Belgium-based EsoBiotec, a leading in vivo cell therapy company, in a deal worth up to $1 billion.
EsoBiotec’s platform empowers the immune system to attack cancers and could offer many more patients access to transformative cell therapy treatments delivered in just minutes rather than the current process which takes weeks.
AstraZeneca executive vice president Susan Galbraith said: “We are excited about the acquisition of EsoBiotec and the opportunity to rapidly advance their promising in vivo platform.
“We believe it has the potential to transform cell therapy and will enable us to scale these innovative treatments so that many more patients around the world can access them.
“EsoBiotec will accelerate and expand the impact of our recent investments and marks a major step forward in realising our ambition to harness the full potential of cell therapy.”
AstraZeneca will acquire EsoBiotec for a total consideration of up to $1billion, on a cash and debt free basis.
This will include an initial payment of $425 million on deal closing, and up to $575 million based on development and regulatory milestones.
FTSE 100 holds firm after US rebound, central banks in focus
07:12 , Graeme Evans
The FTSE 100 index is set for a flat start to the session as attention turns to an important week for monetary policy announcements.
The US Federal Reserve, Bank of England and Bank of Japan are among the central banks meeting this week.
On Friday, the Dow Jones Industrial Average rallied 1.7%, the S&P 500 index by 2.1% and Nasdaq Composite by 2.6%. All three benchmarks finished more than 2% lower across the week.
The FTSE 100 gained 1% on Friday to end the week at 8632.33, despite a poor session for supermarket stocks Tesco and Sainbury’s.
Gold starts the week at $2988 an ounce, Brent Crude at $71.13 a barrel and the pound at $1.294.
