Shares round-up: Rolls-Royce, profit upgrades and top picks

There’s light at the end of the tunnel, and the mood among investors has improved markedly.

The completion of a £2 billion fundraising by Rolls-Royce (LSE:RR.) and a clutch of profit upgrades added to the feeling that markets are turning over a new leaf despite Covid-19.

In a busy session for corporate updates, sentiment was boosted by the optimism of FTSE 250 index companies including defence equipment business QinetiQ (LSE:QQ.), housebuilder Vistry (LSE:VTY), building supplies company Grafton (LSE:GFTU) and paving products business Marshalls.

The FTSE 100 index was 0.5% lower but this reflected profit taking among banks, oil giants and leisure companies after an eight-day winning streak in which the top flight had risen to a five-month high, including a vaccine-driven surge of 14% in November alone.

Brexit remains a worry as EU trade talks near their conclusion, while certain widely-held stocks including BT Group (LSE:BT.A) have continued to struggle for momentum. BT fell 1% today.

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Legal & General (LSE:LGEN) was also 2% lower after a virtual capital markets event for investors and analysts gave detailed commentary on the five-year trajectory for dividend payments.

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The stock has rewarded its fan club of income investors throughout the pandemic, including today's promise of an unchanged final dividend for 2020. From next year, however, it intends to grow the dividend at low-to-mid single digits with cash and capital generation of £8 billion to £9 billion much higher than £5.6 billion to £5.9 billion of dividends.

The biggest faller in the top-flight was Rolls-Royce as the new 32p shares, issued to existing shareholders under the engine giant's 10-for-3 rights issue, commenced trading. The company received acceptances in respect of £1.94 billion of the shares, with underwriters set to find homes for the remaining 375 million shares.

A further announcement on the allocation of new shares is still to be made, with share certificates due to be issued and accounts credited no later than 25 November.

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The rights issue was part of a £5 billion fundraising to shore up the balance sheet after the Covid-19 crisis crippled the aviation industry and sent Rolls shares to a 17-year-low.

The move has increased the total number of Rolls shares in existence by 333%, diluting holdings by 77% for those shareholders who did not take up the rights. Investors who bought new shares and protected their existing stakes have been rewarded with a recent big surge in the Rolls valuation after the Pfizer vaccine breakthrough.

The stock jumped to 130p on Monday afternoon before settling at 94.2p - a fall of 4% today.

The biggest riser in the FTSE 100 index was 3i Group (LSE:III) after the private equity firm once again demonstrated its resilience with a total half-year return of £1.14 billion, or 15%, on opening shareholders' funds. Its net asset value per share increased to 905p at the end of September, from 804p in March.

Alongside robust performances from portfolio companies operating in consumer, e-commerce and healthcare, 3i reported a better-than-expected result from European discount retailer Action since re-opening stores in May. Shares rose 50p to 1,134p.

Several impressive performances were seen in the FTSE 250 index, which bucked the profit-taking trend in the top-flight by adding another 85 points to 19,425.3.

Top pick in the second tier was Qinetiq after a big jump in orders in the first half of the year led to an increase in full-year guidance. The science and engineering company now expects to deliver low double-digit revenue growth, prompting shares to surge 11% to their highest level since April at 321p.

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Grafton was up 46p to 833p after the company with operations in the UK, Ireland and the Netherlands said revenues and profits had exceeded hopes in the four months to the end of October. Landscaping specialist Marshalls (LSE:MSLH) had a similar story to tell after reporting that sales over the same timeframe were at levels seen a year ago. This included a 10% rise in the domestic market as households focused on improving their homes during the pandemic.

Marshalls shares were 26.5p higher at 797p, while Bovis Homes company Vistry rose 5% or 34.5p to 794.5p after forecasting full-year profits at the top end of expectations and signalling a resumption of dividend payments earlier than previously thought.