Intertek Group Share News (ITRK)

LONDON (Alliance News) - A fall in oil prices caused stocks to give up opening gains by midday Monday, while worse-than-expected data on the post-referendum UK manufacturing sector scuppered a rally by the pound.

Survey data from Markit and the Chartered Institute of Procurement & Supply showed that the final purchasing managers' index for the UK factory sector plunged to 48.2 from 52.4 in June, below the flash estimate of 49.1 and marking its lowest level since February 2013.

A PMI score below 50 marks a contraction in activity, and the July reading is only the second time since early 2013 that the manufacturing sector has fallen into contraction.

"The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound," said Rob Dobson, senior economist at at survey compiler Markit.

Scott Bowman, UK economist at Capital Economics, said the negative tone of the July manufacturing PMI reinforces the case for the Bank of England to ease its monetary policy in its next decision on Thursday.

"We expect a 25 basis point cut in Bank Rate and a GBP75 billion expansion of the QE programme. But we think that the response of policymakers, along with the boost to exporters' competitiveness from the fall in the pound – as already seen in this survey – will provide support to the economy," Bowman said.

"Accordingly, we think the ultimate damage from the vote to leave the EU will end up smaller than some others fear," he added.

The pound sank following the PMI data and at midday traded at USD1.3173, compared to USD1.3285 at the London stock market close on Friday.

The FTSE 100 was down 0.3%, or 20.78 points, at 6,703.65. The blue-chip index tracked the losses in oil prices, with Brent crude trading at USD42.92 a barrel versus its earlier intraday high of USD43.83.

"Oil prices are coming back from their weekend highs too, as concerns about global growth kick back in following Friday's disappointing US GDP estimate (just an estimate though...), not to mention a poor UK manufacturing PMI," commented Augustin Eden, analyst at Accendo Markets.

The FTSE 250 index was down 0.3% at 17,231.48 while the AIM All-Share was up 0.3% at 758.02.

In mainland Europe, the French CAC 40 index was down 0.6% and the German DAX 30 was up 0.1%.

Ahead of the open on Wall Street, futures pointed the DJIA, S&P 500 and Nasdaq 100 stock indices all up 0.1%. The highlight in the earnings calendar across the pond is second quarter results from conglomerate Loews Corp.

In the UK, shares in Intertek Group were down 2.0% after it reported growth in profit and revenue for the first half but analysts raised concerns that organic growth had been slow in the half and challenges in the oil and gas industry will continue to weigh on the group's performance.

The testing, inspection and certification services provider said pretax profit in the half year to the end of June grew 7.3% year-on-year to GBP149.2 million from GBP139.1 million a year prior. Revenue rose 14% to GBP1.20 billion from GBP1.06 billion, driven mainly by acquisition contributions.

Organic revenue growth in the half was 3.1%, or 0.5% in constant currencies. A good performance in Intertek's Products arm and solid half in its Trade division offset the challenging conditions in the oil and gas infrastructure market for its Resources unit.

Shore Capital analyst Robin Speakman highlighted the slow constant-currency organic growth of 0.5% and the ongoing pressures on the business from a soft oil and gas market.

Associated British Foods was up 1.7% after the sugar producer and Primark owner was upgraded to Buy from Hold by Deutsche Bank. The German bank said the company's outlook is "positive", as an improvement in its sugar business is expected to join Primark's strong performance.

In the FTSE 250, Senior was the best performer up 11%. The aerospace, military and vehicle components manufacturer reported a drop in profit for the first half of 2016 due to weaker margins and ongoing issues in its Flexonics division.

Senior said its pretax profit for the half to the end of June was GBP32.6 million, down 28% year-on-year from GBP45.0 million, despite revenue growing to GBP450.5 million from GBP434.5 million.

But the company declared an interim dividend of 1.95 pence, up 6.0% year-on-year, and said it is well-positioned to increase market share over the medium-term.

Keller Group was the biggest mid-cap faller, down 11% after the ground engineering company said it expects its full-year results to be at the lower end of its expectations following a "disappointing performance" in Asia Pacific in its first half.

The group posted revenue of GBP849.7 million for the six months ended June 30, 12% ahead of the GBP755.8 million reported a year earlier. Pretax profit dipped to GBP25.0 million from GBP31.6 million, however, as the company's operating margin fell to 4.2% from 5.0%.

Keller said it had performed strongly in the US, where bidding activity was robust, as well as in its European markets, but said it had a "very difficult first half" in Australia, Singapore and Malaysia, with the Asia Pacific division making a GBP9.6 million loss compared to the GBP4.8 million profit a year earlier.

Financial markets technology provider Fidessa Group posted higher profit and revenue for the first half of 2016 and pushed up its dividend, amid broad-based growth for the business.

Fidessa said pretax profit for the six months to the end of June grew 14% year-on-year to GBP22.2 million from GBP19.4 million, as revenue increased 9.0% to GBP158.3 million from GBP145.9 million. The company declared an interim dividend of 14.30 pence, up 9.0% year-on-year. The stock was up 3.9%.

Still ahead in the economic calendar, the Markit manufacturing PMI for the US is at 1445 BST, before the ISM manufacturing PMI at 1500 BST and construction spending also at 1500 BST.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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