MARKET REPORT: BAE Systems shares soar as aerospace and defence juggernaut promises investors double dividend windfall
BAE Systems shares soared as the aerospace and defence juggernaut promised investors a double dividend windfall.
The FTSE100 group is going to reinstate the £440m, 13.8p per share final dividend that it pulled several months ago as it tried to work out how much the coronavirus crisis would dent its finances.
This was a prudent move and one echoed by dozens of other major firms – but one that also deprived savers and pensioners of much-needed top-ups from the regular payouts.
But BAE has now said it is only expecting a small drop in profits this year and reckons it is also in a position to pay a half-year dividend of 9.4p per share – the same as in mid-2019.
Profits fell 11 per cent to £689m in the first six months of this year, as it was hit by a slump in demand for the products it supplies to commercial plane makers such as Boeing.
It also saw some disruption at its UK manufacturing, shipyard and submarine sites because of social distancing measures and extra monitoring protocols.
Like many industrial groups, it has brought in measures such as multiple shift patterns and arranged for anybody who can to work from home.
On the up side, defence spending has held up well – and bearing in mind this provides around 90 per cent of its revenues, this is the bit that counts. The City gave the dividend boon a standing ovation, with BAE barging to the top of the Footsie leaderboard as its shares rose 5.9 per cent, or 28.1p, to 505p.
And in a bumper day for defence-mad investors, engineering group Ultra Electronics was one of the top performers on the mid-cap index after it too unveiled plans for a double-divi after revenue climbed 7pc to £413m.
It will hand out the final 2019 payout – 39.2p per share – in September, as well as an interim divi worth 15.4p. Ultra rallied 9.2 per cent, or 202p, to close at 2390p.
While defence followers had a double boon, it was a less cheery day for mining watchers.
Anglo American shares fell 4.6 per cent, or 90.2p, to 1883.6p after it reported profits at its De Beers diamond arm had fallen from £320m last year to £1.5m in the six months to June.
The diamond market, which was already fragile, has been paralysed by the pandemic, which has hit the supply chain all the way from mines in southern Africa to high-end stores in Hong Kong and London.
Anglo, which bought Yorkshire potash project Sirius Minerals earlier this year, plans to restructure De Beers and reported a 39 per cent drop in earnings across the group.
Over on AIM, not even Gem Diamonds could make itself sparkle. Shares dropped 5.9 per cent, or 1.5p, to 23.9p, despite half-year revenues rising after it sold more higher-priced gems.
What started as a relatively good day for the wider stock market – which was barraged with company financial results releases in a so-called ‘super Thursday’ – quickly soured after economic data showed US GDP fell by 32.9 per cent during the second quarter.
The FTSE 100, which is much more sensitive to global events than its smaller peer, closed down 2.3 per cent, or 141.47 points, to 5989.99.
On the FTSE 250 – which fell by 1.3 per cent, or 230.61 points, to 17017.05 – car insurer Hastings continued to accelerate after news on Thursday that two companies are in talks to buy it. Hastings’ stock rose 3 per cent, or 6p, to 206p.
Perhaps unsurprisingly, pest controller Rentokil saw sales leap by 16 per cent in its hygiene division over the last three months.
Profits fell during the first half but it is hoping to hand back cash to shareholders later this year. Shares rose 1.7 per cent, or 9.2p, to 557.6p.