BA-owner IAG pulls out of nosedive
BRITISH Airways-owner International Consolidated Airlines finally found some wings yesterday. The group – which also owns carriers including Iberia and Aer Lingus – was the biggest riser on the FTSE 100 after analysts at broker Bernstein said it is a “quality play” as legacy airlines try to emerge from the coronavirus.
It outperformed a generally rising European airline sector.
Bernstein – which said it also likes the low-cost carriers Ryanair and easyJet – said that IAG was the most compelling investment through a multi-year recovery, due to the strength of its business model.
IAG shares climbed 14.2p to 201p, a near 8pc gain that left it as London’s biggest blue-chip riser by some distance.
It is still the FTSE 100’s worst performer of 2020, with shares trading at less than a third of their start-of-year prices. But analysts have stuck by the group, which holds 21 “buy” ratings, against eight “holds” and just three “sells”.
Putting further wind behind the group was a proposal by Germany’s main aviation industry group, which called for the creation of limited air-travel corridors between the United States and certain European hubs. The move – which would help repair the damaged transatlantic flight industry – would benefit IAG and Lufthansa especially.
The FTSE 100 gradually gained pace during the session, with a tepid open developing into modest gains by the close. About two thirds of London’s blue-chips rose amid thin news and economic flows.
Persimmon shares slipped 70p to £27.52, taking the edge off Tuesday’s chunky rise. The housebuilder announced its new boss would join sooner than expected.
On the FTSE 250, Hochschild Mining was the biggest faller, down 23p at 255p, after posting a drop in first-half profits. Pre-tax profits at the precious-metal miner fell to $6.5m (£5m) in the first six months of the year, versus $29.5m for the same period last year. A drop in production took revenue from $354.5m to $232m.
The group said it expects rising metal prices will boost its second-half performance. It maintained its dividend suspension, saying a payout would be “inappropriate” in the face of continued uncertainty.
Babcock shares dropped 9.6p to 269.2p after Morgan Stanley analysts slapped it with an “equal weight” rating.
They warned the group’s outlook is “uncertain”, adding the process of change initiated by the defence contractor’s management will be slow to take effect.
Softcat shares ended the day virtually unchanged after an initial jump. In a trading update, the infrastructure group said it “continued to trade satisfactorily” during the three months to the end of July, adding that it will resume its normal dividend policy, as well as its previously cancelled interim payout. It closed up 3p at £13.32.
Avon Rubber was one of the biggest mid-cap climbers, rising 245p to £36.75 after winning a 10-year contract to supply gas masks for Nato. The Wiltshire-based company expects to shortly receive its first order under the contract.