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Tue City brief: Macfarlane lifted; HSBC disappoints

Results from HSBC failed to impress and UK stock markets dropped into the red by the close. The FTSE 100, which rose to a high of 7,053.18 early on, finished down 58.37 points (-0.84%) at 6,927.58. This was the index’s lowest close since 2 April when it settled at 6,833.46.

HSBC beat expectations with its first-quarter results, with pre-tax profit up 4% at $7.1bn, though worries about the future of its dividend prompted the stock to decline. The bank warned that the UK banking levy would limit the potential for dividend growth and said it was looking at whether to move its headquarters back to Hong Kong from London.

Sector peers Lloyds and RBS fell into the red. Jefferies raised Lloyds to ‘buy’, while Nomura lifted RBS to ‘neutral’ following the stock’s recent underperformance.

Shares in packaging company Macfarlane Group rose 3.18% or 1.38p to close at 44.88p, close their year high, as investors warmed to a trading update. Sales continued their growth from last year into the early part of 2015 and both businesses acquired in 2014 were performing well.

Graeme Bissett, chairman, said group sales in the first four months of 2015 are 13% ahead of 2014 and profitability is stronger than in the equivalent period last year.

Online trading by consumers was boosting parcel traffic and has led to a 16% rise in sales in packaging distribution of which 6% relates to organic growth and the remainder to the impact of the acquisitions.  Gross margins have also improved as anticipated and as a result profitability is well ahead of the equivalent period in 2014.

Sales in the manufacturing operations are running at similar levels to 2014.  Whilst the competitive UK retail sector continues to impact the labels business, the packaging design & manufacture business has won new customers in its target sectors.  Profitability in manufacturing operations is slightly ahead of last year’s levels.

The company said full year results will again be heavily influenced by performance in the second half of the year due to increasing presence in the internet retail sector.

Mr Bissett said: “Given the strong start to the year, the Board is confident that the group will perform in line with its expectations for 2015.”

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