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UK Investor Magazine Podcast- CEO Alan Green discusses Barratt Developments, BP, Deltic Energy and ECR Minerals
The UK Investor Magazine was delighted to be joined by Alan Green for our weekly instalment of UK equities and discussion around key market themes.
We discuss:
- Barratt Developments (LON:BDEV)
- BP (LON:BP)
- Deltic Energy (LON:DELT)
- ECR Minerals (LON:ECR)
We start by looking at the UK economy and a Think Tank prediction a UK recession will now be avoided. The FTSE 100 has reached new all-time highs above 7,900 – we look at the future trajectory for London’s leading index. We also the FTSE 250 and AIM, and the correlation with certain UK economic data points.
After a torrid year for Barratt Developments shares in 2022, there was reason for optimism in this morning results after the homebuilder said they were encouraged by January sales figures. We delve into the numbers.
BP confirmed bumper earnings for 2022 yesterday, as expected. We look at Barclay’s £10 price target and run through their key metrics.
We finish with a look at Deltic Energy and ECR Minerals.
Listen- Barratt Developments, BP, and Deltic Energy with Alan Green – UK Investor Magazine
Ian Pollard – Severn Trent #SVT now looking after its customers.
Severn Trent plc SVT is pleased with the recognition it has received for its continued strong performance in the eyes if its customers.in the period from the 1st October to the 6th February. Performance incentives will be more aligned to the things the customers care about most. and from the companiy’s point of view will provide the opportunity for it to receive further out performance payments in 2019/20
Barratt Developments plc BDEV is increasing its interim dividend by 11.65% after delivering a strong operational and financial performance for the half year to the 31st December. Revenue rose by 7.2%, profit before tax by 19.1% and basic earnings per share by 20.7%. Total forward sales as at the third February are up by 7.3%
Grainger plc GRI updates that its resilient growth strategy has delivered a strong performance during the first four months of the year to the end of January 3.7% Overall like-for-like rental growth of 3.7% has been achieved in the year to date. Residential sales for the period performed in line with the previous year and prices were robust.
Redrow plc RDW produced another record first half in the six months to the 31st December, with another 111m cash return promised to shareholders. Group revenue rose 9% to a first half record as did pre-tax profits up by 5%. Legal completions increased by 12%. During the run up to Christmas the market was subdued but sales over the last three weeks have bounced-back. Steve Morgan who founded Redrow nearl45 years ago is to step down as Chairman next month and will be replaced by John Tutte
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Ian Pollard – Barratts #BDEV outstanding pedestrian year
Barratt Developments BDEV’s performance for the year to the 30th June was positively pedestrian compared to yesterdays results from Redrow but that does not stop Barratt claiming it has had another outstanding year with a strong operational and financial performance and its highest volumes in a decade. The increase of 4.7% in the final dividend, however, pales into insignificance compared to Redrows 65%. Profit before tax for the year rose by 9.2% and basic earnings per share by 8.5%. As at the 2nd September forward sales were ahead by 11.1%
Breedon Group BREE claims a resilient performance in a challenging market for the six months to the 30th June. Revenue rose by 16% but profit before tax fell by 3% although on an underlying basis it looked better with a rise of 15%. Ireland’s outlook was positive but the GB market continued to suffer from short-term challenges. The company say it is is comfortable with current market expectations.
Somero Enterprises plc SOM enjoyed robust trading in the US and Europe in the half year to the 30th June and is doubling its interim dividend with a payment of 0.055 cents per share. Revenue for the half year grew by 6% and profit before tax by 13%. Sales in Europe were particularly strong with a surge of 24%.
Xaar plc XAR’s woes continued in the half year to the 30th June with underlying revenue falling by 39% year on year, due largely to a 69% decline in its ceramics business which was exacerbated by a slower than anticipated uptake of new products, in particular the Xaar 1201 printhead . The interim dividend has been slashed from last years 3.4 pence per share to 1p per share to reflect expected cash requirement.
Quiz plc QUIZ will report today that it is pleased with the Group’s performance during the year to date and with the response to its summer product range. Despite an uncertain trading environment the group expects to continue with further strong growth.
