B&M profits surge over lockdown
B&M (LON: BME) has reported a 95% rise in first-half core earnings for the six months to 26 September.
The high street discounter saw profits soar over the lockdown and posted a 25.3% increase in revenue to £2.24bn.
B&M has adjusted its earnings before interest, tax, depreciation, and amortisation to £295.6m.
The group has closed 10 stores this year, however, plans to open a further 40-50 in the UK.
Chief executive Simon Arora said: “Despite the wider economic uncertainty and ongoing restrictions related to Covid-19, we remain confident in our business model and future prospects.”
In France, the Babou business was “severely” hit by the lockdown.
The group said: “Unfortunately, whilst approximately half of stores in France remain open, they are currently restricted to selling essential goods only during the November lockdown.”
Shares (LON: BME) in the group are up 49% over this past year.
WH Smith scraps dividend as it swings to loss
WH Smith (LON: SMWH) has posted a pre-tax loss of £280m and scrapped its dividend.
The retailer posted a 33% fall in revenue in the year to the end of August to £1bn.
WH Smith said on Thursday that it plans to close another 25 shops after the group swung to a loss from a £180m profit last year.
The group has been particularly affected by the closure of travel sites and a slump in passenger numbers at airports and train stations.
Revenue at travel sites fell 39% to £344m. During the first lockdown in April, revenue at travel sites was down by 90%.
Chief executive Carl Cowling said: “Since March, we have been heavily impacted by the pandemic.
“While passenger numbers continue to be significantly impacted in the UK, our North American business, where 85 per cent of passengers are domestic, is beginning to see some encouraging signs of recovery.
“We have a robust plan across all our businesses focusing on cost management and initiatives within our control which support us in the immediate term and position us well to emerge stronger as our markets recover.”
The retailer is seeing signs of recovery in North America thanks to new business.
WH Smith shares (LON: SMWH) are trading +2.14% at 1.481,00 (0855GMT).
GDP misses expectations, despite record Q3 growth
The UK’s GDP surged by 15.5% in the third quarter, hitting record-breaking Q3 growth.
According to the Office for National Statistics, the growth is the largest quarterly growth ever recorded.
Despite the record growth, the GDP has still missed expectations and continues to be 9.7% less than before the pandemic.
The surge in the economy comes following a huge 19.8% slump in the UK economy in June following the new restrictions.
The economy has grown for five months in a row, however, it is still has a way to go.
The ONS said: “September 2020 GDP is now 22.9% higher than its April 2020 low. However, it remains 8.2% below the levels seen in February 2020, before the full impact of the coronavirus (COVID-19) pandemic.”
In the period between July and September, the service sector grew by 14.2%, production output was up by 14.3%, and construction output surged by 41.7%.
Ben Dyer, CEO of Powered Now, comments on how British construction will fare in the winter:
“The economic recovery we have seen in this morning’s announcement is indeed welcome, but of course with much of Britain in a state of national lockdown over the month of November, this month and the subsequent winter season are of course going to present yet more challenges. That’s why it would prudent to look towards sectors that remain open, such as construction and the trades, to provide the kind of stability we need at the moment.
“The new restrictions have had a negligible impact on the construction sector so far, and overall activity around construction has to be welcomed. Given the bonanza that housebuilders are currently experiencing from the stamp duty reduction, it’s no surprise that they are the best performing sector of the construction industry. Whether this boom for the housing industry will be followed by a bust is unknown. At the moment, most firms are just grateful for the good business they are getting right now given how much other sectors are suffering,” he added.
