BAE shares lifted by orders ahead of pre-pandemic expectations
FTSE 100 listed aerospace and defence manufacturing firm, BAE Systems (LON:BA), saw its shares climb higher on Wednesday, with the company noting that orders were ahead of its pre-COVID predictions.
BAE stated that demand remains ‘high’, and celebrated the German Parliament’s decision to approve the purchase of 38 Eurofighter Typhoon aircraft, which it said was a ‘significant’ development. It added that it was working with Eurofighter GmbH and industrial partners to conclude relevant contracts in the near future.
The company also said that it has a large backlog of orders and incumbent programme positions, which it expects to lead to strong top line growth with increasing cash conversion in coming years.
BAE continued, saying that backlogs have created good growth potential in its US business. It continued, saying that it will continue to support European and UK partners in their efforts to spend 2% of their respective GDPs on defence. The company said that it will continue its contractual support arrangements in Saudi Arabia, and that it remains the leading defence contractor in Australia.
Looking ahead, the company retains its full-year guidance for sales and cashflow, though underlying earnings per share are expected to be ahead of expectations, based on ‘good operational performance’ and lower taxes offsetting negative currency impacts.
Speaking on the company’s financial performance, BAE Chief Executive, Charles Woodburn, said: “We have continued to deliver a resilient performance in line with our expectations for a strong second half, thanks to the outstanding efforts of our employees in these challenging times.”
“From a position of strength, the actions we took in quarter two to enhance our resilience are working well as reflected in our guidance, ensuring we continue to deliver on our customer priorities, whilst keeping our employees safe. Demand for our capabilities remains high and we recognise our role not only in supporting national security, but also in contributing to the economies of the countries in which we operate.”
Following the update, BAE shares were up over 2% at lunchtime on Wednesday, up to more than 475p a share 11/11/20. This price is ahead of its year-to-date nadir, seen in October, of 397p a share. It is also more than 25% below the below analysts’ target price of 620p a share.
Analysts currently have a consensus ‘Buy’ rating on the stock; its p/e ratio of 13.05 is below the industrial products sector average of 32.07; and the Marketbeat community has a 50.22% “underperform” stance on the stock.
FTSE 100 edges higher
The FTSE 100 opened 32 points higher on Wednesday, hitting 6328 points.
Shares in the FTSE 100 that surged following the vaccine news saw a dip, whilst companies that fell following the news have gained points.
Rolls-Royce was down by 4% on Wednesday morning to 103,15, whilst InterContinental slumped 3.1%.
In contrast, shares in Kingfisher and Ocado that had fallen over the weekend are climbing again. Kingfisher shares have surged over 5%, whilst Ocado shares were up 3.45%.
“Rotation is not going to be a straight line – this reopening move is taking a bit of a hit this morning. After the initial kneejerk, investors will need to work out now which ‘value’ stocks remain value traps and which have some growth in them,” said Neil Wilson from Markets.com.
“Expect pullbacks along the way but the overall landscape remains much more positive than it was a week ago for these sectors worst affected by the pandemic.”
In Europe, the DAX fell 0.4% whilst the CAC fell 0.5%.
“The markets seem to be in a post-election, post-vaccine news lull – that could be enough to generate some positive action this afternoon,” said Connor Campbell from Spreadex.
“The Dow’s prospective gains also continue to suggest that investors aren’t panicking about Trump’s various legal challenges to the election result, despite Secretary of State Mike Pompeo’s ‘joke’ that there will be a ‘smooth transition to a second Trump administration’. It may not sound like much, but it’s another sign that Republicans, and the current administration, aren’t going to do a conciliatory about-face any time soon.”
Wetherspoons sales fall amid “confusing” restrictions
Wetherspoons (LON: JDW) has reported a 27.6% fall in sales amid new Coronavirus restrictions.
The pub-chain blamed the government for the new restrictions, which it said were “baffling and confusing”.
Chairman Tim Martin called the rules, including the 10 pm curfew and use of face masks when moving inside pubs “a complete muddle.”
“However, the initial regulations, following reopening, introduced on 4 July, were carefully thought through, followed thorough consultation, and were based on solid scientific foundations of social distancing and hygiene,” he added.
“The benefits of the regulatory hyperactivity since then, including the imposition of a curfew, are questionable. “A particular anxiety in the hospitality industry relates to the future timescale for the ending of “temporary” regulations.”
Sales at the group over the month of October “were significantly lower than the previous months, following the imposition of a number of new restrictions, including changes in the tier categories [and] a 10 pm curfew”.
“The Scottish pubs, in particular, are subject to an extremely onerous tier system which, as has been widely reported, is having a serious effect on trade.”
The current rules under lockdown mean that all of the Wetherspoons pubs across England, Northern Ireland, and the Republic of Ireland are closed.
In October, the group reported a £95m annual loss. Revenues at the group fell by 30.6% to £1.26bn amid lockdown and forced closures as well as one-off costs of £29m on staff costs and equipment.
Wetherspoons shares (LON: JDW) are trading -2.05% at 1.097,00 (1013GMT).
