Shares in BA owner dive after cash flow confusion

SHARES in British Airways parent IAG nose- dived after the group told investors its free cash flow would fall this year.

The firm was the worst performer on the FTSE 100 yesterday after bosses issued the ‘clarification’ following finance chief Enrique Dupuy de Lome’s mistaken claim the figure would grow.

But in a letter sent to investors and analysts, IAG said it actually predicted its cash flow would be ‘ lower in 2019 than in 2018’ because spending was set to go up and profits to stay flat.

IAG reported an operating profit of £2.8bn and more than £1.5bn in free cash last year. It expects spending on one-off projects this year to rise to as much as £2.3bn.

City broker Goodbody said the confusion about the figures arose in an analyst call on Thursday, partly because of a change in accounting methods.

Analysts had challenged de Lome’s calculations but he had insisted that ‘at the end of the day, we are foreseeing an improvement in free cash flow’. The embarrassing statement from IAG sent the group’s shares tumbling 4.8pc, or 29p, to 574p.

At the same time, Flybe shareholders were busy voting for a deal that will see the smaller airline cease trading on the London Stock Exchange from March 11.

They waved through a cut-price £2.2m takeover deal despite the struggling company’s board previously saying the 1p per share offer was ‘disappointingly low’.

The approval means its holding company and assets are controlled by a Virgin and Stobart Group consortium called Connect Airways.

There were attempts by some shareholders to disrupt the takeover and oust Flybe’s chairman but these ultimately came to nothing. One industry source said: ‘Shareholders weren’t given much of an option – either take 1p per share or liquidate the company.’

Shares fell 16.2pc, or 0.23p, to 1.22p yesterday. Blue-chip cigarette maker British American Tobacco hit turbulence after revealing it had lost an appeal against long- running claims for customer compensation in Canada.

BAT’s Canadian subsidiary, along with the Canadian subsidiaries of Philip Morris International and Japan Tobacco, faces having to pay billions of pounds to smokers who say it failed to warn them properly that its products caused cancer and other illnesses. Their lawsuit was first brought in 1998.

BAT had appealed against a decision awarding damages but the ruling has now been upheld by the Court of Appeal of Quebec.

The company stressed that only its subsidiary was affected, with analysts saying they expected the legal battle to escalate further to Canada’s Supreme Court. It sent shares in BAT down in early trading but by the afternoon investors seemed more optimistic about the firm’s prospects, with the stock edging up 0.3pc, or 8.5p, higher to 2871.5p.

Property website Rightmove’s shares were given a boost as analysts sounded more positive notes about the falling number of estate agents using its service.

The figure prompted concern in the City last week, sending the company’s shares lower despite it revealing record profits of more than £198m.

But yesterday they bounced back after analysts at Exane played down the agency fears.

‘ While risks to Rightmove’s model from a disruptive No Deal Brexit are very real we see fears over [agency numbers] as overdone,’ they told investors.

Rightmove’s shares closed 5.2pc, or 24.3p, higher at 496.2p.

The FTSE 100 crept up 0.4pc, or 27.66 points, to 7,134.39, while the

FTSE 250 was also up, though just by barely 0.1pc, or 11.78 points, at 19,411.43.