Market Report: City breaks out the booze and cigarettes
Thursday 01 August 2013
The City was hoping it would not wake up with a hangover today after booze and fag sellers boosted the blue-chip index yesterday to the highest point in a week. Good results from British American Tobacco, spirits giant Diageo and Belgian-based beer group AB InBev pushed peers SAB Miller and Imperial Tobacco towards the top of the table.
Lucky Strike and Dunhill owner BAT reported headline pre-tax profits up 5 per cent to £2.8bn and its interim dividend soared 7 per cent to 45p a share.
BAT's foray into the growing e-cigarettes market helped it advance 43.5p to 3,506p while Imperial Tobacco puffed up 39p to 2,206p.
Jefferies scribbler Dirk Van Vlaanderen said it was a "good day for beverages and tobacco" as Smirnoff vodka-to-Guinness owner Diageo reported profit 8 per cent better at £3.53bn in the year to June.
Mr Van Vlaanderen said: "Bucking the recent trend of disappointing results from the beverages sector, ABI delivered a much better set of second-quarter results and Diageo's full-year numbers were broadly in line and the company looks set to accelerate growth in 2014."
Diageo celebrated by taking top spot on the benchmark index – it added 64.5p to 2,054p.
But analysts at Canaccord Genuity said it was "time to reduce consumption" as all the good news was already reflected in the share price so they rated it a hold with a 1950p price target.
SAB Miller, which will report figures today, took second place, up 81p to 3,220.5p.
Traders who put down the drinks and cigarettes for a moment were elated by news of strong growth in the US. Second-quarter gross domestic product data showed the US is growing at 1.7 per cent a year, stepping up from the first-quarter's 1.1 per cent. The FTSE 100 rallied more than 1.5 per cent during the day but settled back down and closed up 50.11 points to 6621.06 – the highest level since last Wednesday. The big day for data to move the market will come tomorrow with the US non-farm payrolls.
Also among the gainers was bank HSBC. Traders decided the international bank was a safer bet than some of the domestic UK banks after news of Barclays' equity raise on Tuesday. HSBC banked an 11.6p gain to 747.8p.
Analysts at Morgan Stanley took a look at Hargreaves Lansdown and said it was a "high-quality franchise, strategically well-placed and supported by structural growth in the UK savings market", so they raised their target price to 1,050p and the shares advanced 14.5p to 980.5p.
Punters were falling over themselves to check out of Moneysupermarket.com as it declared it had suffered a slowdown in June and July. Shares in the mid cap-listed comparison website slumped more than 14 per cent, even though City analysts downplayed the event. The group with the "You're so MoneySupermarket" catchphrase has been a strong performer over the year, having risen over 40 per cent ahead of yesterday. But the first-half results saw shares collapse 31.2p to 181p. Analysts at Investec said that although the first-half figures "are fine and marginally above our forecast" the "full-year outlook comment looks an issue" — rather an understatement considering the share price response. Roddy Davidson, an analyst at Westhouse, said he "would have liked a more definitive statement on success in tackling the problems caused by Google's recent algorithm changes". Another cause for concern was the departure of its finance boss Paul Doughty. But David Reynolds at Jefferies said: "Doughty has served MoneySupermarket well, but it seems like an opportune time to introduce new senior management talent to the group."
Third-quarter numbers from Greencore showed the sandwich, cake and ready meal-maker had been hit by the poor weather earlier this year and the horsemeat scandal, as it slimmed down 5p to 147p.
AIM-listed drug discovery group Summit Corporation got a £2.4m funding boost from David Cameron's UK Biomedical Catalyst fund and it advanced 0.375p to 5p.
Asthma drug specialist Skyepharma got approval in Japan for its flutiform drug for bronchial asthma and it was 8.5p healthier at 74.5p.
Punters made a bet on gambling by smartphone specialist 24/7 Gaming Group yesterday when it listed on Aim. The shares fluttered up 9p to 54p.
Bargain Booze owner Conviviality Retail began trading yesterday and trickled up 30p to 130p.
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