FTSE 100 expected to continue its momentum on budget day

Liam Roche
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FTSE 100 expected to continue its momentum on budget day

The FTSE 100 looks set to extend its gains on budget day as the index pushed up again by 1.28% on early morning trading. This is despite the possibility of tax rises as Rishi Sunak vows “to be responsible” with British people’s money.

Naeem Alam, chief market trader at AvaTrade, speculated on how the UK Government will continue to provide support, while aiming to secure the nation’s finances in the long-term.

“It is widely expected that the Chancellor will be using the budget to extend a vast package of covid-19 support, which is likely to last until the end of September. Of course, the Chancellor is betting on a hope that the economy will return from its coronavirus crisis by that time,” said Aslam

“The furlough scheme was due to end in April, but now, it will run in its current form until the end of June. After that, it is expected to phase out slowly. The key idea over here is to avoid any cliff-edge by withdrawing the furlough support rapidly.”

“Obviously, all of this means a higher bill for the Treasury. The Chancellor will maintain the need to balance the budget once the economy is back on the recovery track. Traders expect to see a future tax rise path that could help repair the damage that has occurred to public financing.”

FTSE 100 Top Movers

Whitbread (4.68%), Informalities (4.01%) and Persimmon (3.84%) lead the pack at the top of the index.

Out of a handful of companies to have lost ground on the FTSE 100 on Wednesday morning, Avast (-1.96%), Kingfisher (-0.39%) and Admiral Group (-0.33%) are the biggest fallers.

Persimmon

Persimmon, the FTSE 100 homebuilder, confirmed its profit fell during 2020, while the company saw an increase in the value of its forward order book to £2.3bn. Profit before tax fell to £783m from £1bn, as revenues also dropped by £0.1bn to £3.3bn.

The company confirmed its dividend for the year at 110p a share, down from 235p per share at the end of 2019.

Avast

Avast (LON:AVST), the internet security application, confirmed an increase in its full-year profit and revenue as more people worked from home during the pandemic. During 2020, the FTSE 100 company’s tax before profit rose to $436.7m, up from $400.1m the year before. Avast’s adjusted revenue increased by 2% to $892.9m.

At early morning trading, the FTSE 100 company’s share price fell by 1.77% to 456p per share. It is a continuation of the performance of the Avast’s share price year-to-date, which is down from 532.5p per share.

Avast pre-tax profit up as more people work from home

Liam Roche
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Avast pre-tax profit up as more people work from home

Avast dividend up to 16 US cents per share

Avast (LON:AVST), the internet security application, confirmed an increase in its full-year profit and revenue as more people worked from home during the pandemic.

During 2020, the company’s tax before profit rose to $436.7m, up from $400.1m the year before. Avast’s adjusted revenue increased by 2% to $892.9m.

Adjusted revenues jumped by 10.6% to $699.7m in the consumer direct desktop segment. This came after a spike in installations as lockdowns came into effect.

Avast confirmed a final dividend for the year at 16 US cents per share, up 8.8% from the year before, while proposing a final dividend to be paid in June 2021 of 11.2 US cents per share.

At early morning trading, Avast’s share price fell by 1.77% to 456p per share. It is a continuation of the performance of the company’s share price year-to-date, which is down from 532.5p per share.

Ondrej Vlcek, chief executive of Avast, commented on the results:

“The Group delivered another strong year of top line organic growth, high levels of profitability and cash flow generation. Group Adjusted Revenue was $892.9m, with organic growth of 7.9%, driven by double-digit growth in our Consumer Direct Desktop business.”

“In a year when more people and businesses turned to technology to keep their lives and their work enabled, Avast has played a vital role in safeguarding our customers’ digital data and privacy. I am proud of the way the Company has met the challenge of the pandemic head on, putting our duty to act as a responsible business at the heart of our approach”

“The core of the Avast business and our fundamental strengths remain unchanged as we continue to effectively leverage the scale and sophistication of our platform in consumer and SMB markets. We are confident in our ability to unlock new growth opportunities, with a commitment to continued product and technological innovation, and a stronger-than-ever customer experience.”

“Underpinned by a strong prior year billings performance, we expect to deliver FY 2021 organic revenue growth in the range of 6 percent to 8 percent.”

