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(Alliance News) - Stock prices in London opened mixed on Tuesday with Diageo weighing on the FTSE 100 after reporting a drop in annual earnings, while BP rose despite cutting its dividend for the first time in a decade.
The UK flagship FTSE 100 index was flat at 6,031.83. The mid-cap FTSE 250 index was up 73.19 points, or 0.3%, at 17,231.31. The AIM All-Share index was down 0.1% at 891.78.
The Cboe UK 100 index was up 0.1% at 602.19. The Cboe 250 was up 0.5% at 14,606.68 and the Cboe Small Companies flat at 9,090.65.
In mainland Europe, the CAC 40 in Paris was up 0.6, while the DAX 30 in Frankfurt was up 0.4%.
On the London Stock Exchange, Melrose Industries was the best blue-chip performer, up 5.3% after the industrial turnaround specialist agreed amended arrangements with its banking syndicate, including improved financial covenants out to December 31, 2022.
Melrose said the covenant amendments include a waiver of the test of net debt-to-earnings before interest, tax, depreciation and amortisation to the end of 2021. The London-based firm said it now has the financial flexibility it needs to continue to focus on cash generation and adapt to current market conditions.
BP was up 5.2% despite the UK oil major cutting its dividend for the first time since the Deepwater Horizon disaster in 2010, as it swung to a huge loss amid lower oil prices.
Brent oil was quoted at USD43.83 a barrel on Tuesday morning, lower from USD44.11 late Monday. The North Sea benchmark was trading at around USD66 a barrel at the start of 2020.
The energy company halved its second-quarter dividend to 5.25 US cents from 10.5 cents from the previous quarter.
"For quite some time now there has been ongoing speculation about the sustainability of BP's dividend, against a backdrop of rising debt levels and concern around the company's ability to continue to pay it in a world of lower oil prices, so this morning's decision to reduce the pay-out is welcome, even if it is long overdue," said CMC Markets analyst Michael Hewson.
For the half-year ended June 30, BP swung to a replacement cost loss of USD18.29 billion from a profit of USD3.78 billion a year before. It reported an underlying replacement cost loss of USD5.89 billion from a profit of USD5.17 billion. The underlying RC measure is what BP characterises as net income.
In the three months to June 30, underlying replacement cost losses were at USD6.7 billion from a profit of USD2.8 billion in the same period last year. Consensus estimates were for a loss in the region of around USD8.45 billion.
The loss for the second quarter attributable to BP shareholders was USD16.8 billion.
At the other end of the large-cap index, Diageo was the worst performer, down 6.5% as the distiller's sales were hit hard by the closure of bars and restaurants due to the coronavirus pandemic.
For the financial year ended June 30, Diageo reported an 8.3% drop in sales of GBP17.70 billion from GBP19.29 billion in financial 2019, and net sales of GBP11.75 billion, down from GBP12.87 billion. Pretax profit fell 52% to GBP2.04 billion from GBP4.24 billion.
Diageo said organic net sales were down 8.4%, with growth in North America more than offset by declines in all other regions. According to company compiled consensus for financial 2020, it was expected to post a fall in organic net sales of 7.3%. Organic volumes were down 11%.
Organic operating profit was down 14.4%, hurt by volume declines, cost inflation and unabsorbed fixed costs. Consensus had expected organic operating profit to fall 13.6%.
A final dividend of 42.47p was declared, unchanged from a year prior, taking the full year dividend payout to 69.9p, up 1.9% from 68.6p paid for financial 2019.
Looking ahead, Diageo said that, due to the continued uncertainty caused by the ongoing Covid-19 pandemic, it is still not able to provide specific financial guidance.
Fresnillo was down 3.5% after Berenberg started coverage on the Mexican gold miner with a Sell rating.
Gold was priced at USD1,974.00 an ounce Tuesday morning, firm from USD1,971.10 late Monday.
The Japanese Nikkei 225 index closed up 1.7% on Tuesday. In China, the Shanghai Composite ended up 0.1%, while the Hang Seng index in Hong Kong is up 2.0%.
The pound was quoted at USD1.3085 early Tuesday, up from USD1.3041 at the London equities close Monday.
The euro was quoted at USD1.1767, up from USD1.1737. Against the yen, the dollar was trading at JPY106.11, soft from JPY106.19.
Tuesday's economic events calendar has eurozone producer prices at 1000 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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