Responding to the latest GDP figures, chancellor Rishi Sunak said:
“Today’s figures show that our economy was recovering over the Summer, but started to slow going into Autumn. The steps we’ve had to take since to halt the spread of the virus mean growth has likely slowed further since then. “But there are reasons to be cautiously optimistic on the health side – including promising news on tests and vaccines. My economic priority continues to be jobs – that’s why we extended furlough through to March and I welcome the news today that nearly 20,000 new roles for young people have been created through our Kickstart scheme. “There are still hard times ahead, but we will continue to support people through this and ensure nobody is left without hope or opportunity,” he added. The International Monetary Fund has predicted a 10.4% slump in UK GDP for 2020. They have predicted a growth of 5.7% for 2021. Labour’s shadow chancellor, Anneliese Dodds, shared concern over the figures. Speaking to Sky News, Dodds said there were fears that the GDP could be shrinking in the current quarter. She said: “There are concerns that we could be seeing a shift backwards because of the lockdown that it currently underway. “This really shows that the government has got to get a grip of those issues that are driving economic decline, particularly the public health crisis and get test, trace and isolate sorted out. “But make sure we have a longer-term horizon for economic support as well. That would really help to bring more confidence.”
Flutter Entertainment posts strong Q3 results, shares rise
Shares in Flutter Entertainment (LON: FLTR) were up over 5% on Wednesday after it posted strong Q3 results.
The group, which owns Betfair and Paddy Power, posted a 32% increase in sports betting revenues whilst gaming revenues rose 21%.
In Australia, revenue soared 76%.
Flutter Entertainment posted a better-than-forecast new customer acquisition of over 450,000 with a total of over 1.8 million active customers in the third quarter.
Peter Jackson, the group’s chief executive, said:
“Flutter’s performance in the third quarter exceeded our expectations in both sports and gaming. Our strong trading continued as we grew market share in key regions while retaining our commitment to safer gambling practices. During the quarter we continued to expand our recreational customer base while bringing our businesses together. This included the successful migration of the BetEasy customer base onto the Sportsbet platform in Australia.”
“[…] We are now a truly global business with significant scale. As such we are in a unique position to respond to the many opportunities we see across our growing markets. Looking ahead, whilst the outlook with respect to Covid-19 remains uncertain, we are confident that our business is well positioned to capture further growth in a sustainable and responsible way.”
Flutter Entertainment shares (LON: FLTR) are trading +5.12% at 13.445,00 (1621GMT).Have Tech Stocks had their day in the sun?
Pfizer’s vaccine announcement saw gold and gilts sell off, while European equities rallied by 5% on Monday. Meanwhile, the tech stocks that boomed during the pandemic – and last week – saw the Nasdaq drop by 1.5% on the same day as Eurozone markets flew.
Fast-rising home delivery stocks, Ocado and Just Eat, shed 5.21% and 3.36% respectively on Tuesday. Similarly, e-commerce took a knock, with Amazon dropping 2.87%, and Alibaba falling by a notable 5.10%.
And, while Amazon, Just Eat and Ocado posted some impressive recoveries on Wednesday (with the latter up by over 6%), Alibaba dipped by an additional 9%. The question is: will Western tech stocks follow the lead of the Chinese e-commerce giant in the coming months.
Speaking on tech stocks, and the ongoing growth vs value equities discussion, Moneyfarm Chief Investment Officer, Richard Flax, said we ought to:
“Remember that in a COVID-19 world, digital businesses rule. They clean up in terms of advertising revenue and sales. Traditional businesses suffer. They have rent, they pump oil, they borrow short and lend long in a world of zero interest rates. And growth stocks crush value stocks, at least in terms of performance.”
“But in a post-COVID world, where growth begins to recover, alternatives begin to emerge. Digital businesses look expensive. Their multiples are high, their prospects perhaps over-hyped (at times). And then everyone starts thinking about things like mean reversion and hoary old sayings like ‘trees don’t grow to the sky’ (like they said about Amazon in 2014/15/16/17 etc). It probably explains why Zoom fell 17% yesterday.”
