As another month draws to a close, it’s fair to say some investors will be breathing a sigh of relief after a FTSE 100 recovery since hitting February lows not seen since 2012.
However, as the impending EU referendum takes the centre stage, I wouldn’t be surprised to see volatility return to test investors’ resolve.
And just when you thought the main reporting period for companies with a December year-end was done and dusted, along come three blue-chips with Q1 trading updates.
A year in brief
As can be seen from the chart, the shares under review today have all had very different levels of success, according to the share price at least.
Kicking off with GlaxoSmithKline (LSE: GSK), it’s the only company to outpace the index over the last 12-month period. Investors finally seem to be buying into the longer-term vision that will see the company maintain the dividend for 2016 and 2017, while achieving double-digit growth in earnings in 2016.
BP (LSE: BP) has spent a year fighting on many fronts. But at the forefront of investors’ minds is the oil price collapse. This has left management the uphill task of balancing the upstream business while squeezing economies from the downstream business, and trying to ensure a rather hefty dividend is maintained during what’s turning out to be a rather difficult period.
But the worst performer is emerging markets-focused banking giant Standard Chartered (LSE: STAN). Investors had seen their investment more than halve in the last 12 months, before a slight recovery in the price along with other sector peers. However, the problems faced by management are company-specific, and it appears that investors have voted with their feet despite a fairly successful $3.3bn rights issue at year-end.
But the market looks forward.
So despite the difficult year just gone, investors and analysts alike will be more interested in the prospects for the coming year.
And all eyes will be on the outlook over at Standard Chartered on Tuesday when management updates the market following the announcement of the new direction under a refreshed management team, led by CEO Bill Winters. Investors will want to see progress on key themes such as: prioritising returns; the allocation of capital; investment in areas in which the group has a long-term competitive advantage; and progress on efficiencies from elsewhere in the business.
As we’ve seen with GlaxoSmithKline already this year, investors have started to warm to the change announced when management carved out the deal with Novartis.
Investors will seek reassurance that management is still confident of achieving core EPS percentage growth in double-digits, thus increasing dividend cover. They will also want to see that the macroeconomic and healthcare environment hasn’t become more challenging, and that the benefits of the integration and restructuring programme are on track.
Over at BP investors will be putting CEO Bob Dudley’s pay to one side and focusing on company performance. It has had to adapt and rebalance due to the changing environment by managing and lowering costs and capital spending, while maintaining safe and reliable operations and continuing disciplined investment into the future of the portfolio.
If management can pull off this balancing act then the 7%-plus yield on offer here should be safe for now.
