Defence duo bolstered by dividend call
DEFENCE companies topped both the blue-chip and mid-cap indexes after
BAE Systems and Ultra Electronics both confirmed they will pay dividends.
Both companies had deferred a decision on shareholder payouts during April as they waited to see how the market fared.
But as they posted interim results, management at both companies said that defence sales which make up the bulk of the revenues were strong enough that they had confidence to go ahead with dividends.
FTSE 100-listed BAE rose 28.10pc to 505p, while mid-capper Ultra gained 202p to £23.90.
BAE said it would pay 13.8p in September, plus an interim dividend of 9.4p for the first half. The announcement came as BAE said underlying revenues rose 4.8pc to £9.9bn in six months to the end of June, and profit before tax fell from £776m to £689m.
Charles Woodburn, chief executive, added that after disruptions from lockdowns, the company’s defence operations, which represent 90pc of the business, were now operating “at close to normal” levels and predicted the second half of the year would be in line with original forecasts.
The rises left the pair in a narrow group of risers on a poor day for European markets, which dropped amid historic economic contractions in Germany and the United States, and a chock-full corporate reporting calendar that laid bear the financial devastation being caused by Covid-19.
BAE’s only heavyweight companion was pharma group AstraZeneca, which climbed 136p to £87.51 after beating analysts’ estimates with its second-quarter results as high demand for its new medicines drove a strong performance.
Pest control group Rentokil also managed to hold in the green. It posted a fall in first-half profits, despite marginally higher revenues, as increased costs and business closures weighed on its bottom line. The FTSE 100 group’s ongoing revenue rose 1pc to £1.3bn, but profit before tax nearly halved, down 45pc to £61.8m. Its shares rose 8.73p to 557.13p.
Lloyds Banking Group led fallers on the FTSE 100, dropping 2.22p to 26.15p after the lender warned of an extra £2.4bn impairment in the second quarter, “reflecting a significant deterioration in forward looking economic outlook”.
It pulled the financial sector down with it, with peers such as Legal & General, Prudential, Aviva and NatWest all slipping. The biggest drag came from Royal Dutch Shell, which dropped 68p to £11.58 after swinging to a deep statutory loss.
Elsewhere on the FTSE 250, outsourcer Equiniti’s shares touched a record low after analysts branded its first-half results as disappointing. It closed down 26.40p at 116.80p.