With that being said, the COVID situation is far from resolved. Not only do we need to discuss further rising numbers in cases and deaths – as seen with Delhi’s third wave, and likely Western infection rates over the festive period – but also the difficulties in delivering vaccinations. Indeed, as Kingswood CIO, Rupert Thompson notes, the Pfizer and BioNTech vaccine is “a major step forward but it is not a silver bullet”. Between transportation, mass production and storage at very cold temperatures, the logistical considerations of rolling out a vaccine at a vast scale are innumerable – and will prove challenging if policy implementation to-date is anything to go on. Similarly, we need to consider who will be prioritised for the vaccine, how long immunity will last for and – crucially – who will actually be willing to be vaccinated. Figuring out these variables will determine the timeline for suppressing COVID infections and deaths – and ultimately, when life can return to some semblance of normality. Certainly, there could be further reality checks for tech stocks, as a vaccine being delivered will see their dominance eroded by the return of equities, which have so far languished during 2020. With that being said, there are likely to be speedbumps ahead, in both COVID cases and the roll-out of the vaccine – not to mention potential disappointments over its efficacy in the field. With that in mind, markets certainly over-priced the positivity of Pfizer’s announcement on Monday. Tech stocks may see their day in the sun expire, but anyone saying that COVID challenges will soon be behind us, is speaking prematurely. E-commerce, consumer tech and gaming may all be set for big Christmas periods, so writing them off now may be the wrong move. Presenting a scenario in which vaccines can be stored and administered with few hiccups, assuming that economies can recover, and that 2020’s unloved stocks will enjoy a resurgence, Mr Flax offers a different outlook on tech stock and growth equities in general:“If the answer to all three is yes – then value could outperform growth. European equities could beat the US, and the Nasdaq might languish, if only briefly. Today’s markets suggest that the answer is indeed yes. We’ve had days like that before, and they’ve faded. But maybe this time will be different.”
European markets continue to climb
Stock markets across Europe are continuing to rise on the back of Monday’s vaccine hopes.
London’s FTSE has gained over 7% this week and this afternoon was up 62 points at 6358.
Contributing to this rise was IAG shares (LON: IAG), which were up 7% at 147,05.
Other risers on Wednesday included Kingfisher and Ocado, which rose 5% and 3.45% respectively.
European markets are continuing to make gains, with the DAX up 58 points or 0.45% at 13,221, the CAC up 28 points or 0.6% at 5448, and Italy’s FTSE MIB up 181 points or 0.8% at 21,033.
“This week’s momentous news of a potentially successful vaccine for COVID-19 has triggered one of the biggest rotations in asset markets in recent memory,” said Geoff Yu, senior market strategist at BNY Mellon.
“Unsurprisingly, the eurozone equities market has been a major beneficiary as its value heavy components finally found favor,” he added.
Goldman Sachs analysts said in a note to clients today that they expect shares to continue their recovery over the next year.
“Our economists expect growth to show a marked acceleration from the end of 1Q as lockdowns ease and populations start to be vaccinated; European and global growth next year should be close to 6%,” said analysts from Goldman Sachs.
“The recent positive news on vaccine efficacy from Pfizer supports their view.”
“We forecast S&P 500 will climb by 16% to 4300 at year-end 2021 and gain 7% to reach 4600 by the end of 2022. The market is actually less dependent on the performance of a few mega-cap stocks than many investors perceive.”
On Wall Street, tech stocks are rising. Microsoft is up 2.6% and Salesforce.com is up 3.5%.
Renold shares surge thanks to “resilient margin performance”
Renold shares (LON: RNO) surged 6.42% on Wednesday after the group reported resilient margin performance and strong cash generation.
For the half-year ended 30 September 2020, the group revealed a fall in revenue from £98.2m a year ago to £81.5m.
Pre-tax profit fell from £3.5m to £2.8m.
Renold has a new factory in China, which is continuing to “improve on time delivery, efficiency and productivity.”
Robert Purcell, the chief executive of Renold, said:
“Whilst the market environment continues to be challenging, the strategic actions taken in recent years, augmented by the measures taken earlier this year in response to the Covid-19 pandemic, have resulted in a more resilient business that is better placed to overcome today’s challenges.
“Renold reacted quickly to the sharp decline in order intake arising from the pandemic and, as a result, delivered a robust operating margin and substantial reduction in net debt. I would like to thank all employees for their commitment and outstanding efforts in keeping our facilities open and serving our customers during this time.
“The tight focus on cost and cash management in the first half has created a platform from which we can manage through short-term disruption. We are focused on ensuring Renold can respond strongly as markets recover.”
