News Column

GKN and Next help FTSE 100 edge higher after updates

July 29, 2014

Nick Fletcher, theguardian.com



On a busy day for corporate news, engineering group GKN is roaring ahead.

The company had been under pressure due to worries about the strength of sterling hitting its figure, but it has reported a 6% rise in half year profits to 296m and raised its interim dividend by 8%. It said growth at its driveline business which supplies components to car makers had offset the effects of currency fluctuations. Chief executive Nigel Stein said:

We have continued to outperform our key markets and report good underlying financial results in spite of sterling's strength and some end market weakness. We expect these trends to be maintained in the second half.

The optimism has lifted the shares 21.6p higher to 364.7p, with analysts at Numis raising their recommendation from add to buy:

The shares have underperformed the UK engineering sector in 2014 reflecting downgrades from currencies and Land Systems division. No further changes to forecasts today and with currencies now appearing to have stabilised attention can move back to underlying value and prospects. 37% of earnings from aerospace, and automotive making good progress, the shares, trading at a discount to the sector (2014 PE 13.1 time versus 16 times) look attractive. Hence we have upgraded to buy albeit further data points (eg the third quarter interim management statement) may be required before we see much upward traction.

Next has added 155p to 66.75 as it raised its sales and profits guidance for the second time in three months after a strong second quarter performance. It said it expected full year profits of 775m to 815m, up from the previous forecast of 750m to 790m. The star performer, once more, was Next Directory, with sales up 16.2%. Store sales were 7.5% higher.

All this helped the FTSE 100 edge up 3.61 points to 6788.68, despite continuing concerns about Gaza and Ukraine, as well the prospect of further sanctions on Russia.

So BP is down 2.75p at 494.1p despite a 34% rise in second quarter profit, weighed down by the possible effect of any sanctions.

St James Place is leading the fallers, down 36p at 754p. The wealth manager recorded funds under management up by 19%, but this appeared to be less than some optimistic forecasters had hoped for.


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Source: Guardian Web


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