Centrica Looks set for Turbulence as Rolls-Royce Soars Higher

Tuesday, August 1: the FTSE 100 enjoyed a relatively buoyant day closing 0.70% higher as Rolls-Royce and Direct Line posted big gains, along with a broad selection of other stocks.

Rolls Royce leapt higher(+8.84%), as the engine and turbine manufacturer reported a swing to a profit in the first half of 2017 delivering results ahead of expectations and maintaining its full-year outlook. A pretax profit of £1.94bn was achieved in the first half after suffering a £2.15bn loss in H1 2016 due to booking £2.42bn of exceptional financing costs. Revenues were led higher to £7.57bn from £6.46bn due to good performance in Civil Aerospace and Power Systems, with underlying revenue increases of 14% and 3% respectively.

Direct Line(+6.13%) traded higher after reporting a material lift in pretax profit in the first half of 2017 and hiking the interim dividend 39%. Gross written premiums increased as the combined operating ratio fell. The dividend was lifted to 6.8p from 4.9p, as written premiums came in 5% higher to £1.69bn and net earned premiums were +4.6%  to £1.54bn.

Centrica(+2.47%) reported steep declines in profit and earnings in the first half of 2017 with results hampered by exceptional items and losses from re-measurements, as the utility supplier also announced it will lift electricity prices within British Gas by 12.5% from September 15. On a more positive note, H1 revenue was 7% higher to £14.30bn as EBITDA climbed 2% to £1.29bn. This marked the first electricity price rise on the standard British Gas tariff since November 2013, but is unlikely to be welcomed by consumers already feeling the Brexit-induced inflation pinch.

PMI data this morning illustrated an improvement in the UK manufacturing sector ahead of expectations. The July PMI figure was expected around the 54.9 mark, but came in higher at 55.1 and well ahead of June’s 54.2 metric as strong exports orders came in from  overseas regions experiencing strong economic growth. The reaction in currency markets was muted, given Thursday’s Bank of England decision, quarterly inflation report and the PMI for the more important service sector loom large. Despite this, sterling was slightly higher against both the euro and dollar.

Across Europe, indices were up at the close with the FTSE 100 +0.70%, the DAX 30 +1.10% and the CAC 40 +0.65%.

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