LONDON MARKET PRE-OPEN: Shell and Anglo American plan chunky returns

(Alliance News) - Stock prices in London are seen opening higher on Thursday, following a strong ...

Alliance News 29 July, 2021 | 7:53AM
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(Alliance News) - Stock prices in London are seen opening higher on Thursday, following a strong handover from Asia and amid decent corporate earnings and the promise of boosted investor returns.

Among major London listings, Lloyds Banking posted a swing to profit and announced an acquisition. Miner Anglo American unveiled a new buyback programme. Oil major Royal Dutch Shell said it is "stepping up" shareholder returns.

IG futures indicate the FTSE 100 index is to open 14.2 points, or 0.2%, higher at 7,030.83. The blue-chip index closed up 0.3%, or 20.55 points at 7,016.63 on Wednesday.

Shell said it has rebased its second quarter dividend to 24 US cents, up 38% quarter-on-quarter. For the second quarter of last year, it had declared a 16 cents payout. In addition, Shell is targeting USD2 billion in buybacks which it aims to complete by the end of 2021.

Chief Executive Ben van Beurden said: "We are stepping up our shareholder distributions today, increasing dividends and starting share buybacks, while we continue to invest for the future of energy. The quality of Shell's operational and financial delivery and strengthened balance sheet have given the board confidence to rebase the dividend per share from Q2 2021 onwards to 24 US cents. We are also launching USD2 billion of share buybacks, which is targeted to be completed by the end of this year.

"Total shareholder distributions for 2021 are expected to be around the middle of the 20-30% range of [cash flow from operations] from the previous four quarters. Our progressive dividend policy to grow dividends per share by 4% annually, subject to board approval, remains unchanged."

On its recent performance, Shell said it saw "another quarter of operational and financial delivery".

The oil major swung to a USD3.43 billion profit attributable to shareholders, from a USD18.13 billion loss a year earlier. It posted pretax profit of USD4.13 billion, swinging from a USD23.91 billion loss a year prior.

Second quarter total revenue, so including joint-ventures, surged 90% to USD61.76 billion from USD32.49 billion.

Miner Anglo American also set out plans to return USD2 billion to investors. It will buyback USD1 billion, and it declared a special payout of USD0.80 per share, equal to USD1 billion.

Finance Director Stephen Pearce explained: "As a result of our prudent approach to capital allocation, including our commitment to our established base dividend policy of returning 40% of underlying earnings to our shareholders, our balance sheet is in a strong position."

The buyback will kick off immediately and end "no later" than February 14.

In addition, Anglo American lifted its regular half-year payout to USD1.71 per share, from USD0.28 a year earlier. The FTSE 100 firm noted that including the buyback and special dividend, its interim payout is USD3.31 per share.

In the six months to June 30, Anglo American's revenue more than doubled to USD21.78 billion from USD10.19 billion. Pretax profit surged to USD10.70 billion from USD1.56 billion.

CEO Mark Cutifani said: "The first six months of 2021 have seen strong demand and prices for many of our products as economies begin to recoup lost ground, spurred by stimulus measures across the major economies."

Elsewhere in London, the city's banking reporting season continued, with Lloyds following peer Barclays.

Lloyds said it swung to a GBP3.91 billion pretax profit in the first half of 2021, from a GBP602 million loss a year earlier.

The lender's net income rose 2.0% to GBP7.56 billion from GBP7.41 billion.

Lloyds was boosted by an impairment credit of GBP656 million in the first half, following a GBP3.82 billion hit a year earlier.

It resumed interim dividends by declaring a 0.67 pence per share payout, having not made on in the first half of 2020. The dividend is 18% higher than its 0.57p payout for the second half of 2020.

"During the first six months of 2021, the group has delivered a solid financial performance with continued business momentum, bolstered by an improved macroeconomic outlook for the UK," interim CEO William Chalmers said.

In addition, Lloyds announced plans to acquire investment and retirement platform Embark Group for GBP390 million.

"Embark enhances the group's capabilities to address the attractive mass market and self-directed Wealth segment, completing its Wealth proposition. Embark will also enable the group to re-platform its pensions and retirement proposition, delivering a market-leading platform for intermediaries and significantly strengthening its offering in Retirement, an important growth market," Lloyds said, adding that Embark will become part of Scottish Widows.

In China on Thursday, the Shanghai Composite was up 1.2%, while the Hang Seng index in Hong Kong surged 2.8%. The Nikkei 225 in Tokyo closed 0.7% higher, and the S&P/ASX 200 in Sydney ended up 0.5%.

Beijing moved to calm investors after a crackdown on some of China's biggest firms rattled markets, with regulators calling bankers in for a last-minute call Wednesday night, Bloomberg reported.

The call hosted by the China Securities Regulatory Commission included executives of international investment banks, Bloomberg said.

The business models of private tutoring firms were obliterated by a shock announcement on Saturday that they must become non-profits, sending stock prices crashing.

Stocks in New York closed mixed on Wednesday. The US Federal Reserve struck a more hawkish tone. The central bank said the US economy has made progress against its maximum employment and price stability goals for any QE tapering.

Indicators of economic activity and employment have continued to tick up, the central bank said, while it reiterated its belief that recent inflation strength is being driven by "transitory" factors.

Inflation could rise higher and stay there longer than expected as the US economy recovers from the downturn caused by the Covid-19 pandemic, Fed Chair Jerome Powell said.

The dollar was weaker early on Thursday.

The pound was quoted at USD1.3934 on Thursday morning in London, up from USD1.3881 at the equity market close on Wednesday. The euro was priced at USD1.1857, up from USD1.1807. Against the yen, the dollar weakened to JPY109.78 from JPY110.09.

Gold advanced to USD1,816.72 per ounce early Thursday from USD1,800.47 late Wednesday. A barrel of Brent oil was changing hands at USD75.10, up from USD74.62.

Thursday's economic calendar has eurozone consumer confidence at 1000 BST and German inflation at 1300 BST, followed by US initial jobless claims and a GDP reading at 1330 BST.

By Eric Cunha;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Lloyds Banking Group PLC 49.00 GBX 0.46
Royal Dutch Shell PLC B 1,784.00 GBX -0.23
Royal Dutch Shell PLC Class A 1,773.80 GBX -0.11
Anglo American PLC 2,818.50 GBX 0.21

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