Persimmon reinstates dividend as company looks ahead to 2021

Liam Roche
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Persimmon reinstates dividend as company looks ahead to 2021

Persimmon forward order book to £2.3bn

Persimmon, the FTSE 100 homebuilder, confirmed its profit fell during 2020, while the company saw an increase in the value of its forward order book to £2.3bn.

Profit before tax fell to £783m from £1bn, as revenues also dropped by £0.1bn to £3.3bn.

The company confirmed its dividend for the year at 110p a share, down from 235p per share at the end of 2019.

At early morning trading, Persimmon’s share price is up by 0.89% to 2,734p. This follows a strong performance by homebuilders on the FTSE 100 yesterday in anticipation of Rishi Sunak’s budget announcement.

As the firm benefitted from the stamp duty holiday throughout the pandemic, as well as low interest rates, it will now look to further announcements by the UK Government.

Ben Nuttall, senior analyst at Third Bridge, singled out Wednesday’s budget announcement as a policy area of significance to Persimmon.

“All eyes will be on the budget later today as stamp duty plans come through. Many are expecting a stamp duty holiday extension so if the chancellor takes a different path housebuilders such as Persimmon will feel the repercussions.”

While the government’s Help To Buy scheme I unlikely to impact Persimmon as it will other construction companies, the homebuilder could be affected by environmental regulations, according to Ben Nuttall.

“Something that Persimmon won’t escape dealing with will be new environmental building regulations, which are expected to add around £5k to each house build.  However, our experts say it is unlikely to impact Persimmon’s profitability as the cost is more likely to be shared by house buyers and land values,” Nuttall said.

Dean Finch, chief executive of Persimmon, outlined the company’s ambitions for the future.

“We must build on this important progress and further enhance our build quality and customer care so we are known for both outstanding service as well as outstanding value. To achieve this we will further strengthen our build quality and independent inspection regime within the Persimmon Way. This will both drive efficiencies that will pay for these improvements and enhance our capabilities, enabling us to build a greater volume of homes at five-star. We have also set new environmental targets in line with the Paris Agreement and will seek to further develop the Persimmon Way to embed the specific measures that will deliver on these targets in the future.”

Rolls-Royce share price: awaiting positive news on air travel

Liam Roche
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Rolls-Royce share price: awaiting positive news on air travel

Rolls-Royce’s share price (LON:RR) is coming under increased scrutiny ahead of the company announcing its financial results on 11 March. In addition, with the continued success around the vaccine roll-out, the airline industry could soon provide the FTSE 100 company with some positive news.

Rolls-Royce Share Price

Rolls-Royce shares were badly impacted by the pandemic, falling by 63% between February and April 2020, from 232.39p per share to 86.34p. Since then the company’s share price has mostly staggered along as demand for aircraft dried up. However, in February the company’s stock value rose by 20% as positive news emerged around vaccine roll-outs.

Outlook

As one of the largest aircraft manufacturers in the world, Rolls-Royce has been significantly impacted by the ongoing pandemic. Not only did many airlines rescind their orders but fewer planes are currently being serviced due to a lack of flights. The company does not expect orders to recover to pre-Covid levels until 2025.

In the meantime, much will depend on the success of the continued vaccine roll-outs, and the resumption of international flights. Airlines reported an influx of holiday bookings following the Prime Minister announcing a roadmap out of lockdown. However, the sector will need more than demand from consumers to secure its future. A question mark remains over the long-term effects of Covid-19, even once most people have received a vaccine jab. If the disease lingers then intonational travel could be restricted further.

In addition, the aerospace company recently announced it has made progress towards developing the world’s fastest electric plane. Rob Watson, director of Rolls-Royce Electrical, said: “Electrification of flight is an important part of our sustainability strategy as we aim for net zero carbon by 2050. For the first time, the plane propelled itself forward using the power from an advanced battery and propulsion system that is ground-breaking in terms of electrical technology.”

Experts have said that it will be decades before electric planes are able to displace kerosene models. However, it is an emerging sector which could interest investors with a long-term perspective.

Rolls-Royce will hold announce its annual results on March 11 when the company is expected to record a significant loss.

