IAG shares soared in the FTSE 100 index today after the British Airways owner reported a bumper summer.
Quarterly profits jumped by a bigger-than-expected 15.4% amid strong demand across the business, which also includes Iberia and Aer Lingus.
Elsewhere, another profit warning hit the shares of affordable homes builder Vistry while Serco estimated its bill from higher national insurance costs.
FTSE 100 Live Friday
- IAG shares surge on Q3 resutls beat
- Vistry in fresh profit setback
- Serco fails to retain key contract
Market update: IAG shares soar but retailers drag on FTSE 100, Greggs down 6%
10:26 , Graeme EvansTailwinds from the airline sector after IAG quarterly results smashed City forecasts failed to mean a smoother ride for the FTSE 100 index today.
Disappointment over additional stimulus efforts in China and the heavy selling of consumer-focused stocks in the wake of Budget tax changes left London’s top flight down 53.52 points to 8087.22.
British Airways and Iberia owner IAG rose 6% or 13.2p to 232p, a performance that also boosted interest in easyJet as its shares lifted 2% or 9.8p to 546.6p.
The read across from a busy summer for IAG also benefited low-cost carrier Wizz Air as its shares surged 7% or 96p to 1472p.
IAG reported a third quarter operating profit of two billion euros, well ahead of City hopes thanks to an improved operating margin of 21.6%.
Having just paid its first dividend since the pandemic, IAG’s strong cash generation means it now intends to buy back 350 million euros of shares.
City firm Peel Hunt said: “This is a positive surprise. We are delighted that capital is being returned through buying back an undervalued stock rather than via a dividend.”
The broker added: “The outlook is encouraging, with sustainable demand for travel and attractive margins.”
Despite being up almost 50% this year, the shares are still well below the 400p level seen prior to the pandemic.
Today’s improvement and a rebound of 201p to 9926p for AstraZeneca failed to prevent the FTSE 100 index from falling into negative territory.
Mining stocks accelerated the 0.6% slump, with Antofagasta and Anglo American down by more than 3% amid a lacklustre response to China’s latest stimulus efforts aimed at easing local government debt.
Retail stocks were also out of favour as investors calculated the bottom-line impact of rising national insurance contributions in last week’s Budget.
Sainsbury’s, which yesterday warned the changes could cost £140 million in the next financial year, fell 3% or 8.6p to 248.2p.
There were declines of a similar scale for Marks & Spencer, which reversed 13p to 380.2p, and Tesco after a drop of 10p to 338.5p.
The biggest fall in the FTSE 100 came from affordable homes builder Vistry, which slid 18% or 158.5p to 715p after revealing the profit impact of over-optimistic cost assumptions in its South division will be more than first thought.
It also warned that completions for this year will be short of its 18,000 target, deepening the slide for shares which were 1300p before disclosure of the cost issues last month.
The FTSE 250 index fell 0.7% or 141.97 points to 20,493.40, led by Serco after it failed to retain its contract for immigration detention facilities in Australia.
Serco estimates the work would have contributed around £165 million of revenues in 2025 and £18 million of underlying operating profit, which is about 6% of analysts' consensus. Shares fell 10% or 18.2p to 159.2p.
Other big FTSE 250 fallers came from the consumer sector as Greggs reversed 6% or 180p to 2626p and Mitchells & Butlers lost 12p to 240.5p.
IAG shares surge but still below pre-pandemic levels
09:18 , Graeme EvansIAG’s rise of 7% or 14.6p to 233.4p means shares have advanced 50% this year.
However, they are still well below the 400p seen prior to the pandemic.
Today’s rally came after operating profit of two billion euros beat City hopes of 1.75 billion euros, fuelled by a margin of 21.6%.
IAG also announced a 350 million euros share buyback programme, which it said reflected confidence in its strategy and business model. The move followed the reinstatement of dividend payments in recent interim results.
Mark Crouch, market analyst at investment platform eToro, said: “Nearly five years on from the pandemic which clobbered the airline industry, investors are still tentative despite most key financial metrics at IAG surpassing pre-pandemic levels.
“Poor share price performance has largely been psychological rather than fundamental, as IAG’s balance sheet reflects one of strength.
“Operating margins are above 2019 levels and the business has slashed debt while at the same time building a substantial cash position.”
Operating profit at British Airways rose by £310 million to £1.38 billion in the first nine months of the year. This was driven by a 4.6% increase in capacity as well as higher load factors and improved unit passenger revenue.
