Sonos shares crank up 30% on ‘record’ results and $50m stock buyback
Sitting atop the Nasdaq as trading closed on Thursday, home audio innovators Sonos (NASDAQ:SONO) saw their share price rocket on a double-barrelled packet of good news for its investors.
The company swung from a $29.6 million loss to $18.4 million income year-on-year during the fourth quarter. Similarly, revenue jumped by 16%, to $339.8 million, while adjusted EBITDA spun around, from a $2.8 million loss to $46.4 million in earnings.
The situation was equally peachy for SONOS shareholders, with diluted EPS flipping from a $0.28 loss to a $0.15 profit year-on-year.
The big news for stakeholders, though, was that the company have completed a $50 million share buyback programme – in which it repurchased 3.8 million shares – and now the Board have authorised an additional buyback programme for the same amount of shares to be purchased again.
Funded by cash and cash equivalents, the buyback will see outstanding Sonos shares absorbed from the open market, which, inevitably, has given the company’s share price another reason to surge higher.
Speaking on the company’s updates, and what he sees as a paradigm shift in the business, CEO, Patrick Spence, said: “We reached an inflection point in the fourth quarter that demonstrates the power and profitability of our model. As our customers recognize, Sonos products operate seamlessly together, with more products improving the experience. That’s why year in and year out, our existing customers add more products to their systems – every new household that we gain starts that cycle anew.”
“Fiscal 2020 was the 15th year in a row we grew total households by at least 20%, while our existing customers once again showed strong repurchase habits, accounting for a record 41% of total product registrations. We deliver a consistent cadence of new, innovative products and services, and we have only started the process of realizing the lifetime value of our customers, both old and new.”
“In fiscal 2020, we delivered a record 8.2% adjusted EBITDA margin, or 10.6% excluding the effect of tariffs, and we project delivering 12% to 14% adjusted EBITDA margins next year, which is ahead of our prior targets,” continued Mr. Spence.
He added that, going forwards, the company will remain committed to delivering ‘innovative new products’ and supporting its partnerships. Over the long-term, he believes the company can deliver strong profit margins, cash flow, revenue growth and increased shareholder value.
Following the news, Sonos shares soared by 29.84%, up to $22.19 19/11/20. This is not only well above its year-to-date nadir of $7.92, but ahead of its previous all-time-high, of $20.95 back in August 2018.
Nasdaq dodges the over-extended equities correction
Tech and growth stock-heavy index, the Nasdaq Composite, escaped the market correction on Thursday, as virus fears crunched over-extended value equities.
European equities fell sharply during the morning, with the DAX and CAC falling 0.88% and 0.67% apiece. Following was the FTSE, who, having suffered 5% losses by Kingfisher and Johnson Matthey, extended yesterday’s losses, and fell 0.80%.
Speaking on the sour mood across equities, IG Chief Market Analyst, Chris Beauchamp, said: “After the soar-away gains of the past two weeks, equities now look much more richly-valued, and thus vulnerable to an outbreak of bad news.”
“This is precisely what we got in the form of spreading infections in the US but also in Japan, a worrying sign indeed for a country that had been successful earlier in the year in controlling the spread.”
“Even reports of success for AstraZeneca’s new vaccine were not enough, the impact of these vaccine announcements having been on a declining trend since the first, excitedly-received news from Pfizer almost three weeks ago.”
“There appears to be little desire to chase equities at these levels, and perhaps rightly so, with markets looking priced for perfection and still vulnerable to some short-term turbulence.
Over the pond, the Dow Jones shed 0.13%. Interestingly, though, the Nasdaq bucked the trend, and bounced by around 0.60%. This was partially led by some modest gains from big tech stocks, with Amazon, Apple and Facebook all rising by around 0.40%, while Microsoft bounced by 0.85% and Alphabet rallied 1%.
