Rolls Royce shares were sharply higher in early trade on Wednesday after the group said they see a much better-than-expected first half.

Rolls Royce said operating profit would be £660m-£680m compared to analyst consensus estimates of £328m. The aerospace company’s free cash flow will also smash estimates coming in at around £340m-£360m. The consensus was for just £50m free cash flow.

“Rolls Royce is highlighting the early success of its transformation programme, which is driving productivity improvements. Civil Aerospace has swung back into profit, reflecting a stronger aftermarket outcome, while defence sector earnings are also sharply improved, with demand stronger and a more even pattern of deliveries this year compared to last,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.

“Rolls Royce is boosting full year guidance for operating profits and cash flows by around 50%, one of the largest improvements seen so far in the current reporting season. The company is benefiting from a recovery in flying hours by the airline industry, which is pushing more aircraft into the workshops for engine overhauls.”

Rolls Royce shares were over 20% higher at the time of writing.

The strong first half has given Rolls Royce the confidence to upgrade their outlook for the rest of the year and now see underlying operating profit in the region of £1.2bn-£1.4bn, up from prior forecasts of £0.8bn-£1.0bn.

The upgrade in profit outlook is testament to Rolls Royce’s turnaround plan, which shows early signs of success.

Tufan Erginbilgic, Rolls Royce CEO, commented:

“Our multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023. There is much more to do to deliver better performance and to transform Rolls-Royce into a high performing, competitive, resilient, and growing business.”

Lawrence Stroll’s Aston Martin Lagonda Global Holdings (LON:AML) has today announced better than expected half-time results.

The £2.5bn capitalised luxury car maker reported that in the six months to end June its total wholesale volumes were up 10% at £2.95bn (£2.67m), while its revenues were 25% increased at £677.4m (£541.7m), with its pre-tax loss halved at £142.2m (£285.4m).

The first half improvement was driven by the much higher volumes and stronger pricing, together with its DBX707 and V12 Vantage Roadster showing impressively.

The group, which is enjoying its 110^th anniversary this year, ended the period with a cash balance of £400m, boosted by the Geely £95m subscription, together with a £60m revolving credit facility, giving it an overall liquidity of £460m. Net debt was £846m (£766m).

In Q3 deliveries are scheduled to begin for its 499 DBS 770 Ultimate, which was a total sell-out of the January 2023 launched model.

The Aston Martin DB12, the new generation front engine sports car classed as the world’s first Super Tourer, was launched in late May and which is sold out for the rest of the year will see customer deliveries starting in Q3.

Executive Chairman Lawrence Stroll stated that:

“Although we may only be halfway through the year, 2023 has already proven to be a remarkable year in which Aston Martin has shone brighter than ever.

We are now driving new levels of operational excellence to support our growth and deliver on our targets which focus on increasing value for each car we sell, aligned with the characteristics of a true ultra-luxury company.”

The group remains well on track to achieve its medium-term financial targets of c.£2bn revenue and c.£500m adjusted EBITDA by 2024/25. 

The company has stated that it expects to substantially achieve these financial targets in 2024 and, with continued strong momentum, is likely to exceed them in 2025.

Consistent with its target to become free cash flow positive from 2024, the company also expects to further deleverage its balance sheet, targeting a net leverage ratio of c.1.5x in 2024/25.

For the second half of this current year, the group expects to achieve a similar level of adjusted EBITDA in Q3 2023 as Q2 2023, with a significant increase in adjusted EBITDA in Q4 2023, primarily due to the timing and related contribution of new product launches.

It also expects to deliver significant growth in profitability.

The shares opened up 3% at 360.80p.

Just as developments in China drove declines in the FTSE 100 yesterday, on Tuesday, London’s leading index bounced back on reports that Chinese authorities were finally preparing to move to stimulate the economy.

China’s recovery from the pandemic has stalled, and market participants have been hoping for action to spur growth.

“After a poor start to the week as investors grew tired of waiting for the next stimulus initiative from China to boost its economy, Asia stocks rallied on Tuesday as investors got some of the news they wanted,” said Danni Hewson, head of financial analysis at AJ Bell.

“Reports suggested Beijing will provide more support, albeit details remain thin on the ground at present. It was enough to lift the Hang Seng by 4% and send investors scrambling to own shares in real estate, basic materials, technology and financial sectors.

“Good news from China always makes its way to the UK market in a flash, with commodity producers riding high including a 4% gain from Anglo American and Rio Tinto.”

