Ashtead shares prove resilient despite 38% decline in first quarter profits

Jamie Gordon
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Ashtead shares prove resilient despite 38% decline in first quarter profits
Industrial equipment rental company Ashtead Group plc (LON:AHT) saw its shares rally during Tuesday morning trading, in spite of what might have been viewed as a bad but ‘not as bad as it might have been’ first quarter. The company boasted that its 7% year-on-year decline in overall revenue, and 8% year-on-year fall in quarterly rental revenue – from £1.17 billion to £1.08 billion – illustrated its impressive resilience during the pandemic. However, with underlying profit before tax falling by 35%, and profit before tax falling by 38% during the same period year-on-year – from £305 million to £192 million – there is only so much positivity that can be drawn from Ashtead’s first quarter results. Further, the company’s EBITDA fell by 14% during the same period comparison, from £627 million to £548 million, while its quarterly operating profits fell from £358 million to £249 million. The situation was equally bleak for the company’s shareholders, with underlying earnings per share falling 33% year-on-year frm 51.4p to 34.7p, and EPS on a statutory basis falling 35%. Although, there were some glimmers of hope looking ahead. First, the company announced that it had resumed its greenfield opening programme with three openings during the first quarter. Second, the company booked ‘record’ cash flow despite the pandemic, with free cash flow during the first quarter increasing from £161 million to £447 million year-on-year.

Ashtead response

Commenting on what he viewed as a period of impressive resilience in trading, company Chief Executive Brendan Horgan stated:

“In these challenging markets, the Group delivered a strong quarter with rental revenue down only 8% at constant exchange rates. This resilient performance illustrates the successful execution of our long-term strategy, which we embarked upon after the last recession, to broaden and diversify our end markets and strengthen our balance sheet. This positioned us to capitalise on our ever increasing scale, while remaining agile, particularly during these unprecedented times. The actions we took to optimise cash flow, reducing capital expenditure and operating costs, resulted in record free cash flow for the first quarter of £447m (2019: £161m) contributing to reduced leverage of 1.8 times compared to 1.9 times at year end.”

“Looking forward, the strength of our business model and balance sheet positions the Group well in these more uncertain markets. Assuming there is no significant COVID-19 second wave leading to major market shutdowns, like we experienced earlier this year, we expect full-year Group rental revenue to be down mid to high single digits when compared with last year on a constant currency basis. The benefit we derive from the diversity of our products, services and end markets, coupled with ongoing structural change, enables the Board to look forward to a year with free cash flow in excess of £1bn, continued strengthening of our market position and the medium term with confidence.”

Investor notes

Following the update, Ashtead shares rallied 1.89% or 51.00p, to 2,744.00p a share 08/09/20 11:00 GMT, with markets likely factoring in the possibility of more bleak-sounding quarterly fundamentals. This is shy of the company’s year-to-date high of 2.802.00p per share, but ahead of analysts’ consensus 12-month target of 2,650.00p a share. The current price also represents a 20.19% growth from its price one year ago on this date. The Group’s p/e ratio stands at 15.31, its dividend yield is 1.48%.

JD Sports shares rise despite profit plunge

Safiya Bashir
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JD Sports shares rise despite profit plunge
JD Sports (LON: JD) has reported a fall in profits for the first six months of the year. The group has also warned of a continued hit to sales as a decline in footfall is hitting the fashion retailer. Pre-tax profit slumped £96.7m from £158.6m, whilst revenue was down 6.5% over the same period. Since stores has reopened post-lockdown, sales have increased by 20% compared to the same period last year, however, the group has said the costs of health and safety measures have hit profits. JD expects full-year profits of £265m – up from the previous expectations of £96m-206m. JD shares rose over 8% in early trading. They have fallen 14% this year, however, have recently rallied back to stronger figures. On the fall of sales from the post-lockdown boost, the group said: “That boost was generally short lived with footfall into physical retail continuing to be significantly weaker than historic levels in all of our geographies but particularly across Europe.” “Some of the weakness in footfall has been offset through better conversion and higher average transaction values as those consumers who visited physical retail did so with greater intent.” “Nonetheless, we remain absolutely confident in our strengths in consumer engagement, key brand relationships and globally consistent multichannel retail standards. These, combined with an agile operational infrastructure, provide us with a robust platform for further positive development.” Analysts from CMC Markets said: “While JD Sports’ share price might be down on the year, it’s having a remarkable run of form right now. In the 31 days to 4 September, JD Sports’ share price soared 7.5% and, with a [Relative Strength Index] of 72, it seems that there could be more upwards momentum left in the stock.” JD Sports shares (LON: JD) are currently trading +6.99% at 775.26 (0859GMT).  

