MARKET REPORT: Even its £19bn share buyback can’t stop oil giant Shell sinking

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A chunky £19billion share buyback from Royal Dutch Shell was not enough to stop the oil giant’s shares sliding, as earnings disappointed.

Shell promised yesterday that it would buy a maximum of 834m of its own shares back from investors between now and 2020.

Such a move usually causes shares to climb, as the number available reduces, so those remaining become more valuable.

But Shell’s stock lost more than 3 per cent of its value. Its A-shares, which follow Dutch tax rules, fell just over 3.1 per cent, or 81p, to 2576p, while its UK-taxed B-shares dropped 3.6 per cent, or 98.5p, to 2626.5p.

Buyback: Shell promised yesterday that it would buy a maximum of 834m of its own shares back from investors between now and 2020.

Investors were unimpressed by the profit growth of 36 per cent to £7.8billion, and the unchanged quarterly dividend of 36p per share.

Nicholas Hyett, an analyst at Hargreaves Lansdown, said: ‘The buyback will probably be taken as a sign of confidence, but these numbers are actually a bit disappointing. Earnings are behind market expectations and operating cash flows have gone backwards. 

‘That basically reflects the fact that the recovery in earnings have been driven by a higher oil price, with production more or less flat and costs actually rising.’

Meanwhile the fall in Shell’s value suggested some shareholders were asking why some of the ‘monster return’ being ploughed into the share buyback wasn’t being given to them in dividends.

Another FTSE 100 heavy hitter proved more popular with investors yesterday.

Stock Watch – Frontier Smart

Investor disappointment in audio invention company Frontier Smart Technologies boomed out loud and clear after a trading update.

Frontier, which develops new technologies for digital radios and smart speakers, said its net debt figure of £2.4million was higher than stated in May due to ‘short-term timing of cash flows’.

It was reducing research and development spending to make £2.6million in savings.

The shares fell by 7.6 per cent, or 4p, to 48.5p.

British American Tobacco shares heated up by 5.1 per cent, or 204p, to 4177p, as it said its push into cigarette alternative ‘next generation’ products was going well. Revenue rose an impressive 56.9 per cent to £11.6billion in the first half of the year, while profit ratcheted up 72.4 per cent to £4.4billion.

Chief executive Nicandro Durante said: ‘We remain confident of exceeding £1bn of reported revenue in next-generation products in 2018 as we expect a range of new launches to re-energise growth.’

On a day which saw company results flooding in, the FTSE 100 ended the day up 0.06 per cent, or 4.91 points, at 7663.17, despite a drag from utilities company SSE which began trading without its latest dividend.

Fund manager Brooks Macdonald turned around its lacklustre performance at the beginning of the year to reveal that it now has a record £12.4billion under management.

After it said net new business was up 18.7 per cent over the year, shares climbed 2 per cent, or 35p, to 1825p.

Market research and analytics company Yougov came under the spotlight itself as it released a trading update, but walked away glowing. 

The company said that its results for the year ending 31 July would be ahead of previous expectations.

Analyst consensus is currently predicting revenue of £116.6million, and pre-tax profit of £21.4million, as broker Numis called the update ‘very encouraging’, and shares rose 3.6 per cent, or 17.5p, to 499p.

Franchise Brands, which is creating a group of franchise businesses under one roof, stacked up a 6.1 per cent gain as its shares gained 5p to close at 87p.

The company, which owns dog holiday care brand Barking Mad, Ovenclean, drain unblocker Metro Rod and car repair brand Chips away, said that revenue for the first half of the year was up 88 per cent to £16.8million, while profit before tax had rocketed to £1.4million from a £200,000 loss a year ago.

Stephen Hemsley, the chairman of Domino’s pizza chain who founded Franchise Brands with Saracens rugby club owner Nigel Wray, said the company was investing in its brands to help ‘unlock potential’.

 





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