Other interesting developments came from Sonos, soaring 28%, while hot stocks NIO bounced 7%. In the meantime, Black Friday and the Christmas holiday have seen Wayfair and Etsy soar, up around 6% apiece.
Halma shares rise on “resilient performance”
Halma shares (LON: HLMA) opened almost 2% higher on Thursday after the group revealed a “resilient performance” for the six months ended 30 September 2020.
Revenue and adjusted profit before tax for the period was down 5% to £618mln and £122mln respectively.
The group has raised its dividend by 5% to 6.87p per share.
Despite a revenue decline in mainland Europe and the Asia Pacific, Halma reported growth in the US and China.
Andrew Williams, chief executive, commented:
“Halma’s proven strategic, financial and organisational model has contributed to a resilient performance in testing circumstances, with our financial performance improving as the first half progressed. Throughout the pandemic, we have maintained our focus on employee safety and wellbeing, while working hard to ensure the continued delivery of critical safety, health and environmental solutions for our customers. This was achieved thanks to the tremendous commitment and capability of our colleagues across the Group. Our rapid response to the many new challenges of recent months enabled Halma to not only weather the storm, but to be well positioned to meet the challenges and opportunities ahead.
“We have had a good start to the second half, with order intake ahead of revenue and up on the same period last year. Our improving trading performance, together with our strong cash position, will enable us to accelerate strategic investments in the second half of the year. As a result of our progress so far this year, we now expect Adjusted profit before tax for FY 2020/21 to be around 5% below FY 2019/20, compared to prior guidance of 5% to 10% below FY 2019/20.”
Halma shares (LON: HLMA) are trading +1.85% at 2.393,41 (1530GMT).
Octopus Renewables credit facility could add £250m to its acquisitions firepower
Octopus Renewables Infrastructure Trust plc (LON:ORIT) announced on Thursday that it had secured a £150 million rolling credit facility from a group of five lenders.
The credit facility, provided by provided by Banco de Sabadell, Intesa Sanpaolo S.p.A. London Branch, National Australia Bank, NatWest and Santander, has a term of three years, an interest rate of 2.3% above LIBOR, and can be drawn down in GBP, EUR, AUD and USD. The company added that the facility also features an uncommitted accordion allowing it to be increased by an additional £100 million.
Octopus Renewables said it plans to use a portion of the funds to pay for ongoing construction and acquisition commitments, which will allow further amounts drawn from under the credit facility to be used to acquire further renewables assets.
Speaking on the new facility, ORIT Investment Director, Chris Gaydon, said: “We are delighted to have secured this £150m RCF for ORIT with the support of a group of high-quality lenders. This RCF marks the next step in ORIT’s development and provides additional resources to enable us to continue to grow and diversify ORIT’s portfolio.”
This latest financing development follows the complete deployment of all the funds Octopus Renewables raised as part of its December 2019 IPO. Among the capital allocations were five key acquisitions, including the buy-up of 14 windfarms, the Ljungbyholm Wind Farm, and a 24MW construction-ready windfarm in France.
Despite the seemingly positive update, the company’s shares dipped by 0.47%, to 107.00p apiece – back to just below where it started the year, at 108.80p.
Cineworld shares dive as CVA rumours swirl
Shares at British cinema chain Cineworld (LON:CINE) have been something of a horror show on Thursday, falling almost 7% as the firm reportedly considers launching a CVA amid ongoing financial difficulties.
A CVA – an insolvency procedure common among businesses seeking to cut costs – would help to take the pressure off of Cineworld’s mounting debt crisis, with over £6 billion in debt and the chain’s half-year results revealing a bruising £1.3 billion loss.
Rumour has it that if a CVA is agreed then as many as 127 of its UK cinemas may have to permanently close their doors as part of the arrangement, although a source close to Cineworld has cautioned that no deal has been made at this stage.
Other options are reportedly still being considered. Advisors from consulting firm AlixPartners were drafted in last month to help organise emergency talks with Cineworld’s creditors, as loan terms are likely to be breached by December.
