Mitchells & Butlers shares sank on Thursday morning despite the pub and restaurant group saying sales grew in the last year and they had started to see cost pressures subside.

Although the group said like-for-like sales jumped 9.1% in the year to 30th September, adjusted operating profit fell to £221m from £240m and the company swung to an earnings per share loss as cost pressures ravaged the bottom line.

After a material rally from the October 2023 low to around 195p to 250p, Mitchells & Butlers shares dumped around 6% to 227p on Thursday morning.

“The pub chain behind Harvester and Miller & Carter had no problem filling seats at its tables last year. The focus on meeting punters’ preferences translated to LfL sales and volume growth across all brands. Mitchells & Butlers has something to offer most budgets,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

“The continuing investment in the estate and customer service is translating into impressive outperformance in takings compared to the wider market. That’s likely to continue. And despite a 13.2% decline in pubs and restaurants in business since the outbreak of COVID-19, there could yet be more supply to come out of the market.”

However, investors want to see a profit and Mitchells & Butlers have failed to deliver. Top-line growth is encouraging, given the problems the industry faced during the pandemic, but if this doesn’t translate to greater earnings, shareholders are showing they will not hang around.

“It’s been more challenging to get the bottom line moving in the right direction. Sales growth wasn’t quite strong enough to offset cost headwinds of £175m faced in the period,” Nathan said.

Should the company secure material cost savings in the year ahead and maintain its strong market position, profit will likely return in the coming periods.

The FTSE 100 was again a laggard in the global equity arena on Wednesday as London’s leading index failed to partake in a rally spurred by US interest rate optimism.

The FTSE 100 underperformed Europe on Wednesday as the composition of the index meant it wasn’t as well placed to benefit from dovish US central bank comments as European peers.

Indeed, the German Dax was 0.95% higher at the time of writing, while the FTSE 100 languished in negative territory, down 0.1%. The S&P 500 was 0.3% higher.

“Comments from a usually hawkish Fed policymaker that there could be room for cuts to interest rates if the price spiral keeps heading in the right direction look set to push Wall Street higher at the open,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“But the FTSE 100 has opened on the backfoot with little to spark a wave of buying. Central bank policymakers in Europe have been more guarded, with Christine Lagarde of the ECB stressing that wage pressures remain elevated, and Andrew Bailey of the Bank of England warning that higher rates will be needed for a prolonged period.”

The FTSE 100 was held back by heavyweight financials reacting adversely to the prospect of lower rates.

“Financials helped to drag the FTSE 100 lower amid speculation about rate cuts given the potential implications for their profitability,” said AJ Bell investment director Russ Mould.

The FTSE 100’s banks have been beneficiaries of the global rate hiking cycle as rising interest rates drove higher income margins.

As the narrative around interest rate cuts starts to grow, it is likely banking institutions will increasingly fall out of favour for fear of lower earnings in the coming periods.

This was most evident in Asia-focused Standard Chartered and HSBC on Wednesday HSBC slipped 1.8%, and Standard Chartered gave up 2%.

Silver-focused precious metals miner Fresnillo was among the best performing FTSE 100 stocks as the dovish Federal Reserve comments buoyed gold and silver prices. 

Ocado displayed its ‘tech stock’ attributes and jumped over 4% on hopes interest rates would soon be cut and provide support for technology growth shares that thrive as discount rates fall.

Fusion Antibodies shares have continued a rip-roaring rally after announcing an agreement with the US National Cancer Institute.

Fusion shares added another 15% on Wednesday after more than doubling yesterday. The company’s stock is up in excess of 150% over the past five trading sessions.

Fusion Antibodies has signed a 2-year agreement with the National Cancer Institute (NCI) to use Fusion’s OptiMAL technology to discover novel antibodies against cancer targets selected by NCI.

Under the agreement, Fusion will provide NCI access to OptiMAL to develop potential therapeutic antibodies against an agreed number of primarily cancer targets.

The parties will collaborate to ensure successful validation of OptiMAL and may jointly publish results.

Validation will occur at NCI labs by NCI staff. Any identified antibodies would be retained by NCI, part of the US National Institutes of Health and the leading US government agency for cancer research and training.

The deal represents a major validation of Fusion’s OptiMAL technology and presents an opportunity to test it in conjunction with a world-class institution, without major cost to Fusion.

Adrian Kinkaid, CEO of Fusion Antibodies, commented: 

“At the time of our fundraise in May, we said that we would be seeking the support of third parties to continue to progress the delivery of OptiMAL^®. We are delighted to have been able to secure a partner with the expertise of NCI to provide validation to the technology without Fusion being required to commit significant resource to the project.”

Halfords shares were sharply lower on Wednesday after the group said in was facing a ‘challenging and volatile trading environment’ and reduced their profit before tax estimates for 2024FY.

Halfords narrowed their profit before tax guidance to £48m to £53m from prior guidance of £48m to £58m.

The downbeat amendment to profit guidance saw Halford shares crash more than 20% in early trade on Wednesday.