Global equities chase vaccine hopes: tech falls while oil, finance and airlines rally
Having cheered on the news of Pfizer’s (NSYE:PFE) vaccine candidate demonstrating 90% efficacy, global equities heavily priced in COVID challenges being overcome, and favoured pandemic casualties during trading on Tuesday.
Leading the charge and at one point up by almost 18%, Lloyds finished up by 6.63%, up to 32.82p a share. Following close behind were air travel stocks, with Boeing rallying by 6.38% to 188.15p, and IAG bouncing 5.88% to 137.65p. Also posting notable progress were oil equities. Having hit respective twenty-year-nadirs within the last few months, oil companies BP and Shell spiked by 5.11% and 4.00% apiece, up to 241.70p and 1,179.20p a share.
In stark contrast, some of 2020’s winners took a hit on Tuesday, with markets pre-empting light at the end of the pandemic tunnel. Fast-rising home delivery stocks, Ocado and Just Eat, shed 5.21% and 3.36% respectively. Similarly, e-commerce took a knock, with Amazon dropping 2.87%, and Alibaba falling by a notable 5.10%.
Leading the way in global equities on Tuesday, the oil and finance heavy FTSE 100 rallied by almost 1.80%, up to almost 6,300 points. Following close behind, the CAC was up by more than 1.50%, while the DAX and Dow Jones rose by around half a percent. The poor performance of tech stocks weighed on US equities, as illustrated by the tech-laden Nasdaq, which fell by more than 1.50%.
Chris Beauchamp, Chief Market Analyst at IG, noted that oil, airlines, REITs, banks, and housebuilders all benefited from vaccine hopes, and the potential for “an earlier than expected reopening of the UK and global economies”.
He adds that: “Previous big winners such as tech stocks are still being left out for now however, as shown by US futures, where the S&P 500, Dow and small cap Russell 2000 are once more looking much stronger than the hitherto-unstoppable Nasdaq.”
In addition, Spreadex Financial Analyst, Connor Campbell, noted that Zoom shares fell 7% on Pfizer’s vaccine hopes, but added that: “Croda International, meanwhile, climbed 6.6% after it was revealed that the chemicals firm will supply ‘novel excipients’ to Pfizer during the manufacturing of the vaccine.”
“Over in the FTSE 250, Cineworld Group, which was riddled with bullet holes after the James Bond No Time to Die delay, rose 17.5% on hopes that the chain will be able to nudge back towards normalcy once a vaccine starts to rollout.”
Labour tells government to ‘Build it in Britain’ with Biden-style green economy
Serving up the latest hot slice of catchy soundbite, the Labour Party has taken ownership of the ‘Build Back Better‘ campaign, and called for the government to ‘Build it in Britain’, with a Biden-esque recovery driven by the green economy.
The call from the UK’s largest opposition party comes ahead of next month’s Comprehensive Spending Review, and challenges the government to boost jobs in UK manufacturing and spend big on low-carbon infrastructure, as part of the push towards a cleaner economy.
This latest round of pressure follows almost 2,000 consultation responses from businesses, trade unions and other stakeholders, which informed the party what a credible green recovery ought to look like.
As part of the ‘Build it in Britain campaign’, the party called for the government’s £30 billion capital investment to be pulled forwards, and used to retrain workers affected by the COVID crisis, and equip them with the skills needed to be employed in the green economy.
Further, Labour also challenged the government to follow the lead of other countries, and create a National Investment Bank that focuses on driving green investment. Speaking on the pressure being put on the government for a ‘Build it in Britain’ eco-friendly recovery, Shadow Secretary of State for Business, Energy and Industrial Strategy, Ed Miliband, said:
“This is the right thing to do for so many people who are facing unemployment, the right thing to do for our economy to get a lead in the industries of the future and the right thing to do to build a better quality of life for people in our country.”
As part of the infrastructural changes being called for, Labour wants the government to accelerate the planned investment on electric vehicle charging infrastructure, and expand its energy efficiency and retrofit programmes, including in social housing.
Commenting on the green economy push, and the need for retrofitting to applied more broadly, Ringley Managing Director, Mary-Anne Bowring, suggested:
“[The] focus needs to be much wider than simply social housing. The UK has some of the oldest housing stock in Europe, and this is an even greater issue in the private rented sector.”
“While part of the answer is encouraging the supply of quality new-build homes that are more energy efficient, retrofitting existing homes must also be part of the solution.”
“Beyond providing subsidies for homeowners and landlords to upgrade their properties, another policy lever the government could pull is to cut or abolish VAT on retrofit projects, which currently stands at 20 percent.”
Andrew Shepherd, managing director at TopHat, adds that we need to not just improve what also exists,but lay the right groundwork for future infrastructure and construction work:
“We would also urge politicians not to lose sight of the need to ensure that the homes we build today will stand the test of time, and to focus investment on scaling up the skills and supply chains needed to harness innovations in modern methods of construction, which are already delivering some of the most energy efficient homes ever seen.”
“Modular housing, which can be delivered more quickly and with greater energy efficiency than traditional homes, will be an essential part of the solution. Investment in skilled manufacturing jobs to deliver low-carbon homes will allow a rebasing of the UK economy away from the pressured south east, delivering an economic benefit to the rest of the UK.”