Adding to the sour news, earlier today the owner of London’s entertainment complex Trocadero Centre filed a High Court claim against Cineworld, suing it for £1.4 million over unpaid bills.
Shares at the chain nosedived 6.81% to 45.10p at GMT 13:23 on Thursday, following on from a disappointing year with an annual low of a mere 21.38p in March when the UK launched its first lockdown.
Although Cineworld’s share price reached a rosier 52.98p earlier this week on Monday on the back of promising vaccine development news, the CVA rumours have understandably quashed hopes of an imminent recovery.
The chain’s dividend yield stands at 13.03%, and its P/E ratio at 3.00, while 63.82% of MarketBeat’s community voters list the chain as an “outperformer” compared to the S&P 500 average.
However, Cineworld was listed by City A.M. as one of the top 10 most shorted stocks as of 12 November according to analysis by exchange-traded fund provider Granite Shares, with 9.5% of the cinema’s stock held short by pessimistic investors last week.
Investec revenue down 24%, shares fall
Investec shares (LON: INVP) were down over 7% on Thursday as the group revealed a 24% in revenues.
The group described “reduced economic activity and increased market volatility” amid the Covid-19 backdrop.
Adjusted operating profit was down 48.4% to £142.5m – from £276.3m a year previously.
Investec has declared an interim dividend of 5.5p.
Fani Titi, Chief Executive commented: “The first half of the financial year has been characterised by difficult and volatile market and economic conditions attributed primarily to COVID-19. As a result, group adjusted operating profit of GBP142.5 million was 48.4% behind the prior period and adjusted basic earnings per share of 11.2p was 50.0% behind the prior period, albeit ahead of pre-close guidance. We are encouraged by the resilience of our loan book, the performance of our core franchises against a tough backdrop and progress made on our strategic objectives. Tangible net asset value per share increased by an annualised 10.4% and a dividend of 5.5p has been declared.
“We entered this crisis from a position of strength and continue to have a strong capital, funding and liquidity position, leaving us well placed, both operationally and financially, to navigate this evolving environment for the benefit of our clients and other stakeholders.”
Looking forward, the group expects the overall performance this year to be ahead of the first half.
Investec shares (LON: INVP) are -7.73% at 188,50 (1319GMT).
Nichols shares leave bitter taste as revenues fall flat
British soft drinks producer, Nichols plc (AIM:NICL) watched its shares leak value as its revenues slid down during the nine months to September 30 2020.
The company’s statement said that, “As anticipated in the Group’s Interim Results in July, the ongoing Covid-19 pandemic has continued to impact the soft drinks industry.” While it enjoyed ‘strong’ 5.8% value growth in its core Vimto brand, and a 10.5% rise in year-to-date revenues in its African business, the company saw a 45.2% reduction in its Out-of-Home (OoH) sector during the third quarter.
Amid ‘very challenging’ trading, and outlets either being closed or having reduced capacity, its packaged, frozen, post-mix and technical solutions all suffered a slump in demand. With this, the company’s total revenues fell by 16.5% year-on-year, to £91.7 million.
Nichols said it has been focusing heavily on cost control activities, with a mind to ‘build back better’ from the pandemic. Having reviewed its operational structures, and attempted to reduce its marketing investment, the company said that it will make staff redundancies by Q1 2021.
Keeping in mind the lingering uncertainty of COVID risk factors, the company has offered an £11 million to £14 million adjusted profit before tax guidance for Q4. Nichols added that company cash generation has continued to be ‘very positive’ through 2020 – with cash and cash equivalents totalling £45.4 million at period-end.
Speaking on the results, Non-Executive Director, John Nichols, said: “As part of our ongoing focus on ensuring the Group has the right structures in place to deliver its long-term strategy, the Group has taken the difficult decision to propose, subject to consultation, that a number of roles are removed from our structure. These difficult decisions have not been taken lightly and I thank all Nichols colleagues for their continued hard work and commitment.”