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Ian Pollard – Burberry #BRBY Forced To Adopt Meaningless Jargon
Burberry Group BRBY claims to have completed global roll out of new digital clienteling tool. Despite this first quarter comparable sales have grown 3%, which it finds pleasing.Even worse in the jargon stakes it is engaging consumers with frequent and sometimes unexpected “drops of fresh product”. The final insult to the intelligence of its readers, shareholders and customers is its claim that “Farfetch collaboration” is performing ahead of its expectations. What management in its right mind, especially one trying to market high end luxury goods, is so lacking in know how, that it proudly admits to having anything in its armoury which is far fetched
Barratt Developments BDEV updates that it has produced a strong financial and operational performance for the year to the 30th June and achieved 17,579 completions the highest level in a decade. Helped by a strong end to the year, profit before tax expected to be around £835m a rise of some 10% on last years figure.
Wetherspoon JDW in the 10 weeks to the 8th July like for like sales rose by 5.2% sales. In his by now almost one man battle to ensure that Brexit happens, Chairman, Tim Martin explains in detail the benefits of Brexit to both Wetherspoons and many other companies. “The main advantage of Brexit is that the EU is a protectionist system that imposes high tariffs on non-EU imports such as wine, rice, coffee, oranges, children’s shoes and clothes, and over 12,000 other products. “Leaving the EU allows the UK to adopt the approach of countries like Singapore, Hong Kong, Switzerland and Australia by dismantling the tariff walls, which improves general living standards.He ends with a quote from the Australian High Commissioner that there was never a country that embraced free trade that was poor as a result.
Page Group plc PAGE The second quarter produced a number of records with a record 16% rise in profits and a record total profit for any quarter of 202m. The rise of 16% was the highest quarterly growth rate for seven years. For the half year total profits rose by 12.5% or 14% at constant exchange rates.
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Ian Pollard – Marks Trounced By Tesco
Marks & Spencer MKS Brave words from Steve Rowe as he tries to explain away Marks continued decline both at home and abroad. Group third quarter sales for the thirteen weeks to the 30th December fell by 0.1%. In the UK total sales fell by 1.4% with clothing and home down by 2.8% which should not surprise anyone when clothing prices are high and uncompetitive.The decline at home however falls into insignificance compared to the mayhem abroad where international sales collapsed by 9.8%. Rowe describes it as a mixed quarter which must go down as the understatement of the year so far. The international debacle is explained away as being “planned” leaving Marks open to the question as to why they did not plan for international expansion, instead. Nevertheless in the year ahead Marks claims it will be getting its business back on track as its accelerated transformation continues. Brave words indeed, albeit based on this Christmas, somewhat empty sounding.What Marks can not explain away is that it is operating in the same market with the same market conditions as Tesco which has had a highly successful Xmas and third quarter.
Tesco plc TSCO A third quarter rise of 2.3% in like for like sales only exposed the glaring weaknesses in Marks performance. Tesco enjoyed a record Xmas and outperformed the market in sales and volume. UK food sales in the 4 weeks to Christmas Day rose by 3.4% but this was somewhat offset by weakness in general merchandise.. The only other weakness was in Asia where like for like sales fell by 11.1% over 19 weeks as Tesco withdrew from bulk selling in Thailand. As for the coming year the merger with Booker is now expected to complete in March.
Barratt Developments BDEV Gone are the days of heady growth for the UKs largest housebuilder whose forward sales as at the end of December showed a rise of only 2% and whose growth for 2018 is expected to be only modest. Nonetheless the first half performance is described as being strong, supported naturally by the government and by good mortgage availability. Total completions in the 6 months to the 31st December rose but only by 144 units on top of the previous total of 7.180 units. Where Barratts really won was on its average selling price which it managed to increase by 6.5% more than double that of its competitors who have reported recently. and way above the increase in average building costs during the period.
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Card Factory Pressured By Having To Pay A Living Wage
Card Factory CARD produced sales growth of 6.7% in the 9 months to the 31st October fuelled by the opening of 38 net new stores, bringing the UK total to 903 and with more to come during the final quarter. The strong first half sales performance has continued into quarter 3 but profits will be impacted for the rest of the year by foreign exchange pressures and by having to pay a living wage to its employees! Not many companies are so brazen or clueless as to admit that paying a living wage is a problem. Presumably back to Victorian times and the problem may be solved – but how many could then afford to buy cards and how many card shops were there festooning the high streets. If the country saw widespread wage reductions to help companies cope with so called pressures, the Card Factory could be closing shops, not opening new ones.
Barratt Developments BDEV Updates in advance of today’s AGM that it has made a strong start to the new financial year with forward sales up 8.4% between the 1st July and the 12th November, helped by good market conditions and the wide availability of attractive mortgage finance. 2018 is expected to produce a good operational performance.