Renold shares (LON: RNO) are +8.26% at 11,80 (1511GMT). This year to date, shares have fallen from a high of 21,80.
Workspace shares down on H1 loss
Workspace shares (LON: WKP) were down 3.24% on Wednesday after the group shared its half-year results for the period to 30 September 2020.
Despite the challenging operating environment amid the pandemic, the group shared results that showed “resilience” thanks to its flexible customer-focused offering and freehold ownership model.
In the six months to the end of September, Workspace made a pre-tax loss of £110.4m – compared to the £99.1m profit made a year earlier.
With the loss, the group’s board will defer a decision on dividend payment until the full year.
Like-for-like occupancy fell by 7.8% to 85.5%; rent per square foot and 95% of rents due for the first half were successfully collected.
Graham Clemett, the group’s chief executive, commented on the results: “Like so many businesses, we have had a challenging first half as a result of the Covid-19 pandemic. Despite the difficult environment, we have delivered a resilient performance which has highlighted the strength of our offering and business model. We have sought to support our customers as much as possible during this time, offering the majority a 50% rent discount in the first quarter.
“We believe our freehold ownership model, our financial strength and our long-established flexible offer will be an attractive option for an increasing number of London businesses as the economy recovers. In this regard, it was encouraging to see the increase in enquiries and lettings from new customers to near pre-Covid levels in the second quarter, confirming the appeal of our offer.
“Our immediate priority is to manage our way through the challenges of the second half of the year. With Government Covid-19 restrictions in place we expect to see further pressure on occupancy and pricing in the near-term, which will impact on our full year performance. However, our strong balance sheet, compelling customer offer and experienced team mean that Workspace is well positioned to navigate the challenges ahead and benefit as the economy recovers.”
Workspace shares (LON: WKP) are trading -3.17% at 732,00 (1422GMT). In the year to date, shares have fallen from a high of 1.317,00.
Event organiser Informa expects to be cash positive from the start of 2021
Having watched its share price crash to half the level it began the year at, FTSE 100 listed event organiser, Informa (LON:INF), has published another update showing that recovery is on the horizon.
The company that its COVID Financing Action Plan is now complete, which will provide it with “long-term Stability and Security in relation to its balance sheet, with no debt maturities until 2023, no financial covenants and available liquidity of more than £1bn”.
This followed nine months of financing activities, including the issue of a follow-on £150 million in Sterling Bonds; issuing £640m equivalent Euro Bonds with 5-year maturities; £1 billion raised through a share placing; and the company securing and then cancelling a £750 million short-term Surplus Credit Facility and £1.1 billion in US Private Placement loan notes.
Informa said that having completed its Financing Action Plan, it will continue its Cost Management Programme, which is on track to deliver £600 million is run-rate savings by the end of 2020. This, it said, will ensure it will be cash positive from January 2021 – even without physical events outside of Mainland China and outdoor events.
The company added that given its half-year results were published in late September, its pre-closing trading update will be delivered following the end of the 2020 trading year. Speaking on the action company’s action plan and financing progress, Group Chief Executive, Stephen Carter, said:“Informa continues to build Stability and Security through 2021 and beyond, reflecting the combination of continuing strength in digital subscriptions, the progressive re-opening of physical events in Mainland China and other parts of Asia, and growth across our virtual events and media brands, alongside our ongoing cost and cash management programmes.”
He added: “Following a nine-month programme of activity, we have now concluded the restructuring, refinancing and rescheduling of our debt. Combined with the continued delivery of our COVID-19 Action Plan, this ensures Informa is on track to deliver positive free cash flow from early 2021, with over £1 billion of available liquidity.”
Despite the positive news, Informa shares dipped by between 4% and 5% on Wednesday, down to over 543p a share. This was likely a bounce-back from Tuesday’s over-excited response to vaccine hopes, which saw the company’s shares climb around 27% in one session.
Today’s price is ahead of the company’s year-to-date low of 354p seen in September, but behind analysts’ target price of 644p a share. Analysts currently have a consensus ‘Buy’ stance on the stock, while the Marketbeat community give it a 50.98% “underperform” rating.