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4.30pm: Blue chips close off lows

The FTSE 100 came off its lows to close 22.91 points lower at 7,907.72 as banking and healthcare majors traded ex-dividend. However, losses were limited by a surge in Rolls-Royce after its boss outlined a strategic overhaul (see below).,

The latest CBI Distributive Traders Survey released earlier today showed that UK retail sales growth rose in the year to February.

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Rolls-Royce

Shares in aero-engine manufacturer Rolls-Royce closed 25.48p (23.68%) higher at 131.85p after it reported strong growth and predicted further advances this year as the recovery in international travel continues. However, it did not recommend a dividend.

The engineer said revenues rose as demand rebounded with large engine flying hours in Civil Aerospace up 35% year on year.

A higher margin was driven by improvements in long-term service agreement contract margins and increased spare engines profit in civil aerospace work.

It posted a statutory operating profit of £837m in 2022, up from £513m a year earlier. Revenue grew to £13.5bn from £11.2bn.

On an underlying basis, operating profit was up to £652m from £414m.

It forecasts operating profit between £0.8bn to £1bn in 2023 with free cash flow of £0.6bn to £0.8bn. The guidance assumes £100mln to £200m of targeted contract improvements and large engine flying hours at 80-90% of 2019’s level and 1,200-1,300 total shop visits.

The firm has also embarked on a transformation programme and strategic review.

New chief executive Tufan Erginbilgic said, “Our transformation programme is already underway and is moving at pace.

“It will include a strategic review so that we can prioritise our investment towards the most profitable opportunities. We will report the findings together with our medium-term goals in the second half of this year.”

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Drax

Drax Group posted annual profit that beat analysts’ expectations and the board proposes an increase in its dividend for the year, raising the total by 11.7% to 21p per share.

The company was buoyed by robust demand for renewable power and a rise in wholesale gas prices.

Its renewables generation that includes controversial biomass, as well hydro and pumped storage, collectively supplied up to 70% of the UK’s renewable power in certain periods last year.

The company provides around 7% of Britain’s electricity through its network of power stations. It said annual adjusted core profit rose 83.6% to £731 million, beating forecasts.

There have been calls for a government subsidy, which makes the company profitable, to be withdrawn. Critics question its green credentials as it burns wood that is imported.

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BAE Systems

BAE Systems, Britain’s biggest defence company, posted a 9.5% rise in annual earnings and expects more growth this year as military spending rises.

The company recommends a 7.6% increase in its annual dividend, reflecting confidence in its long-term growth.

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Macfarlane

Glasgow-based packaging group Macfarlane has raised its dividend after posting a 7% rise in pre-tax profit on a 10% rise in revenue to £290.4m.

Profit before tax from continuing operations came in at £19.9m (2021: £18.7m) and the board is proposing a final dividend of 2.52p per share (2021: 2.33p per share).

This would take the total dividend for 2022 to 3.42p per share (2021: 3.20p per share) up 7% on 2021.

Chair Aleen Gulvanessian said the company is confident of delivering further growth despite the impact of the cost of living on customer demand, as well as rising operating costs, particularly related to labour, energy, and interest charges.

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Heathrow

Heathrow said its annual losses almost halved in 2022 as its recovery from the COVID pandemic gathered speed despite a series of troubles, including a lack of staff.

The airport group reported an adjusted loss before tax of £684m compared to the £1.27bn loss recorded in the previous 12 months.

It attributed the improvement largely to growth in passenger numbers, which trebled to 62 million.

However, it remains 25% down on the pre-pandemic year of 2019.

No dividends were paid in 2022 and none are planned for 2023 as it continues to rebuild after the industry was battered by pandemic travel restrictions.

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Lovell and Morgan Sindall

Housing specialist Lovell has announced another record performance in year-end figures showing profit jup 12.7% to £37.4m.

The company is part of Morgan Sindall Group which reported significant strategic and operational progress across the business.

Group revenue increased by 12% up to £3.6 billion while adjusted profit before tax increased 7% to £136.2m. 

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Hays CEO steps down

The CEO of gobal recruitment firm Hays is to step down after 15 years at the company.

Hays said Alistair Cox will remain as CEO until a suitable candidate to replace him can be found.

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Global markets

Investor mood is expected to turn more positive after the minutes of the latest meeting of the US Federal Reserve did not reveal much that the markets did not already know.

The response on Wall Street was muted with the Dow Jones Industrial Average ending down 0.3%, the S&P 500 down 0.2% while the Nasdaq Composite was up 0.1%.

Financial markets in Tokyo were closed for the Emperor’s Birthday holiday.

In China, the Shanghai Composite was down 0.3%, while the Hang Seng index in Hong Kong was down 0.4%.