AstraZeneca slammed on drug failure, Anglo pops on dividend return

AstraZeneca shares were crushed after suffering a huge disappointment with its lung cancer drug trials. The stock skidded 16% lower in a brutal sell-off and was set for its worst ever day.

Jeffries reckons the poor performance knocks about 10-15% off the earnings and valuation in the mid-term. Revenues in the second quarter also fell 8%.

Meanwhile Anglo American shares popped after it resumed its dividend earlier than forecast on better profits.

Attributable profits rose to $1.4bn from a loss of $0.8bn in the first half last year. That’s allowed the miner to pay a dividend of 48 cents per share for the first half, equal to 40% of first half underlying earnings.

Diageo also rose more than 4% to a record high as profits climbed and the drinks business announced a £1.5bn share buyback scheme.

Higher oil prices lifted Royal Dutch Shell. The stock rallied 1%, a fairly modest gain after reporting a 245% jump in profits.

Lloyds shares fell more than 1.5%  after it was forced to set aside more cash for PPI claims although first-half profits still managed to hit an eight-year high.

We thought Lloyds was through the worst of it in terms of conduct charges but the bank had to up provisions by £1bn, with £700m of this coming in Q2. Lloyds has now set aside more than £18bn to cover PPI claims. It’s not just PPI: Lloyds has also been forced to allocate at least £300m to reimburse mortgage customers after failures in the way it handled arrears. Is there any end to the conduct charges?

Despite this, profits were up 4% at £2.5bn as Lloyds benefited from increased net interest income and better margins. Good capital generation continues and common equity tier one ratio rose from 13.8% at the end of 2016 to 14%. The cost to income ratio also continues to improve, which was cut from 47.8% to 45.8%.

But PPI remains a thorn in the side of Lloyds and it could yet get worse. The bank stressed that ‘risks and uncertainties remain’ with respect to future volumes of claims. Costs could easily rise again. Lloyds has so far settled or provided for just over half of all the 16m PPI policies sold since 2000. Not all PPI policies were mis-sold, of course, but it would be reasonable to assume that there will have to be further provisions made.

It was a torrid time for estate agents as the property creaked in the first half of the year. We knew it was going to be rough, with the overall market for mortgage transaction down 7%, and both Foxtons and Countrywide reported dismal first-half figures. Shares in the pair fell 5% and 10% respectively.

Foxtons profit was about two-thirds lower, falling from £10.5m in the first half of the year to £3.8m.

Total sales revenue collapsed to £22.2m, down 29% in the half, although this was against a strong prior year period that included the mad dash in buy-to-let in Q1 2016 before stamp duty changes took effect. Lettings was a lot more resilient with revenues down just 2% year-on-year with volumes actually up a touch.

Foxtons blamed ‘unprecedented economic and political uncertainty’ for the slump in revenues and profits. Certainly the London market has been the worst hit and Foxtons’ exposure to this made it more vulnerable.

Countrywide suffered a similar meltdown in profits in the first half, with pre-tax profits collapsing 98% to less than half a million pounds.

Operating profit fell 77% to £6.5m in H1 2017 from £28.3m in H1 2016. Total income was down 10% and earnings were down 26%.

Both are cutting costs to fight the drop in activity. Countrywide said total costs are down £27 million year on year, while Foxtons reported a £3.7m reduction in costs.

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