DWF shares up on strong trading

Safiya Bashir
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0
DWF shares up on strong trading
DWF shares (LON: DWF) rose 7% after the law firm revealed strong trading in the first quarter on the year. The listed law firm released its first-quarter trading update, which showed a 20.3% growth in revenue to £84.3m. The strong results for the first-quarter had helped offset the impact of the COVID-19 pandemic. Pre-tax profit at DWF jumped over 200% to reach £7.4m. The group has proposed a final dividend per share of 0.75p. “The strength and resilience of the Group and our differentiated model has been evident in the first three months of the 2021 financial year,” said Sir Nigel Knowles, the group’s chief executive. “We have seen strong activity levels generating positive momentum across the business resulting in revenue and Ebitda being materially ahead of the prior year. “Trading through the majority of FY20 was strong and the Group made significant investments to support its growth objectives. The sudden and far-reaching impact of Covid-19 had a material effect on the final quarter with a resulting impact on profitability,” he added. DWF shares (LON: DWF) are currently trading +4.90% at 62.41 (0844GMT).

Travis Perkins shares fall on 80% profit plunge

Safiya Bashir
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0
Travis Perkins shares fall on 80% profit plunge
Travis Perkins shares (LON: TPK) shares fell on Tuesday after the group revealed an 80% fall in profits for the first six months of the year, as the Coronavirus pandemic halted construction work. The builders’ merchant saw revenue fall 20% from the same period last year to £2.8bn. Travis Perkins has over 2,000 sites and branches across the UK, which closed during lockdown – putting construction on pause. The group has said that an ongoing restructuring programme will save £120m annually. This include shutting 165 branches and axing 2,500 jobs. The company has said it will not pay an interim dividend. Nick Roberts, the group’s chief, commented: “Throughout the pandemic, the health and safety of our colleagues and customers has been our primary concern. “Customer interactions have changed significantly resulting in changes to the way we do business, from increased activity through digital channels through to alterations to our physical store formats in order to maintain safe working practices. “Although our financial performance in the first half of 2020 was impacted by the Covid-19 pandemic, and we have had to undertake a restructuring programme in light of the challenging outlook for the Group‟s end markets, we have made significant strategic and operational progress against the four strategic priorities we outlined at our full year results in March 2020. “Although considerable uncertainty around the impact of the COVID-19 pandemic remains, the actions we have taken to adapt and innovate in our businesses mean that the Group is well 2 placed to continue to service our customers, support our colleagues, outperform our markets and generate value for our shareholders,” he added. Travis Perkins (LON: TPK) shares fell on Tuesday morning by 6% (0832GMT).  

FTSE soars as the Pound falls on No-Deal Brexit jitters

Jamie Gordon
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FTSE soars as the Pound falls on No-Deal Brexit jitters
UK prime minister Boris Johnson hinted that he might renege on January’s Withdrawal Agreement, and in doing so, renewed predictions that a No-Deal Brexit would be the most likely outcome of negotiations with the EU. Also on Monday, a Europe-wide equities rally was led by a booming FTSE. The index had been somewhat spurred on by a fall in the Pound Sterling – which was hampered by the rising tensions between Downing Street and Brussels. Following the news of more diplomatic loggerheads, the pound sank 0.7% against the euro, down to 1.11, and 0.8% against the dollar, falling to 1.32. The latter fall sees cable at its worst price in over two weeks, with plenty of legroom to sink lower still. With the start of the week undoing much of the good work done by the Pound Sterling during August, further discussions over the sensitive Irish border issue will no doubt prolong the awkwardness of the increasingly likely outcome (Britain leaving without a deal). Despite the political bitterness and the glumness of the Pound, the FTSE proved eager to lead the pack in the Monday equities rally. With the US taking a day off, the FTSE bounced off of the news of Chinese exports hitting a 17-month-high and the Pound sinking, and booked a noteworthy 2.5% rally, up to 5935 points. Still shy of its its recent 6500 point high in mid-June, political tensions will now dictate how much wiggle room the British index has to move upwards. Unfortunately, with Coronavirus likely ceding some media attention to renewed Brexit coverage, any hopes of recovering to the January 7,600 point highs in the near future, seem like little more than a fool’s hope. Speaking on wider market sentiment and progress in Eurozone equities, Spreadex Financial Analyst Connor Campbell stated:

“The Eurozone indices were no slouches themselves, even when factoring in the euro’s gains against the pound. That Chinese export news helped, and the absence of the US, helped erase some of the bearish sentiment that arose at the end of last week, pushing the DAX and CAC up 2.3% and 2.2% respectively.”

“Now Europe needs to hope that the Dow Jones et al. are feeling similarly perky when they return from their Labor Day weekend break tomorrow.”

 

UK house prices hit record high, new report says

Bronte Carvalho
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UK house prices hit record high, new report says
A widely-followed monthly report by money-lender Halifax has revealed that the average UK house price has risen to a record high of £245,747 in August 2020, making it the largest monthly leap since 2016. Halifax’s House Price Index showed that house prices had risen 1.6% since July 2020, and overall 5.2% on this time last year. The property market has seen a marked boom in recent months with a surge in demand following the easing of lockdown restrictions and the introduction of Chancellor Rishi Sunak’s stamp duty holiday. An estimated total of 89% of all property sales in the UK are eligible for the scheme, as part of a drive to lift the property market out of the coronavirus-induced stalemate. Last week, Yahoo Finance reported that rival lender Nationwide had published figures stating that house prices had hit the highest point in 16 years, as mounting evidence suggests an emerging “mini-boom” in the market. Bloomberg also stated that property firm RightMove said “the value of agreed sales jumped to the highest in a decade in July and Bank of England data showed mortgage approvals rising”. As many as 1 in 7 homes are selling in just one week – more than double the rate at this time in 2019. Larger houses were also selling especially well, with RightMove citing the increasing move towards working from home as the driving force behind buyers seeking additional office space, as well as coastal and rural properties to get away from the city. Three bedroom, semi-detached and four bedroom detached houses are currently seeing the greatest demand. Meanwhile, Sunak’s attempts to jumpstart the market have failed to fuel movement in London, where properties are taking the longest to sell. The recent surge in activity is unlikely to last, however, with Halifax’s managing director, Russell Galley, urging caution over hopes that the upward trajectory may be exponential: “A surge in market activity has driven up house prices through the post-lockdown summer period, fuelled by the release of pent-up demand, a strong desire among some buyers to move to bigger properties, and of course the temporary cut to stamp duty. “Notwithstanding the various positive factors supporting the market in the short term, it remains highly unlikely that this level of price inflation will be sustained. The macroeconomic picture in the UK should become clearer over the next few months as various government support measures come to an end, and the true scale of the impact of the pandemic on the labour market becomes apparent”. “It remains highly unlikely that this level of price inflation will be sustained,” Galley insists. “With most economic commentators believing that unemployment will continue to rise, we do expect greater downward pressure on house prices”.

Rumours swirl of Thomas Cook relaunch “within days”

Bronte Carvalho
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1
Rumours swirl of Thomas Cook relaunch “within days”
According to an article by Sky News this afternoon, doomed travel agent Thomas Cook could be set to make a revival as soon as this month, as Chinese owner Fosun toys with relaunch plans. An announcement is expected in the coming days, but is highly subject to the “introduction of any further quarantining restrictions on British citizens” as well as needing to secure the required regulatory approvals. If the relaunch does go ahead, it would roughly mark the 1-year anniversary of Thomas Cook’s collapse last September, when the brand was bought out of administration by Fosun for £11 million. The subsequent chaos led to the UK government having to step in amidst the largest peacetime repatriation effort – and the largest overall since World War II – to organise travel for millions of stranded British citizens around the world. Back in January, The Times reported that there were existing plans to rebrand Thomas Cook as an “online travel agent”, with the aim to relaunch sometime during June this year. With the enormous impact of the coronavirus pandemic on the aviation and travel industries, it was largely expected that Fosun would shelve its plans – or at least significantly postpone them – until demand returned to pre-Covid levels. News of the relaunch therefore has come as a bit of a surprise, with a source close to Thomas Cook telling Yahoo Finance that there is “still a huge amount of uncertainty surrounding the timing”. “The travel industry has been battered by the COVID-19 pandemic and fast-changing travel restrictions in the UK have created headaches for operators”. Nevertheless, the source emphasised that there had been “no secret” that Fosun were seeking to relaunch Thomas Cook as an online brand at the earliest opportunity, and told Sky News that plans for the brand to reemerge with a “refreshed” image are already at an “advanced stage”. The relaunch would likely mean that Thomas Cook would not operate its own airline, high street stores or hotels, and would be “closely watched by rivals” for its performance in its maiden months as travel demand slowly creeps back to pre-pandemic levels. A spokesperson for the brand declined to respond to Sky News on request.