Experian EXPN is on course to deliver stronger organic revenue growth as the year progresses and after a first half produced revenue and EBIT growth of 5%. On a statutory basis profit before tax for the six months to the 30th September fell by 7% and basic earnings per share by 15%. The first interim dividend is to be increased by 4%.
Wizz Air Holdings WIZZ announces that it has ordered 146 Airbus A320neo aircraft worth $17.2bn at current list prices. Deliver is to start in 2022 and will enable Wizzair to extend its market reach beyond Europe and to make further reductions in operating costs.
TalkTalk Telecom TALK is slashing its interim dividend by over 50% after managing to turn last years first half profit of £30m into a statutory loss before tax of £75m this year meaning that it will only be able to pay shareholders 2.5p per share instead of last years 5.29p. Statutory revenue fell from £902. to £856m but the company has now produced its third consecutive quarter of growth, so things may be on the mend.
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House builders sales static but forward orders surge
Barratt Developments BDEV Completions in the year to the 30th June rose by a lowly 0.4% on 2016 but it was still the highest volume for nine years, enabling Barratt to claim another excellent year which produced a strong operational and financial performance. The final dividend is being increased by 39% in addition to a 17.3p per share special dividend. Profit before tax rose by 12.1% and basic earnings per share by 11.3p. No mention is made this time round of what happened to the average house price but the tiny rise in completions produced a 9.4% rise in revenue, so perhaps that speaks for itself. The future still looks rosy with forward sales as at the 3rd September up by 13.8%.
McCarthy & Stone MCS managed to complete only 6 more sales in the year to the 31st August than it did in 2016 despite a strong recovery in the second half which saw a strong upward momentum in the average selling price, which is set to continue into the current year. For the year as a whole the average selling price rose by 3% and revenue by 4%. The forward order book at he year end was 21% head of last year.
Sports Direct SPD provides a trading update ahead of today’s much anticipated AGM. The only statistic provided is that underlying EBITDA for 2018 is expected to grow by between 5% and 15% which appears to indicate a certain amount of uncertainty amongst senior management as to the eventual outcome of the years trading. The company’s obsession with becoming the Selfridges of sport seems to continue and Mike Ashley admits it is their strategic goal and that in fact they are exceeding their expectations in moving towards it.
WANdisco WAND claims an outstanding performance in the six months to the 30th June with total bookings up by 73%, revenue by 71% and its first ever positive EBITDA of $0.3m. compared to last years first half loss of $4.5m. The result of this success is that the statutory operating loss fell from $17.9m to $3.8m. The order book is strong and the second half sales pipeline is gathering pace. Its latest Fusion version is claimed to have a broad appeal across multiple verticals, which presumably it regards as a good thing.
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Barratt, Eddie Stobart, Robert Walters and Wetherspoons all upbeat
Barratt Developments BDEV is upbeat on trading, and reports total completions of 17,395, the highest level of completions in nine years. PBT is expected to beat current expectations at around £765m (2016: £682.3m), and year end net cash balance of around £720m is also ahead of guidance, driven by strong performance and the timing of land and working capital payments.
Eddie Stobart ESL reports a 13% hike in sales for six months to 31 May to approx £287m, with operational efficiencies improving the growth rate at an EBIT level. H2 has started well despite the challenges for the logistics sector due to the current political and economic environment, plus the period will benefit from a full six months’ contribution from the recently acquired iForce business.
Micro Focus International MCRO reports FY revenues of $1,380.7m, slightly above the mid-point of management guidance. Underlying adj EBITDA rose 4.2% to $640.9m, adj diluted earnings per share rose 19.7% to 175.65 cents and the FY dividend increased by 32.1% to 88.06 cents. The board says it is confident that medium-term low single digit revenue growth, industry leading margins and strong cash conversion will ensure that Micro Focus can deliver on its strategy.
NEX Group NEX says NEX Markets revenue grew 11% on a constant currency basis (20% on a reported basis) during Q1 principally driven by the CFETS partnership. Trading activity was hit by low volatility albeit with episodic activity around macro events such as the French election and a US rate rise.
JD Wetherspoon JDW says like-for-like sales increased by 5.3% for the 11 weeks to 9 July 2017, while LfL sales year to date (50 weeks to 9 July 2017) rose 3.9% (total sales up 1.9%). Around £24m of exceptional, non-cash losses are expected this financial year, mainly from pub disposals and closures.
