Join our community of smart investors

News & Tips: RBS, AstraZeneca, IAG & more

Market jitters send UK equities lower
October 28, 2016

Bonds and equities are again demonstrating this morning that they can sell-off together: that must be what commentators mean by 'sentiment'. That's despite Thursday's better-than-expected economic data on UK economic output. Click here to read The Trader Nicole Elliott's morning view.

IC TIP UPDATES:

Sirius Real Estate (SRE) expects to meet full-year profit expectations, and has announced two key developments. Providing flexible workspace for small companies in Germany, Sirius completed the acquisition of the Dresden business park and also expects to complete the purchase of a multi-let office building in Wiesbaden. Crucially, both sites come with a significant amount of un-let or underutilised land, proving the opportunity to boost rental income. Occupancy rates on the existing portfolio rose to a record 81 per cent, thanks to a continued drive to derive income from previously under-utilised space, while rents has risen from €5.02 per sq m in March to €5.07. Buy.

News that AstraZeneca (AZN) has had to stop enrolling patients for a crucial cancer drug trial, sent shares down 3 per cent yesterday. Cancer immunotherapy durvalumab has been marked as one of Astra’s best new drugs for helping to restore earnings growth and thus news that the pivotal trial had encountered difficulties came as quite a blow to investors. Astra maintains a positive outlook and is hoping to return to recruiting once the issue - which involves unwanted side effects from the drug - is sorted with the FDA. Durvalumab is still being trialed in different cancer indications including non-small cell lung cancer and bladder cancer. Buy

KEY STORIES:

A huge drop in fuel costs at British Airways owner International Consolidated Airlines (IAG) is likely the reason for support of the company’s shares this morning. Fuel costs dropped nearly a fifth in the three months to 30 September, helping counterbalance a 4 per cent drop in total revenue to €6.48bn (£5.80bn), within which passenger revenue fell more than 5 per cent. The cost savings meant revenue per passenger kilometre actually rose by more than 9 per cent to €71.4m. The weakness of the pound has impacted the reported numbers and lower interest rates have widened its pension deficit. Capacity at the group was increased by more than 11 per cent in the nine-month period but this fell to 4.1 per cent if its acquisition of Irish carrier Aer Lingus is excluded. Full-year operating profits remain on track to it roughly €2.5bn.

Royal Bank of Scotland (RBS) reported a pre-tax profit of £255m for the three months to the end of September compared with a loss of £14m in the same period the previous year. However, the banking group incurred an increased tax charge of £582m as a result of this profit. Restructuring costs increased to almost £470m,although litigation and conduct also rose to £425m from £129m in 2015. As a result the group booked at attributable loss of £469m. Management also confirmed it would not meet the EU’s deadline for offloading Williams & Glyn by the end of 2017 and is in discussion with the Treasury to agree a solution regarding its state aid obligations.

OTHER COMPANY NEWS:

Luxury interior furnishings group Walker Greenbank (WGB) has received yet more compensation following flood damage at its Lancaster-based Standfast & Barracks site in December 2015. Management said it had been paid another £2m from insurance payouts on top of the £12m it had already been granted. More payments are expected. Full production has returned to Standfast & Barracks and the restocking of printed fabrics at the company's Milton Keynes warehouse is almost complete.