“Whilst recognising the current and near-term impact of the pandemic on the soft drinks market, the Board continues to believe that Nichols, underpinned by the strength of the Vimto brand and the Group’s diversified business model, remains well placed to deliver its long-term strategic ambitions.”
Following the update, Nichols shares lost their pop, falling 5.83%, to 1,130.00p a share 19/11/20. This price is behind its post-pandemic high of 1,387.50p, and around 6.2% short of analysts’ target price of 1,200p a share.
Analysts currently have a consensus ‘Hold’ stance on the stock; it has a p/e ratio of 23.69, versus the consumer goods average of 52.90; and the Marketbeat community give it a 54.11% “underperform” rating.
Jet2 shares lose altitude on half-year loss
Shares at Jet2 plc (LON:JET2) slumped more than 6% on Thursday lunchtime after the airline posted its half-year results, with the coronavirus pandemic driving a £111 million loss in the sixth months leading up to September.
The firm reported a group operating loss of £111.2 million for the half-year period, in stark comparison to the £361.5 million profit it made during 2019 before the travel and tourism industries were decimated by global lockdown measures.
Jet2 was forced to ground its entire fleet in March when the UK government implemented the first wave of travel restrictions. The airline was able to resume operations in July, but lingering concerns about the safety of flying during a pandemic meant only 0.99 million passengers flew during the half-year period – plummeting from last year’s 10.07 million.
A reduced summer flights programme allowed Jet2 to concentrate on the most lucrative routes, and the firm insisted that its ‘quick to market, flexible operating model’ helped it to withstand the rife uncertainty amongst the industry.
Nevertheless, the damage has been clear to see. The average load factor (how many seats a plane fills) was just 69%, compared to 93.1% in 2019, a fall which Jet2 blamed on “uncertainty created by the several changes in UK government quarantine guidance”.
For the approaching winter season, Jet2 said it expects to fly about 50% of last year’s seat capacity, while investors battle with the implications of the firm’s basic earnings-per-share free falling from 185.5p to just 56.9p since last September.
However, the airliner was keen to emphasize that its total post-tax profit was still solidly in the green at £278.6 million.
Jet2’s executive chairman Philip Meeson said that the pandemic had caused “unprecedented operational and financial challenges”, but added that the group had benefited from a “strong and carefully-managed balance sheet” and its “considered but swift response to the pandemic”.
“As is typical for the business, further losses are to be expected in the second half of the financial year, as we ready ourselves operationally for the proposed summer 21 flying programme.
“In addition, the ability to fly in the short term remains uncertain, as UK government guidance currently restricts international travel except in limited circumstances, until at least 3 December 2020”.
Jet2’s shares were down 6.72% to 1290.00p at BST 12:38 on Thursday, following a turbulent year which saw prices hit an annual nadir of just 305.80p in March.
The airline’s performance has picked up in recent months – up 108.91% over the past 3 months alone – but questions remain on the impact of the UK’s current second lockdown as an extension is considered and Christmas holiday plans look to be under threat.
Johnson Matthey shares dip with profit before tax plunging 88%
FTSE 100 listed chemicals and tech company, Johnson Matthey (LON:JMAT), watched its share price shed 5% on Thursday, as the company saw its bottom line contract significantly during the recent half-year of trading.
The company reported that sales fell by 20%, driven by reduced demand for its Clean Air, Efficient Natural Resources and New Markets offerings. Despite this, reported revenues rose by 2%, led by increases in average previous metals prices.
Following the trend of painful fundamentals, its reported operating profits contracted by 74%, from £259 million to £68 million. Similarly, profit before tax dropped by more than 88% year-on-year, following ‘major’ impairment and restructuring charges of £78 million.
In terms of its balance sheet, Johnson Matthey reported cash flow of £482 million, while its net debt to EBITDA ratio stood at 1.6 and its return on invested capital fell to 10.6%, pushed by lower operating profit.
