Antofagasta’s financial results will tell you a lot about the state of the global economy

Linda J. Dodson

The FTSE 350 held steady last week with a small gain of 0.3pc, even with a recession being confirmed. Despite being a big faller a couple of weeks ago, Cineworld stormed to a 20pc gain last week as the highest climber, followed by financial company Plus500. The fallers last week were topped by struggling coach firm National Express with a 13pc share price drop, and the world’s largest manufacturer of sewing supplies Coats Group, who reported a sorry set of results on Thursday. 

This week we have first-half results from Persimmon and Antofagasta.

Persimmon first-half results: Tuesday 18 August

York-based house builder Persimmon is still trying to put behind it rows over executive pay and the quality of its houses, as it prepares to welcome Dean Finch as its new chief executive officer and looks to cope with the economic fall-out from the pandemic.

July’s trading statement was fairly upbeat under the circumstances, as it flagged a 30pc year-on-year increase in reservations in the previous six weeks. Persimmon also noted that first-half sales had dropped by a third to £1.2bn, thanks to a 35pc drop in completions to 4,900, even as average selling prices rose 4pc to £225,050. Cancellation rates were described as being “in line with historic trends”.

Any Fantasy Fund Manager investors considering this stock for their portfolio should pay particular attention to the balance sheet and, by implication, the dividend in Thursday’s results. Persimmon noted in the July update that it had cash of £830m at hand. The company cancelled plans to pay a 125p-share special dividend and postponed a 110p-per-share regular final dividend for 2019. Management will revisit the issue of dividends in the second half and reinstating a dividend may see the share price rise as income investors could rush to get a piece of the action.

Antofagasta first-half results: Thursday 20 August

Thursday’s report from Antofagasta, which mines copper at four different sites in the Antofagasta and Coquimbo regions of Chile, should be insightful for Fantasy Fund Manager investors because the FTSE 100 company’s key product is often seen as a key indicator to global economic well-being – hence the nickname Dr. Copper. 

This is because the metal is malleable, a good conductor and ductile so it has many uses in manufacturing, industry and construction. Copper’s role as a guide to the economy means it can also be one useful indicator for the stock market overall as you can argue that the copper price and the FTSE All-World equity index have some kind of relationship.

In particular, look out for the production and the cost of that production. In 2019, Antofagasta produced a record 770,000 tonnes of copper and at the start of the year management guided to output of 725,000-755,000 tonnes of copper.

Fantasy Fund Managers should also look to see how the first-half dividend payment compares to last year’s 10.7 cents a share. Similarly to Persimmon, any FTSE 350 stock retaining a dividend could become a desirable asset in a portfolio and hence see its share price rise as investors pile in.


Monday 17 August

Tuesday 18 August 

Wednesday 19 August

Thursday 20 August 

Friday 21 August 

Russ Mould is investment director at AJ Bell

The Telegraph Fantasy Fund Manager game will run from July 6 to October 2 2020. The winner will receive £20,000 and there will be weekly prizes of £100, courtesy of our sponsor AJ Bell Youinvest. Telegraph Media Group and AJ Bell employees will not receive any prizes. For full terms and conditions, click here. To play, click here.

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