Three things you need to know in the financial markets this morning from investment writer, Tony Cross.
Lloyds Banking Group
Lloyds Banking Group [LON:LLOY] has posted its half year results this morning, with another stark warning over the state of the UK economy. The lender had been expected to post a modest profit, but in setting aside an extra £2.4 billion for bad debt provisions arising off the back of the COVID pandemic, the company has slumped to a £600m pre-tax loss for the period. Whilst there are early signs of business recovery being flagged in core markets, the bank admits that there’s a lot of economic uncertainty and low interest rates are going to be around for quite some time yet.
Catering giant Compass [LON:CPG] has published a Q3 update this morning, highlighting performance through the April-June period. The company has strong diversification across multiple business types so although education, business and leisure channels have typically performed poorly, its healthcare, defence and offshore arms have all performed somewhat better. In summary, organic revenue for the quarter is down 44% but on a 9 month basis, the impact is just 14%. Perhaps most interesting is the fact that the recovery seen in recent weeks is in line with the company’s ‘slow’ scenario, as set out in the half year results in May.
Half year results are out from Rentokil Initial [LON:RTO] today. This is a company that appeared well poisoned to cater for the growing hygiene demands off the back of the COVID-19 pandemic as institutions looked to enhance cleaning protocols. The Hygiene division saw revenues up by 16.3% in Q2, or 10.5% for the half year, but rising costs, specifically in terms of kitting out staff with PPE and bed debt provision, have taken a toll. Ongoing operating profits are down 9.4%, although the company notes it has more than £800m of liquidity headroom. There’s uncertainty as to how businesses demand will fare as lockdowns unwind but if trading continues in line with expectations, a dividend will be proposed for the full year.
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