Landsec posts £835m loss – CEO remains confident
Landsec (LON: LAND) has said that the demand for London office space remains strong despite more people working from home.
The property company wrote almost £1bn a billion off the value of its portfolio to £11.8bn – but chief executive Mark Allan remains confident of demand.
In the six months to 30 September, Landsec made a pre-tax loss of £835m, which is an increase from last year’s £147m.
The group will pay a dividend of 12p a share in January.
Landsec said earlier this month that it plans to sell almost a third of its £12.8bn property portfolio over the next four to five years.
The property group behind Trinity Leeds shopping centre and Bluewater in Kent said that it will reinvest the money in new developments.
Landsec shares (LON: LAND) are trading +4.69% at 673,60 (1544GMT).
Interview with Mode Banking Executive Chairman, Jonathan Rowland
Mode Banking Executive Chairman Jonathan Rowland joins the UK Investor Magazine Podcast to discuss recent progress at Mode and their plans for the future.
Mode Group Holdings (LON:MODE) has recently listed on the LSE Standard List raising £7.5m to fund the growth of their Digital Asset Banking App that harnesses Open Banking systems.
Classic Motorcycles or Classic Cars? Which offers better returns?
In a recently recorded interview, Brand Communications CEO Alan Green and The Motorcycle Broker Paul Jayson look at the investment returns from some of the great classic motorcycles and cars over recent years.
Average investment returns for classic cars over 15 years from the Coutts Passion Index are discussed, before Alan and Paul look at some examples of investment returns from rarer machines, including the Ferrari 250 GTO, Alfa Romeo 8C and 6C, Aston Martin DB4, Ducati 916 Carl Fogarty race bike, Ducati 750SS Green Frame, Brough Superior, Vincent Black Lightning and Honda CBX 1000. Paul looks at some of the pitfalls for prospective classic motorcycle purchasers, and emphasises the importance of machine provenance and originality before the purchase.
Ahead of the next episode covering potential dark horse classic motorcycle investments for the coming decade, Paul talks about the amazing Allen Millyard Kawasaki 1000 four cylinder two stroke.
Arena Events remains in strong financial position, despite Corona impact
Arena Events Group Plc shares (LON: ARE) opened 24.55% higher after the group released a trading update for the six months ended 30 September 2020.
Due to Corona restrictions and the ban on mass gatherings, revenue fell from £88.3m in 2019 to £42.8m. Gross profit fell from £24.9m to £14.8m.
Despite the tough trading environment, Arena Events Group Plc protected significant overhead cost reductions, which was 10.3%.
In the UK and Europe, the group delivered numerous structures for temporary Corona medical facilities and testing centres.
The group has also signed a multi-million pound contract extension for the rental of 26,000 seats to the Tokyo 2020 Olympics, which will now be held in 2021.
Greg Lawless, the chief executive of Arena Events Group Plc, commented:
“We are at the epicentre of the economic destruction that the COVID-19 pandemic is causing to the hospitality sector worldwide with virtually no live audience participation at any event over the last six months. However we have been proactively working to reduce the impact on our business as much as possible by securing extensive non-event revenues, reducing our cost base and raising funds from both our bank, HSBC, and shareholders to be able to put the Group in a solid financial position to trade through these very difficult times and emerge in a stronger, more cost efficient position.
“The fact that we have delivered a positive EBITDA out-turn for these first six months, taking everything into consideration, reflects a robust performance that demonstrates the benefits of a global platform and, in particular, the tremendous tenacity, agility and positive attitude of the senior executives and their teams across all of our business units.
“No dividend will be paid in relation to FY21 as the Board prioritises the optimisation of cash resources. Audited full year results are expected to be released in early July 2021.”
Arena Events Group Plc shares (LON: ARE) are trading +30.25% at 7,16 (1014GMT).
Persimmon reveals plans to pay extra dividend
Persimmon (LON: PSN) revealed in its latest trading update that it plans to a second interim dividend thanks to strong trading.
The housebuilder plans to pay an interim dividend of 70p per share in December after the group resilient demand for new homes and secured £1.4bn of sales for future years.
In the period between July 1 and November 9, the group average private weekly sales rates per site was 38% higher than the year previously.
Chief executive Dean Finch said: “Persimmon continues to perform robustly despite the significant challenges presented by the Covid-19 pandemic and we are currently on course to deliver a good result for 2020.”
Head of Markets at Interactive Investor, Richard Hunter, said: “Persimmon is playing the hand which it has been dealt prudently and profitably.
“Returning demand meant that during the summer, the company was indeed able to make hay while the sun shone.
“The summer surge, partially driven by some pent-up demand, has resulted in a strengthening of the company’s financial position, with net cash of £960 million comparing to £829 million at the half-year results.”
On Monday, rival housebuilder Taylor Wimpey also said that it expects this year’s financial results to be at the upper end of expectations and remains confident about next year.
Shares surged on Monday morning as the housing market continues to be resilient after reopening after the second quarter shutdown.
Persimmon shares (LON: PSN) are down 3.14% to 2.694,40 (0949GMT).