Pizza Express to close 73 stores amid major restructuring

Bronte Carvalho
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0
Pizza Express to close 73 stores amid major restructuring
High street Italian chain Pizza Express (HKG:3396) has revealed that it is set to close 73 stores across the UK – jeopardising as many as 1,100 jobs – as part of a major restructuring plan after creditors approved a rescue deal. The brand is owned by Beijing-based Hony Capital, which bought Pizza Express for £900 million in 2014. Last month it was reported that the chain was in talks to announce a company voluntary agreement (CVA) – a form of insolvency – to discuss repayment of its hefty £1 billion debt with creditors on more favourable terms. The family favourite brand had already planned to shut 67 of its 449 outlets worldwide, but the new arrangement requires that 73 UK sites close their doors for good – including the flagship Pizza Express restaurant in London’s Soho, which opened back in 1965. Creditors voted 89% in favour of the CVA deal, stating that it would potentially create a further 9,000 jobs in the UK, but admitted that more than 1,000 roles would be lost as collateral amid the restructure. According to an article in The Guardian, the restructure is expected to help cut the firm’s debt down to £319 million, as well as potentially “hand control to its bondholders in a debt-for-equity swap”. An additional £144 million will be pumped in to help reopen sites which were forced to shut in March after the UK government imposed lockdown restrictions on the hospitality industry. In early August, Pizza Express revealed that it had sought advisors from financial advisory firm Lazard to help secure a sale – orchestrated separately from the restructuring plan – with the hope of selling its business in China amid a drive to open more sites on the mainland. The company has assured that it will be looking for redeployment opportunities for staff affected by the closures.

Blackbird revenues jump 49% with video-makers working from home

Jamie Gordon
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2
Blackbird revenues jump 49% with video-makers working from home
Developer of cloud video editing service, Blackbird PLC (AIM:BIRD), booked notable improvements in its financial fundamentals, as media outlets opted to use its software while working from home. The company recorded ‘record’ revenues of £714,000 during the six month period ended 30 June 2020, up 49% year-on-year from £479,000 for the previous first half period. Similarly, the group noted a 54% jump in contracted but unrecognised revenues, up from £1.21 million to £1.86 million.

This progress was led by developments such as; A+E broadcasting doubling the volume of videos edited using the Blackbird platform; a three-year deal signed with esports specialists Venn; Liverpool FC and Arsenal FC using the platform for remote working solutions; and deal renewals with Deltatre, MSG Networks and Gfinity.

Further, the company also recorded reductions across its loss margins. Indeed, its EBITDA loss fell by 30% year-on-year, from £1.02 million, to £714,000. Similarly, net losses before tax fell from £1.19 million during H1 2019, to £942,000 for H1 2020.

Aside from improvements in demand, the company’s trajectory towards profit-making has been led by its ability to better-conserve cash. Indeed, it reduced its operating costs from £1.42 million to £1.36 million year-on-year. Also, it reduced its cash burn rate by 31% – excluding proceeds form share issues – which saw it fall to £846,000 for the six month period, down from £1.24 million.

Blackbird response

Commenting on the performance, company CEO Ian McDonough stated:

“I am pleased to deliver record revenues for the six-month period of £714k, up 49% year on year. This accelerated performance has come despite the Covid lockdown, proving the resilience of our operating model and whilst moving the Blackbird team fully to remote working. It has also enabled our customers to continue their operations remotely and, at the same time, ensure the safety of their staff. I am genuinely excited about the future prospects for the Company and made a further significant investment in the Company in April 2020. As we continue to execute the next stage of our strategy and Blackbird becomes more widely adopted, I look forward to delivering further good news and strong results to the market.”