Boohoo share price: outlook is positive despite challenges from all angles

Liam Roche
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Boohoo share price: outlook is positive despite challenges from all angles

Boohoo shares (LON:BOO) are stirring interest among investors again as the fast fashion brand emerges from the pandemic in tact. However, the next few weeks could be telling for investors interested in the online retail giant as the company faces up to the prospect of a tax hike from the UK government and an outright ban from the US authorities.

Boohoo share price

Boohoo’s share price tumbled in July by over 20% to 210p per share as news emerged of poor factory conditions and low pay at some of the company’s suppliers. However, the fast fashion brand showed resilience and recovered well in the following weeks by convincing investors that they planned to turn the situation around. At the end of January, when Boohoo announced its acquisition of Debenhams, the company’s shares jumped up but have since retreated.

Over the past 12 months, taking into account the pandemic and the factory scandal, Boohoo’s share price has risen by over 10% to 333.42p per share. Asos, one of the online retailer’s main competitors, saw a dramatic rise in its share price during 2020, from 2,945p per share to 5,646, an increase of over 90%. However, over a period of five years, Boohoo’s share price, up 669%, has far outperformed Asos, which is up 84%.

Boohoo’s outlook

Boohoo’s revenue growth over the past year has been strong across all regions. In January the retailer released a trading update. Four the final four months of 2020, Boohoo saw its revenue grow by 40%, up to £660.8m. More specifically, in the UK, the US, the rest of Europe and the rest of the world, revenues were up by 40%, 51%, 32% and 34% respectively. The fashion brand anticipates revenue growth between 36% and 38% for the financial year to 28 February 2021. Boohoo also expects to deliver an adjusted EBITDA margin for 2021 at around 2021.

Risks

Boohoo’s price-to-earnings (PE) ratio is at 58.4. This is a high PE ratio, which appears expensive, however it could also reflect the company’s potential for high earnings growth.

While Boohoo recovered well from the factory controversy in 2020, the issue may not have been put to rest. The company could be facing a ban on importing into the US as an investigation has been launched into the its handling of claims of “modern-day slavery”.

Online retailers, including Boohoo, could also face the prospect of a tax policy aimed at the companies that have profited from the unique nature of lockdowns.

BlackRock Circular Economy Fund highlights key sectors for 2021

Liam Roche
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BlackRock Circular Economy Fund highlights key sectors for 2021

The BlackRock Circular Economy Fund report has outlined how the coronavirus pandemic threatened to stall the world’s transition towards ‘circular’ solutions to economic issues. However, as consumer preferences have changed, corporations have increased awareness, and governments have implemented regulations, the sector looks set to get back on track in 2021. The fund’s managers have identified four key sectors where they are expecting growth over the coming months.

The fund invests at least 80% of its total assets in companies that contribute to the advancement of the Circular Economy. The Circular Economy involves unravelling business activity from the consumption of finite resources. Its core principles include: designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

The BlackRock Circular Economy fund was established in partnership with the Ellen MacArthur Foundation, which is providing the investment firm with expert insights and guidance on circular economic principles and practices.

There is a great deal of overlap between the principles of the Circular Economy and Environmental Sustainability and Governance (ESG) investing.

Plastic

The widespread use of masks during the pandemic saw a reverse in the decline of single use plastic, although more sustainable options have made an impact.

Plastic usage is often touted as being problematic when discussing sustainability. However, within the circular economy, plastics could very much be a part of the future, according to BlackRock. This can be done, as an example, by replacing recyclable plastic with compostable plastic, which would avoid the prospect of recyclable plastic ending up in a landfill or the sea.

Evy Hambro, co-manager of the BlackRock Circular Economy Fund, argues that getting rid of plastic use is not the solution to the take-make-waste model of consumption.

“We believe that the pandemic will shift the focus to building the right infrastructure to deal with plastic disposal — waste management, collection, sorting and chemical recycling. That makes us more bullish on the supply chain opportunities compared to the pre-COVID era when the debate mostly focused on demonising plastic.”

Technology

BlackRock sees tech companies as embodying the principles of the circular economy. The investment management company expects the theme of sustainability to grow specifically within electronics.

Olivia Markham, co-manager of the BlackRock Circular Economy Fund, believes there needs to be a sustainable solution to manage the economics of decommissioning equipment, and says the company will allocate its holdings accordingly.