Robert Walters RWA reports a record quarter, with net fee income up 16% (25% actual) year-on-year. The performance benefited from the group’s international footprint and breadth of recruitment solutions. The RWA board is confident that FY PBT will be ahead of current market expectations.
Xaar XAR reports an in line trading performance, and expects to report revenue of approx £44m for the six months ended 30 June 2017. The co also reports a joint development agreement with Xerox to develop together the next generation of industrial bulk piezo printheads using the extensive combined resources and IP of both companies
Sterling Helps Compass Pay £1bn Special Dividend
Compass Group CPG received a big helping hand from the weakness of sterling which added an extra 15% to revenue, operating profit and earnings per share for the first half year to 31st March. The result is that the company can afford to celebrate with a proposal to pay a special dividend of £1bn, as well as raising the interim dividend by another 5.7%. Well done sterling.
Revenue for the half year rose by 20.3% but on an organic basis this was reduced to a more realistic figure of 3.6%, North America leading the way with a rise of 7% and the board remains excited about the long term prospects of the company. Let us hope that sterling does not wipe the smile off their faces by reverting to a more realistic valuation.
Barratt Developments BDEV is firing on all cylinders and expects house completions for the year to the end of June will be the highest for nine years. It displays no signs of the ills which have begun to afflict some of its competitors and appears to be going from strnegth to strength. Profits are expected to be at the top end of current analysts estimates. Total forward sales as at the 7th May were at record levels after a rise of 12.7%. Market conditions remain good and attractive mortgage finance is widely available. Private average selling prices have shown upward momentum, as the company euphemistically puts it and the net cash position at the year end will be ahead of expectations at £600m.
ITV PLC ITV saw total revenue fall by 1% in the quarter to the end of March whilst total external revenue was down by 3% and family NAR fell by 6% over the 4 months to the end of April, with a forecast ofr further declines of 8% in May and 15-20% in June, making a total first half decline of 9%. One good sign among the statistics was a rise of 4% in viewing share for the quarter and guidance for the full year remains unchanged.
Marshalls MSLH. Group revenue rose by 6% compared to last year, in the 4 months to the 30th April, whilst sales in the domestic end market increased by 13%. Order books are at their highest ever and the board is becoming increasingly encourage about the groups overall performance for the current year.
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Metro Bank – Providing A Service, Does Pay
Metro Bank MTRO Cheeky little Metro Bank is giving the big bad banks a lesson in growth and has now moved into profit for each quarter of the second half. Profit before tax in quarter 3 was a tiny £0.6m, increasing to £1.5m in quarter 4. Losses for the full year shrank from £46.4m in 2015 to £11.7m. Asset growth came in at 64%, lending and deposit growth were both at record levels with rises 56% and 66% respectively, whilst revenue was up by 62%. Somebody must love its policy of actually trying to provide a service to its customers.
Barratt Developments BDEV Despite a fall of 5.8% in completions and revenue down by 3.2% in the six months to 31st December, Barratt claims it was a strong half year with profit before tax up by 8.8% and shareholders rewarded with a rise of 21.7% in the interim dividend. Total forward sales orders now stand at record levels after a rise of 17%. The one statistic which is omitted for some strange reason, is the increase in the average selling price. I wonder why.
Lloyds Banking Group LLOY is increasing its final ordinary dividend by 13% and maintaining last year’s special dividend of 0.5p meaning an overall rise for the year of 11%. Statutory 2016 profit before tax rose by 158% to £4.2b and earnings per share by 263%, whilst operating costs were reduced by 3%.
Gooch & Housego GHH good trading conditions during the first four months of the current financial year enabled GHH to see its order book up by 64.9% as at 31st January compared to last year, although on a like for like basis, excluding foreign exchange movements and acquisitions, the figure comes in at a more modest 19.4%. So far trading for the full year is expected to be in line but there does seem to be a hint of optimism in today’s trading update as a result of continuing good market conditions.
Hotel Chocolat HOTC produced strong growth in both sales and profitability in the 6 months to 25th December. Profit before tax rose by 28% on reported revenue up by 14% and the net cash position was transformed with a positive balance of £16.1m compared to debt of £1m at the end of the previous year.
Blue Prism Group PRSM now expects full year revenue will be materially ahead of current market expectations following the positive trading momentum evidenced at the end of last year, continuing into the current year.