“A profit warning less than a fortnight since takeover talk surrounded Halfords certainly changes the narrative. No sooner were investors excited about the prospect of Halfords buddying up with van hire group Redde Northgate, we’ve now got reduced earnings guidance amid weak sales of bikes and tyres. The share price has understandably taken a beating,” said AJ Bell investment director Russ Mould.

“Apart from a fruitful period during the start of the pandemic where everyone was clambering to get hold of a bike, cycling hasn’t been kind to Halfords for a long time. One has to question the long-term future of bikes within the business.

“While it has a competitive strength in being one of the few national brands to sell bikes, thereby making it front of mind for consumers looking to buy such products, this remains a highly discretionary purchase and therefore earnings visibility is poor.”

Halfords has increased sales by 13.9% over the past year but the concern lays with sales growth over the coming periods should discretionary spending on big-ticket items such as bikes starts to waver.

The group’s autocentres were a major source of growth with a 33% jump in sales, including the impact of acquisitions. The company said these types of acquisitions form a base for growth and had earmarked capital to expand this side of the business.

Russ Mould added “the future for Halfords seems to be in motoring services where there is a more of a defensive element to its earnings. People rely on their cars to get from A to B and if something goes wrong most have no choice but to pay for repairs. On the whole this is non-discretionary spend and that creates opportunities for Halfords to find more ways to earn from drivers,”

Sabien Technology Group shares surged on Wednesday after the group released a prepared AGM Statement alluding to material progress over the past year and promised further success in the near term. 

Sabien Technology shares were 17% higher at the time of writing.

The company has developed technology that stops boilers from firing unnecessarily, saving fuel and reducing carbon emissions.

Richard Parris, Executive Chairman of Sabien Technology Group said in a prepared statement:

“The Company’s financial year 2023 saw considerable progress in both M2G and b.grn, which progress has continued since the year end. Sabien has built, and is building, a portfolio of businesses whose development is expected to produce a range of outcomes across a range of timescales.

“M2G represents success in the near term while b.grn is expected to contribute materially within the medium to long term. These are not mutually exclusive. Our work within the HVAC market brings important intelligence for the development of our plastic-to-fuel operation. Our development of b.grn has informed our work within the markets facing M2G, not least geographically.

“I am pleased to report that M2G has delivered against challenging expectations. Carbon savings using M2G have almost tripled while Cloud Connect installations are now nearly twice that of a year ago. Since year end, new orders and revenue growth have extended the strongly positive trend during the last financial year. The business has maintained a robust financial position allowing it to further evolve its product offering and geographic footprint.  

“b.grn has continued to build its relationship successfully with City Oil Field (“COF”) and its understanding of the available markets. The Board expects to deliver on key milestones in the year to June 2024.

“The Board looks forward to another year of operational progress and financial delivery.” 

The FTSE 100 fell for a second straight session on Tuesday as comments from central bankers reminded investors that markets were not completely out of the woods in terms of inflation and possible interest rate hikes.

Global equities staged a material rally earlier this month after major central banks signalled we are likely near the end of the tightening cycle. Since then, European equities have sagged as the euphoria diminishes and investors prepare for upcoming inflation data and central bank meetings.

“Markets are going through a one step forward, one step back motion at present, struggling to sustain a proper breakout despite investors increasingly taking the view that central banks are done with raising interest rates in the current cycle,” said Russ Mould, investment director at AJ Bell.

“The problem is that representatives of major central banks don’t want to draw a definitive line in the sand. We keep getting little comments that suggest their work to tame inflation is not finished. The latest example came from ECB President Christine Lagarde who yesterday said that the fight to contain price growth is not yet done. Every time we get such comments, investors lose confidence and equities take a small step back.”

The FTSE 100 was down 0.4% to 7,429 at the time of writing.

Rolls Royce

Rolls Royce was the FTSE 100 top gainer after the engine maker held a capital markets day and outlined plans to divest up to £1.5bn of assets that didn’t fit their medium-term goals.

The company set targets to deliver ‘record future performance’ that included operating profit of between £2.5bn-£2.8bn and operating margin of 13-15%. Rolls Royce said they were delivering a strategy with the aim of producing free cashflow of £2.8bn-£3.1bn and return on capital of 16-18%.

Rolls Royce shares were up 5% to 256p and touched the highest levels since 2019.

Miners

Iron futures fell overnight in Asian trade following reports the Chinese authorities will increase their oversight of the market after a sharp rally in futures contracts.

An integral element in steel making, iron ore prices have jumped from around $105 per dry metric ton in August to just under $130. Rising prices and associated increased prices of steel could derail a Chinese economic recovery helped by construction, prompting authorities to tighten their supervision of the market.

A Chinese administration setting its sights on managing iron ore prices is not good for miners who have been praying for higher commodity prices.

After slipping yesterday, Rio Tinto was down a further 1.3%, while Glencore dropped 0.8% and Anglo American 1%.