The FTSE 100 started the week on a positive note gaining to 7,465.9 in early afternoon trading on Monday as results from bank heavy weight HSBC helped lift the index.
The positive corporate results continued to roll in, with banking giant HSBC and education company Pearson hitting the ground running with high-flying HY1 reports.
“The FTSE 100 started the week higher following some relatively positive corporate updates, notably from index heavyweight HSBC,” said AJ Bell investment director Russ Mould.
“Education publishing specialist Pearson was among the winners on Monday as it stuck with full year guidance and reported a significant increase in profit following stronger sales.”
HSBC
HSBC shares soared 10.3% to 834.8p after the banking group reported a $9.2 billion post-tax profit in HY1 2022.
The company announced an adjusted pre-tax profit drop of $900 million to $10.7 billion, and a small decline in revenue to $25.2 billion.
The results still came in ahead of market expectations, as analysts noted the money HSBC set aside to cover bad debts over the financial term.
Meanwhile, firm remained set in its decision to not break off its Asian operations and list them in Hong Kong, despite intense pressure from major shareholder Ping An.
“Breaking up is never easy to do and HSBC is being pretty steadfast in resisting the push from major shareholder Ping An to divorce its Asian operations from the rest of the bank and list that part in Hong Kong,” said Mould.
“As evidence for the merits of HSBC’s current strategy, today’s first half results were, for the most part, pretty favourable.”
“Profit came in ahead of expectations, if a little below last year’s total as the company was forced to set aside cash to cover bad debts.”
HSBC reported a dividend of 9c per share for the HY1 period, and pledged to reinstate quarterly dividends from next year, with an eventual return to historical shareholder payouts.
Pearson
Pearson shares climbed 9.9% to 831.7p after the education firm announced an adjusted operating profit rise of 22% to £160 million in HY1 2022.
The group credited its profit growth to a positive trading performance, FX benefit and property savings, offset slightly by inflation, portfolio investment and phasing costs in FY 2021.
Pearson confirmed an underlying sales increase of 6% to £1.7 billion, driven by its 16% Assessment and Qualifications expansion and a 22% growth in its English Language Learning sector.
“The increasingly digital-focused company is less exposed to some of the cost pressures facing other types of businesses and this is helping it in the current environment,” said Mould.
“For a long time Pearson has been negatively impacted by structural changes in its market which saw demand for high-margin sales of expensive physical, academic textbooks disappear.”
“Now the business seems to have got its act together to face a world where an increasing amount of learning is done online.”
The company recommended a dividend of 6.6p for HY1, with its £350 million share buyback continuing and over £165 million in shares repurchased as of 29 July 2022.
China Manufacturing Slowdown
China’s manufacturing purchasing managers’ index dropped to 49.0 in July from 50.2 in June, missing analyst expectations of 50.4 for the month.
The results reflected a dramatic slowdown in the country’s production after a summer of intensive Covid-19 lockdowns pumped the brakes on Chinese production.
Stocks tied to the country took a hit, with Asia-focused fashion group Burberry dipping 0.3% to 1,789.2p and Scottish Mortgage Investment Trust falling 0.6% to 856.3p.
The price of Brent Crude oil fell to $102 per barrel as fears of reduced consumption in the largest global consumer dragged the commodity’s price down.
“Elsewhere, oil prices were under pressure after weak Chinese manufacturing figures which really show the continuing impact of lockdowns on the country’s economy,” said Mould.
“China remains one of the biggest consumers of oil and other commodities.”
