FTSE 100 today: Stocks fall; Drax hit by watchdog probe, Softcat rallies

British stocks saw a mixed close with the FTSE 100 down 0.4%, as Drax Group shares fell over 7% following an FCA investigation into its biomass sourcing practices. Conversely, Softcat PLC climbed over 3% on stronger-than-anticipated fiscal 2025 results, though concerns remain regarding reliance on irregular contracts. Other significant corporate news included Chesnara's 26% jump in H1 cash generation, Hunting PLC's announcement of a $40 million share buyback despite mixed first-half results, and GSK's UK regulatory approval for a new oral antibiotic.

Analysis

The UK equity market displayed a divergent performance, with the FTSE 100 declining 0.4% amid significant single-stock news. Drax Group was a notable decliner, falling over 7% after the UK's Financial Conduct Authority initiated an investigation into its biomass sourcing and disclosure compliance, introducing material regulatory and reputational risk. In contrast, IT reseller Softcat PLC saw its shares rise over 3% after raising its fiscal 2025 adjusted EBIT forecast to £177 million, surpassing the £174 million consensus; however, this performance is tempered by a reliance on large, irregular contracts, clouding the outlook for 2026. On the positive side, Chesnara reported a robust 26% increase in first-half commercial cash generation to £37 million, well ahead of estimates, and raised its interim dividend by 3%. Hunting PLC presented a mixed picture, missing consensus on H1 revenue and EBITDA but concurrently announcing a $40 million share buyback to support its valuation. In the pharmaceutical sector, GSK achieved a significant milestone with UK regulatory approval for a first-in-class oral antibiotic for UTIs, a positive pipeline development. Finally, Barclays executed a strategic simplification by agreeing to sell its stake in Entercard Group to Swedbank for SEK2.6 billion, a transaction completed at book value.

Key Decisions for Investors

• Investors in Drax Group should exercise caution due to the significant uncertainty and potential for negative financial and ESG rating repercussions from the ongoing FCA investigation.
• While Softcat's earnings beat is positive, investors should scrutinize the sustainability of its growth given the acknowledged reliance on large, irregular contracts before pricing in future performance.
• GSK's UK antibiotic approval is a significant de-risking event for a pipeline asset, strengthening the long-term growth case for its infectious disease portfolio.
• For Hunting PLC, the announced $40 million share buyback may provide near-term price support, but this should be weighed against the underlying operational weakness demonstrated by the H1 revenue and EBITDA miss.
• Chesnara's strong cash generation and 3% dividend increase reinforce its appeal for income-focused portfolios, though currency impacts on its Swedish business warrant monitoring.
• The divestment by Barclays of its Entercard stake at book value is a neutral strategic simplification and does not materially alter the core investment thesis for the bank.