The situation was equally rough for the company’s shareholders, with reported EPS falling 87%, to 12.3p, and the interim dividend per share sliding 18% to 20.0p, due to reduced profits and higher net finance charges.
Responding to the challenges pandemic trading environment, and looking to the future, Chief Executive, Robert MacLeod said: “ It has been a challenging period but the steps we have taken in recent years to create a more simple, agile and efficient business, coupled with the dedication of all my colleagues across the whole of Johnson Matthey, have enabled us to navigate it well. I am pleased that we delivered operating performance ahead of market expectations, as well as good cash generation, and made further progress on transforming the group.”
“[…] I am excited by our medium term growth prospects driven by accelerating global trends and we are purpose led to reduce the impact of climate change. We are investing for our future and remain focused on executing our growth opportunities including battery materials, fuel cells and our hydrogen production technologies.”
Following the stinging trading update, Johnson Matthey shares fell by 4.59%, to 2,433.00p a share 19/11/20. This price is below its post-lockdown high of 2,654.00p a share, but fairly consistent with its going rate over the last six months.
Analysts currently have a consensus ‘Hold’ stance on the stock and a target price of 2,555p – which is roughly where it began the day. It’s p/e ratio of 18.40, which looks like good value versus the basic materials sector average of 26.81. The Marketbeat community currently has a 53.32% “underperform” stance on the stock.
Kingfisher shares fall despite sales adding 17%
Hardware and DIY retailer, Kingfisher (LON:KGF) saw its shares slide as it built on its sales during the third and fourth quarters.
The company boasted “strong performance across all retail banners and categories, with growth in overall footfall and average transaction value”. With sales of £3.5 billion, Kingfisher reported 17.2% group-wide growth during the third quarter.
This was led by growth across all of its UK, French, Iberian, Romanian and Polish brands – and was led by B&Q, which reported 23.9% sales growth during the quarter. Kingfisher was also boosted by notable new trends in consumer habits, with its e-commerce sales increasing by 153% during Q3 – now comprising 17% of all sales – and click and collect spiking 216% – now making up 77% of all e-commerce activity.
Similarly, in the fourth quarter to-date, like-for-like sales growth continued, up 12.6% and “largely reflecting the impact of more recent temporary lockdown measures”. Despite the lockdown, the company said that all stores remain open.
Weighing on its balance sheet, Kingfisher repaid the £23 million it received under the government’s Job Retention Scheme. Similarly, it saw its sales in Russia contract by 12.3% during Q3, as it agreed to dispose of Castorama Russia for a consideration of £73 million.
In addition to lauding the company’s sales performance, CEO Thierry Garnier said: “At the same time, we have made good progress against our ‘Powered by Kingfisher’ strategic priorities – the early benefits of which are enabling us to meet the current strong demand, both in-store and online, and grow our share in key markets. I am thankful for the way in which our teams continue to respond to the immense challenges of doing business in today’s environment.”
“During the period we also furthered our commitment to supporting our communities. We continued to create jobs in our stores; we continued to make donations to charity partners and health authorities; and earlier this month we repaid £23 million received in the first half of the year under the UK government’s furlough programme. While there remains considerable uncertainty around COVID-19, we are confident in our ability to operate safely, to serve our customers, to look after our colleagues, and to protect our business.”
“Overall, we believe that the renewed focus on homes is supportive for our markets. Furthermore, we are confident that the strategic and operational actions we have taken so far are helping us to build a strong foundation for long-term growth.”
Following what appeared to be a positive update, Kingfisher shares dropped by 5.58%, down to 282.60p a share. This price is short of its 321.40p high seen in October, but around 7% ahead of analysts’ target price of 254p a share.
Analysts currently have a consensus ‘Hold’ stance on the stock; its p/e ratio of 39.12 is ahead of the service sector average of 33.27; and the Marketbeat community currently has a 59.95% “underperform” rating on the stock.