Antofagasta was the FTSE 100 topr riser adding over 5% at the time of writing. Should China successfully stimulate the economy, demand for Antofagasta’s copper will be bolstered.

The FTSE 100 was 0.17% higher at 7,691 at the time of writing.

Investors will be looking forward to rate decisions from Federal Reserve and ECB later this week and the prospect of dovish tones from two central banks enjoying lower inflation rates.

Unilever

After releasing a respectable set of first-half results, Unilever was having its best session for months. Falling volumes were more than offset by rising prices, and revenue for the first half rose 2.7% to €30.4bn. The consumer group’s beauty and wellbeing unit was the standout performer, with growth of 8.6%.

“Decent headline sales growth across the business and an improvement in operating profit, operating margin and free cash flow helped to drive a 5% spike in Unilever’s share price at the market open. That was one of its strongest sessions on the stock market in a long time, helped by quarterly sales beating estimates,” Danni Hewson said.

“But dig deeper and there are several reasons not to get carried away.

“First, group sales growth has come entirely from putting up prices, not shifting more units of products. The sign of a good business is one that can grow prices and volumes. Unilever’s group volumes actually declined in both the first and second quarter periods.

“Second, chief executive Hein Schumacher is still new in the role and it’s easy to get excited when a new leader delivers messages of optimism.”

Technology Minerals shares are struggling to get back above the company’s IPO price despite commissioning progress at their lithium battery recycling plant.

Technology Minerals has 48.25% in Recyclus Group, which is developing UK’s first industrial-scale lithium-ion battery recycling facility in Wolverhampton.

This week, Technology Minerals said the plant’s commissioning phase was on schedule, and operations were building steadily with the aim of processing 8,300 tonnes in the first year.

Despite the apparent landmark news, Technology Minerals shares have failed to rise above the 2.25p IPO price. Technology Minerals shares were comfortably above this level shortly after the IPO before crashing to lows around 1p earlier this year. The stock hasn’t convincingly traded above 2.25p for over a year.

Sellers have consistently stepped in as Technology Mineral’s share price approaches the 2.25p IPO price, and significant resistance has built in the 2p-2.4p region.

One Twitter user suggests Technology Minerals’ disappointing share price performance could be a result of “Bland/Dull” investor communications.

Indeed, one would think the UK’s first industrial-scale lithium-ion battery recycling would pique investor interest and earn the company a greater market cap than the current £32m.

There has also been little guidance on potential earnings from the plant despite Technology Minerals conducting numerous fundraises to progress their recycling plant.

Technology Minerals recorded zero revenue in the half year to 31st December, and there was no revenue forecast provided in their outlook.

Unilever shares were up over 5% in early trade on Tuesday after the consumer giant reported better-than-expected revenue due to sale price growth in the second quarter.

The company reported their second quarter trading statement alongside first-half results.

Unilever’s second-quarter revenue was €15.74bn versus analyst expectations of €15.54bn. Top-line growth was driven by 7.9% underlying sales growth in the second quarter, mitigated marginally by a 0.3% volume decline.

Robust first-half

Underlying sales grew 9.1% in the first half of 2023 for Unilever, driven by 9.4% price growth. Rising sales prices were offset slightly by a 0.2% volume decline for the first half. Unilever’s market share declined to 41% as the company reduced SKUs by 17% and saw volume drops in some markets like India tea and Brazil laundry.

However, beauty and wellbeing sales rose 9.1% led by double-digit prestige beauty and health growth. Emerging markets grew 10.6% though growth in SE Asia was muted. These were key to Unilever’s robust first half.

Developed markets rose 6.9%, with higher pricing in Europe. Turnover increased 2.7% despite currency and acquisition headwinds. Underlying operating profit was up 3.3% as gross margin rose on pricing though it remains below 2019 levels.

“These results from Unilever are solid but uninspiring,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.

“Despite significant price increases, Unilever has managed to maintain broadly flat volumes. This is a clear positive and suggests Unilever’s brands continue to attract a loyal following. The other piece of good news is Unilever upping its full-year sales guidance to “above 5%” and reiterating that operating margins will improve slightly, despite cost pressures.

“The question is – should Unilever be doing better? The answer is almost certainly yes. Margins remain well below pre-pandemic levels and below the bonnet of that robust underlying sales growth there are problems. Only 41% of Unilever’s business is winning market share which means more than half the portfolio is losing out to competitors. And performance in Europe is exceptionally poor, with volumes falling 10% in the second quarter.”

Despite these failings, investors clearly liked Unilever’s top-line growth and shares were very well bid early on Tuesday.