“For our portfolio, we seek companies that are aiding lower waste by reducing, reusing, or recycling materials. This applies to the components going into tech hardware produced by technology companies, as well as enabling consumers to do the same with disposable goods. As such, we see growth in the sharing economy, online flea market apps, second hand and rental platforms, e-waste solutions, device leasing and take back schemes.”

Healthcare

BlackRock has drawn attention to the pressing need for a more reliable healthcare infrastructure. While it is clear the sector needs the best equipment possible, product cycles are short-lived.

Olivia Markham outlined the sector’s various schemes to improve reuse and recycle rates.

“Healthcare is an important part of the circular economy with increasing relevance to circularity, especially considering medical devices and single-use health solutions. COVID-19 has been instrumental in shining the spotlight on this area, as hygiene and disposability – for example PPE and testing material – have taken precedence in almost every household in the world. We believe this accelerates the need to better understand medical waste and develop more permanent solutions for recycling and re-usability.”

Fast fashion

Fast fashion has boomed over the last two to three decades as barriers to trade have broken down across the world. While this has allowed for the democratisation of fashion, more affordable clothing has come at a cost to the planet.

BlackRock has argued that the industry will increasingly come under pressure, which will accelerate its transition towards circular practices. The investment management company will seek supply chain innovators which innovate along these lines.

FTSE 100 edges past 6,600 as ‘strong rebound’ anticipated

Liam Roche
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FTSE 100 edges past 6,600 as ‘strong rebound’ anticipated

The FTSE 100 edged past 6,600 as strong gains by Pershing Holdings, CRH and Taylor Wimpey were offset by fears of slowing demand in China. In better news for the FTSE 100 companies, the UK economy avoided a recession at the end of 2020, and optimism is building around the future.

“The UK economy dodged a double dip recession as the economy grew by 1% in the final quarter of 2020, which was a pleasant surprise as economists were predicting 0.5% growth,” said David Madden, market analyst at CMC Markets.

Madden also highlighted that the BoE predicted there will be a “strong economic rebound this year as restrictions will be eased as the UK’s vaccination distribution process builds on its already solid success”.

FTSE 100 movers

At mid-morning trade, Pershing Square Holdings (3.88%), CRH (2.38%) and Taylor Wimpey (2.09%) led up the FTSE 100 as the day’s top movers.

Ashtead Group (-2.78%), BP (-2.34%) and International Consolidated Airlines (-2%) were at the bottom of the pile before lunchtime on Tuesday.

Taylor Wimpey

Taylor Wimpey confirmed on Tuesday that it would resume its dividend payment after seeing a fall in pre-tax profit of 68%. The housebuilder’s profit fell from £673.9m in 2019 to £217m. Taylor Wimpey has now reinstated its dividend at 4.14p per share. If approved then the total payout will come to £151m.

There was also a 38.9% decrease in completion, down to 9,799 in 2020 from 16,042 the year before.

Intertek

Intertek, the FTSE 100 assurance, inspection, product testing and certification company, confirmed a drop in its profit during 2020 but the company is expecting a strong year ahead. Adjusted operating profit fell by 18.4% to £427.7m, while pre-tax profit dipped by 19% to £392.8m.

Looking ahead, the company vowed to continue its focus on on sustainability, targeting net zero emissions by 2050. Intertek also stated that it is strongly positioned for growth during the pandemic recovery, as it will focus on risk and M&A growth opportunities.

Intertek ‘ahead of expectations’ despite fall in profit

Liam Roche
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Intertek ‘ahead of expectations’ despite fall in profit

Intertek pre-tax profit down by 19%

Intertek (LON:ITRK), the FTSE 100 assurance, inspection, product testing and certification company, confirmed a drop in its profit during 2020 but the company is expecting a strong year ahead.

Adjusted operating profit fell by 18.4% to £427.7m, while pre-tax profit dipped by 19% to £392.8m.

Intertek’s revenue fell from £2.98bn in 2019 to £2.7bn.

Intertek confirmed its full year dividend payment for 2020 at 105.8p, “in-line” with its 2019 payout.

On Tuesday’s early morning trading, Intertek’s share price is up 2.59% to 5,622p. Year-to-date the company’s share price is well down from 5,870.

Looking ahead, the company vowed to continue its focus on on sustainability, targeting net zero emissions by 2050. Intertek also stated that it is strongly positioned for growth during the pandemic recovery, as it will focus on risk and M&A growth opportunities.

