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Barclays and Aberdeen drag down FTSE

Barclays and Aberdeen drag down FTSE

Poor results from Barclays (BARC.L) and Aberdeen Asset Management (ADN.L) have dragged down the FTSE 100, as it retreated from a nine-week high.

The FTSE 100 shed 12 points, or 0.2%, to 6,810, after hitting 6,838 on Friday, the highest level since late February. Barclays and Aberdeen were the biggest fallers, dropping 4.2% and 5.4% to 247.6p and 422p respectively.

Barclays has reported profit before tax of £1.7 billion for the first three months of the year, down from the £1.8 billion the market had been expecting. This represents a 5% year-on-year fall in profits, which Barclays had flagged at its annual general meeting (AGM), stating they would be down ‘slightly’.

Investec analyst Ian Gordon said the figures had not come as a surprise. Adjusted profit before tax is £1.7 billion, in line with us, but £100 million below consensus, which evidently ignored the AGM statement!’ he said.

He said the share price falls were to be expected given disappointing revenues from Barclays Capital, the bank’s investment division. Revenues in that division were down 28%, offsetting stronger performance from its UK retail, corporate and Barclaycard divisions.

Aberdeen meanwhile reported profits of £217 million for the six months to the end of March, down 3% on the same period last year, driven largely by decreasing margins on the funds it manages.

Aberdeen recently finalised the acquisition of Scottish Widows Investment Partnership (Swip) from Lloyds Banking Group (LLOY.L), but despite the increased earnings this will bring, Numis analyst David McCann still rates the stock as a ‘hold’.

‘The stock is not as cheap as it was in the past and the earnings growth outlook is now lower than it was (even with the additional expected Swip earnings accretion),’ he said.

AstraZeneca (AZN.L) continued to slide as the pharmaceutical group prepares to step up its defence against US rival Pfizer’s takeover bid for the company. It fell 94p, or 2%, to £47.13.

Star fund manager Neil Woodford has weighed into the debate over the takeover bid as he prepares to launch his new CF Woodford Equity Income fund, describing Pfizer’s initial bid for the group as ‘opportunistic’ and saying he believed Astra had ‘an exciting future as an independent entity’.

‘I have not been surprised to see bid interest in AstraZeneca,’ he said. ‘The company is undergoing a very significant, value-enhancing transformation and it appears opportunistic for a potential bidder to make an approach now before the full value of this transformation is recognised by the market,’ he said.

Woodford is a longstanding investor in Astra, having bought into the pharmaceutical group around five years ago through his Invesco Perpetual Income and High Income funds, and remains a holder through the £3.7 billion mandate he recently won from financial sales force St James’s Place (SJP.L).

Pearson (PSON.L) was amongst the risers, adding 27p, or 2.5% to £11.21p, after the educational publisher announced it had been selected by a consortium of US states to run their Common Core exams.

Melrose Industries (MRON.L), the acquirer of manufacturing firms, jumped 7.2p, or 2.5%, to 292.8p following an upgrade from Numis after the price had tailed off in recent weeks.  

Balfour Beatty (BALF.L) was the biggest faller outside the FTSE 100. The FTSE 250 infrastructure group dropped 49.8p, or 17.4%, to 236p after issuing a profit warning and announcing the departure of chief exeuctive Andrew McNaughton.

Don’t miss our exclusive video interview with Neil Woodford later today.

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Neil Woodford
Neil Woodford
90/90 in Equity - UK Equity Income (Performance over 3 years) Average Total Return: -3.51%
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