FTSE 100 movers: Imperial Brands lights up blue chips, soggy bottom for Compass

The FTSE 100 was lit up by Imperial Brands and oil majors BP and Shell on Wednesday, with Burberry and Compass the big fallers.

Imperial Brands reported a 2% decline in first-half tobacco volumes and revenues and a 6.7% fall in adjusted operating profits, but this was nowhere near as bad as the market had feared. Even though sterling's swingback and the administration of UK distributor Palmer & Harvey hit reported earnings, a 6.2% decrease in adjusted earnings per share shrank to 114.3p still beating the consensus forecast of 111.9p.

There was also some heart taken by investors who have been worried that the company was not keeping up with developments in e-cigarettes and heat-not-burn tobacco.

Jefferies saw "a number of areas of encouragement for the market to hang its hat on", including volume delivery outperforming declines of 4.9% and 3.6% for Japan Tobacco and Philip Morris over the same period, progress with its Blu vapour business, about which analysts were "particularly optimistic", together with the decision to sell off up to £2bn of non-strategic assets over the next 12-24 months.

BP and Royal Dutch Shell were lifted as oil climbed back up to three-and-a-half-year highs after Donald Trump confirmed that the US will be withdrawing from the Iran nuclear deal and sanctions will be restored.

"The question now is how restrictive the sanctions will be on the Iranian economy and its ability to produce and export oil given that the UK, Germany, France, China and Russia remain committed to the deal," said Craig Erlam, market analyst at Oanda. "Oil has been rallying for days in response to rumours that Trump would announce the withdrawal, which clearly suggests that traders believe the sanctions will further tighten global supply at a time when some of the world’s largest producers have already significantly reduced inventories. There is clearly the potential for these countries to fill the void left by the sanctions but if it aids their cause then they’ll likely opt against it."

Miners, led by BHP Billiton, Rio Tinto, Antofagasta and Glencore, were lifted by a weak pound and as a proxy for global growth, suggested Artjom Hatsaturjants, research analyst at Accendo Markets.

Pearson was an early faller, down 1.3%, after Exane BNP Paribas downgraded the educational publisher to 'neutral' from 'buy' with the turnaround story "now largely priced in”. But the group's shares clambered back into the green as Exane upped its price target to 900p and Credit Suisse analysts said they were impressed by management's increasing confidence, especially apparent over the North American higher education market. After a conference call with chief executive John Fallon, the Swiss bank upped its price target on the group from 700p to 850p.

Fashion brand Burberry had a chequered day after Belgian billionaire Albert Frere sold his entire 6.6% stake in the group for around £498m. While Frere's Groupe Bruxelles Lambert said the divestment was part of its "dynamic strategy in terms of portfolio diversification" and allows it to realise a capital gain, analysts at Berenberg said that such an early disposal was not in line with GBL's long-term investment strategy, though should not be seen as an indicator of any deterioration in the company's fundamentals or a change in the equity story.

"GBL is not on the board of directors at Burberry and, having passed the 3% ownership threshold in February 2017 only after the FX-related share price rally, it may have missed the opportunity to secure a bigger stake."

Contract caterer Compass flopped like a soufflé after serving up slightly soft first-half sales and profits. Organic growth in the second quarter of 3.7% was more soggy-bottomed than analysts had wanted to see, reflecting the effects of Easter timing, bad weather and the demobilisation of contracts in Europe and the US. EBIT before exceptionals fell 2% to £864m, which was 2% below the average City forecast of £880m.

"However, guidance is unchanged and we view this as reassuring. We expect these results to be taken negatively on the back of the softer organic growth in Q2, and a run into the numbers, but it remains our top pick in the sector," said Berenberg.

Security group G4S fell as organic revenues declined 2% in the first quarter, even though it had flagged up this as part of the outlook statement in March. Chief executive officer Ashley Almanza said the group was continuing to make progress in improving revenue growth and productivity. "We expect growth to accelerate in the second half of 2018 as the strong first-half comparatives from retail cash solutions roll off, our new contracts mobilise and our productivity programmes deliver benefits to the bottom line," he said.

Market Movers

FTSE 100 (UKX) 7,640.78 0.99%
FTSE 250 (MCX) 20,648.02 0.26%
techMARK (TASX) 3,482.00 0.37%

FTSE 100 - Risers

Imperial Brands (IMB) 2,788.00p 6.47%
BP (BP.) 570.50p 3.65%
BHP Billiton (BLT) 1,628.60p 3.29%
Evraz (EVR) 506.60p 3.26%
Royal Dutch Shell 'B' (RDSB) 2,718.50p 3.25%
Royal Dutch Shell 'A' (RDSA) 2,630.50p 3.14%
Rio Tinto (RIO) 4,113.50p 2.22%
Fresnillo (FRES) 1,302.50p 2.00%
Antofagasta (ANTO) 1,012.00p 1.85%
Glencore (GLEN) 365.85p 1.82%