Investor notes

Following the update, Blackbrid shares fell 5.33% or 1.15p, to 20.36p a share 07/09/20 12:50 BST. This is down from its year-to-date high of 21.50p on 4 September 2020, but far ahead of its year-to-date low of 7.25p 07/09/20 13:21 BST. The company’s p/e ratio is -29.23.

Destiny Pharma receives grant for Covid-19 treatment, shares soar

Bronte Carvalho
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0
Destiny Pharma receives grant for Covid-19 treatment, shares soar
Clinical biotechnology firm Destiny Pharma plc (AIM:DEST) has seen its shares soar by more than 14% after the company announced it has received an £800,000 grant from the country’s leading innovation agency Innovate UK to help develop a novel, preventative treatment for COVID-19. The programme will see Destiny Pharma work alongside London-based biotechnology research company SporeGen® Limited to co-develop its SPOR-COVTM product into a potential treatment as part of the global effort to find effective treatment and a vaccine for the pervasive coronavirus infection. Both Destiny Pharmacy and SporeGen® have announced that they will share “any costs and commercial returns” from SPOR-COV, with the aim to enter the first human clinical trials “within 18 months”.

What is SPOR-COV?

SPOR‑COV, already produced by SporeGen®, is a proprietary formulation of Bacillus bacteria that can be administered nasally as a spray to infected patients.

Although the product is still in development, SPOR-COV has already been shown to provide 100% protection in pre-clinical models of influenza-type viruses.

It is unique to current vaccines on the market in that it utilises the “innate immune system” in order to develop COVID-19 protection just a few days after the initial dose. SporeGen® has described SPOR-COV as an “easy to use first line of defence” with “the potential to reduce COVID-19 infection rates and transmission significantly”. It is hoped that the final product will be “straightforward to produce at high volumes and at low cost”, with the added bonus that it can be stockpiled for an almost indefinite length of time as it does not require refrigeration. In addition, SPOR-COV could be made available globally as “a cost-effective measure in the fight against COVID-19 as well as new COVID strains and other respiratory viral infections”.

Details of the £800,000 grant

Destiny Pharma and SporeGen® have received an £800,000 grant from Innovate UK to help fund the SPOR-COV programme, which will make up the vast majority of the initial £1 million cost of production. The “preclinical efficacy work” will be undertaken in collaboration with esteemed Professor Aras Kadioglu (University of Liverpool, Professor of Bacterial Pathogenesis in the Department of Clinical Infection, Microbiology & Immunology), who is currently head of Liverpool’s Bacterial Pathogenesis and Immunity group and is a “leading expert in respiratory infection models and host immunity to infection”. The “manufacturing and formulation development work” will be carried out by HURO – an “experienced manufacturer of bacterial product formulations based in Vietnam” – best known for their chewable probiotics dummies, and a subsidiary of food-processing firm PAN Group. The programme aims to complete the necessary pre-clinical safety studies over the next 18 months before moving onto human trials.

Destiny Pharma and SporeGen® react

Both firms have welcomed the grant, expressing their gratitude towards Innovate UK as well as their hopes that SPOR-COV can be developed into an effective treatment for COVID-19.

Professor Simon Cutting, Chief Executive of SporeGen®, stated:

“The SPOR-COV platform has already been shown to be effective against pandemic flu by targeting the innate immune system. As such, SPOR-COV potentially has value as a universal system for combatting other viral diseases such as COVID-19. If successful, we foresee a novel approach against COVID-19 and for future, similar pandemics. […] Prima facie our approach is simple and offers a potential new approach in the fight against one of the most serious diseases to afflict mankind”.

Neil Clark, Chief Executive Officer of Destiny Pharma, said:

“We are excited to announce the collaboration with SporeGen to co-develop their SPOR-COV product to prevent COVID-19 infections and the concurrent award of significant grant funding from Innovate UK. […] The ongoing coronavirus pandemic has highlighted powerfully the need for innovation in developing new treatments to prevent and manage both viral and bacterial infections and Destiny Pharma remains committed to developing cost-effective products that meet this medical need”.

Investor insight

Destiny Pharma’s share price has soared 14.08% to 55.90p at BST 13:01 07/09/20, hitting its highest point all year and clambering from its annual low of 29.00p at the end of July.
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