IAG shares soar in flat FTSE 100, Vistry shares down 15%
08:29 , Graeme EvansForecast-beating results by British Airways owner IAG today helped to send its shares to the top of the FTSE 100 index.
The stock soared 8% or 16.9p to 235.7p after posting a third quarter profits of two billion euros ($1.7 billion) and announcing a 350 million euros buyback.
Vistry shares slid by 15% or 132p to 741.5p after its latest profits warning, while other fallers included Barclays, Marks & Spencer and Sainsbury’s
With mining stocks also under pressure, the FTSE 100 index stood 2.89 points higher at 8143.63.
The FTSE 250 index fell 71.65 points to 20,563.72, with Serco shares 12% or 21.8p lower at 155.6p after it failed to retain a major Australia contract.
Rightmove upbeat as property market improves
08:19 , Graeme EvansProperty portal Rightmove today said it expects to achieve “meaningful strategic and financial growth” in 2024.
Revenues of about £390 million are set to be in line with previous guidance of 7-9% growth, with no change in expectations for an adjusted underlying operating margin of 70%.
Average revenue per advertiser is now expect to grow by £85-£95 on 2023's £1,431, higher than previous guidance of £75-£85.
It added: “Looking across the segments that we serve, we see greater optimism among our partners looking into 2025 than at this time last year.”
Vistry cuts profits forecast after costs review, completions below hopes
07:59 , Graeme EvansHousebuilder Vistry today revealed that over optimistic cost assumptions in its South division will have a bigger-than-expected impact on profits.
The new guidance totals £165 million up to 2026, having carried out independent and internal reviews to verify the nature and scope of the issues,
This compares with last month’s three-year estimate of £115 million.
Vistry said no systemic issues have been found elsewhere, with the problems in the South divison relating to sites from the former Housebuilding business.
It added: “The significant issues have been found to be confined to the South Division and can be attributed to insufficient management capability, non-compliant commercial forecasting processes and poor divisional culture.”
The partnerships-focused builder added that it now expects to deliver total completions in 2024 of 17,500 units, below its previous 18,000 target.
Together with the additional impact on profit from issues in the South Division, this means it now forecast profit for the year of £300 million compared with previous £350 million guidance.
IAG hails strong demand as Q3 profit rise 15.4%
07:29 , Graeme EvansIAG boss Luis Gallego today hailed “a very strong financial performance” after operating profits at the British Airways owner rose 15.4% in the summer quarter.
The increase to two billion euros (£1.7 billion) follows a 7.9% rise in revenues to 9.3 billion euros (£7.7 billion) and improvement in margin to 21.6%.
Passenger revenue per available seat kilometre for the third quarter came in 1.2% higher than in the third quarter of 2023. Planned capacity growth for the current period is around 5% and for the full year it is now around 6%.
Gallego added: “Demand remains strong across our airlines and we expect a good final quarter of 2024 financially.”
Alongside the results, IAG said it intended to buy back shares worth 350 million euros (£290.9 million).
IAG shares have risen 40% this year. IAG also operates the airlines Iberia and Aer Lingus.
Serco estimates £20m Budget hit, misses out on Australia contract
07:10 , Graeme EvansOutsourcing group Serco today said it faces a £20 million a year hit from changes announced in last week’s Budget.
The company said: “We estimate the combination of lowering the earnings threshold at which employers start paying national insurance contributions from £9,100 to £5,000 and increasing the rate from 13.8% to 15% will increase our direct labour costs by around £20 million per year.
“The changes will be effective from April 2025 and we are actively exploring ways to offset these costs.”
The bosses of BT and Sainsbury’s also warned yesterday that the NI changes could cost an additional £100 million and £140 million respectively in the next financial year.
Serco, which employs more than 50,000 people worldwide, also told investors it has been unsuccessful in rebidding the contract for the provision of onshore immigration detention facilities and detainee services in Australia.
If the contract had been retained, Serco estimates the work would have contributed around £165 million of revenues in 2025 and £18 million of underlying operating profit, which is approximately 6% of analysts' consensus.
FTSE 100 seen higher after robust US session, Federal Reserve cuts rates
07:00 , Graeme EvansThe S&P 500 index last night closed 0.7% higher at a fresh record after the US Federal Reserve cut interest rates by another quarter point to 4.75%.
The Nasdaq added 1.5% while the Dow Jones Industrial Average finished flat, fuelling expectations for a robust start to trading in London.
The FTSE 100 index is forecast to open 23 points at 8164, having fallen by 0.3% during yesterday’s session.