André Lacroix, chief executive of Intertek, commented on the results:

“I am very proud of the energy, agility and innovation of our colleagues around the world that has enabled us to navigate a difficult 2020 with a laser focuson health and safety, customer service, cost control, cash management and employee engagement. My sincere thanks to all my colleagues.”

“In 2020, we delivered resilient revenue of £2,742m, down 6.7% at constant rates, with our earnings and cash performance well ahead of expectations. This has enabled us to deliver sustained returns to our shareholders with a full year dividend of 105.8p, in-line with 2019, reflecting our strong financial position and confidence in the future.”

Lacroix expects Intertek to continue to benefit from the pandemic into 2021.

“In 2021, we will continue to benefit from the COVID -19 recovery and the attractive growth opportunities in our industry. We are confident that the Group will continue to drive sustained value for our shareholders with year-on-year progress in revenue, margin and cash.”

Taylor Wimpey reinstates dividend as 2020 profit falls by 68%

Liam Roche
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Taylor Wimpey reinstates dividend as 2020 profit falls by 68%

Taylor Wimpey sees 38.9% decrease in completions

Taylor Wimpey (LON:TW) confirmed on Tuesday that it would resume its dividend payment after seeing a fall in pre-tax profit of 68%.

The housebuilder’s profit fell from £673.9m in 2019 to £217m.

There was also a 38.9% decrease in completion, down to 9,799 in 2020 from 16,042 the year before.

Taylor Wimpey stated that the results were expected, while the company saw a return towards normal levels of building during the second half of the year.

In March the housebuilder cancelled its dividend payment to protect its balance sheet during the pandemic. However, Taylor Wimpey has now reinstated its dividend at 4.14p per share. If approved then the total payout will come to £151m.

At early morning trade, the company’s share price is up by over 3% to 171.7p. It follows on from a strong performance yesterday as rumours circulated of an extension of the stamp duty holiday and a new help to buy scheme in Rishi Sunak’s upcoming budget circulated.

Pete Redfern, chief executive at Taylor Wimpey, commented on the results:

“2020 was a very challenging year, during which our priority has continued to be the health and safety of our colleagues, customers, suppliers and subcontractors. Operating performance has bounced back strongly in the second half of 2020, with build capacity returning to near normal levels and strong sales,” Redfern said.

“We are confident in the medium term performance of the housing market and therefore accelerated our land purchases from May 2020 as high-quality land became available at attractive rates. We are now focusing on driving efficiencies across the business, the roll out of our new house type range and implementing our ambitious new environmental strategy.”

“The UK housing market has been resilient and continues to reinforce our confidence in our outlook. We are a cash generative business with a strong balance sheet, and we are pleased to announce today that we will reinstate our ordinary dividend in line with our aim of providing a reliable income stream to our shareholders.”

UK manufacturing stalls due to Brexit and lockdowns

Liam Roche
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UK manufacturing stalls due to Brexit and lockdowns

Business expectations have improved

UK manufacturers paid the price of supply chain disruptions in February as lockdowns and Brexit caused a dip in production levels.

The latest figures from the IHS Markit/Chartered Institute of Procurement Supply index for manufacturing output revealed a fall to 50.5 this month, the lowest point since May.

Britain’s departure from the single market and customs union led to the erection of barriers between the UK and the bloc. PMI (Purchasing Manager’s Index) data has previously highlighted the short-term impact of the new agreements.

The data showed that UK manufacturing sales fell, while respondents to the survey divulged “difficulties fulfilling orders to existing clients in the EU due to higher costs and transportation delays”.

James Brougham, a senior economist at Make UK, the manufacturing industry trade body, outlined the combined impact of Brexit and the pandemic on the sector.

“The compound effects of continued Covid-19 related disruption now exacerbated by manufacturers’ cautious navigation of the new UK-EU trading arrangement has created a scenario in which logistical and supply-side challenges are limiting the rate of economic recovery for the sector,” he said.

On the other hand, the PMI figures showed business expectations for the year ahead improved in February, as the roll-out of vaccines is expected to generate a rebound effect on the economy.

Despite the slowdown in manufacturing made solid gains on Monday amid expectations that Rishi Sunak will upgrade forecasts on the UK’s economic recovery from Covid-19.

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