After years of low profitability, dividend cuts and balance sheet concerns, the invasion of Ukraine by Russia elevated energy prices and provided the conditions for Centrica to unleash their earnings potential.

Centrica’s EPS for 2022 rose to 34.9p from 4.1p in 2021 as higher gas prices bolstered revenue by 61% to £23.7bn.

With customer numbers for their retail business only growing 2%, the lion’s share of Centrica’s revenue growth was achieved by price inflation in their British Gas retail and business supply, and increased marketing and trading activity.

Net cash rose to £1.2bn at the end of 2022 compare to £0.7bn at the end of 2021.

The higher energy price environment permitted Centrica to reinstate their progressive dividend policy and will pay 3p for the 2022 full year.

“There will no doubt be howls of anguish and pain at the news that British Gas owner, Centrica, has today reported a 700% jump in profits from almost £400m to just over £2,800m, with earnings per share rising even faster from 2.8p to 34.2p. Despite that huge increase, British Gas saw profits fall 39% to £72m, in no small part due to the company spending £75m on customer assistance measures,” said Steve Clayton, Head of Equity Funds at Hargreaves Lansdown.

“The huge dichotomy between a group that makes billions and British Gas making millions is because the money is being made in the North Sea and beyond, where the energy is brought out of the ground at high prices. British Gas’s realm is onshore, where gas must be piped around through expensive networks and sold at thin margins in a market with many competitors.”

The half-time results to end December from MJ Gleeson (LON:GLE), the UK’s leading low-cost housebuilding group, showed a 1.4% fall in revenues to £171m and a 34.8% fall in pre-tax profits.

A lower forward order book in the first six months was further impacted by weaker sales after the mini-Budget.

However, average selling prices were up 15.6% at £186,400, perhaps reflecting higher cost prices.

Gleeson Homes’ customers are typically young, first-time buyers with a median income of £26,000.

The group’s current trading outlook notes that net reservations in the last four weeks have doubled from the low levels seen before Christmas but remain below the levels typically seen this time of the year.

The group, which sold 894 homes in the first half, is now targeting its full year completions at between 1,650 and 1,850 homes for the full year to end June 2023.

New CEO Graham Prothero stated that:

“We have an exciting opportunity to take Gleeson to the next level by delivering sustainable growth over the medium-term, across both our Homes and Land divisions.

 At the same time as managing through the lower levels of current market demand, I want to ensure that the Group is in the best possible shape to take advantage of the recovery which we are beginning to see early signs of.

In terms of guidance: confidence, underpinned by improved mortgage rates, is slowly returning to the market, evidenced by improving net reservations.”

Broker’s analysts are estimating a 40% fall in adjusted pre-tax profits for the end-June year’s figures, to £31.7m (£55.5m) on the back of some £347m (£373m) sales, taking earnings down from 70p to 42p per share. The question is whether the 15p dividend will be retained.

Both Singer Capital Markets and Liberum Capital are rating the group’s shares as a Buy, with Singers looking for 606p and Liberum 560p as their Target Prices.

Gleeson’s shares held steady at 454p after the results.

Hargreaves Lansdown and Barclays weighed on the FTSE 100 on Wednesday after the financial companies provided disappointing earnings updates sending their respective shares into a tailspin.

Barclays shares were down 10% after the company said impairment charges and litigation costs were instrumental in a 14% drop in profit before tax to £7bn.

Total income was higher during the 2022 full year period due to higher interest rates, but the cost incurred due to trading mistakes and worsening economic conditions more than erased top line growth.

“Barclays has bitterly disappointed the market with its full year numbers. Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities. This costly mistake has been known about for some time, but these are now the hard consequences biting the bottom line,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

Barclays poor update also rocked Lloyds and Natwest shares, down 3.2% and 2.3%.

Hargreaves Lansdown

Hargreaves Lansdown results for the six month ended 31st December were positive by many measures. Higher interest rates helped revenue grow 20% and the company increased active clients by 31,000 in the last half year. However, levels of net new business fell by 30% to £1.6bn and assets under administration fell 10% to £127bn suggesting underlying weakness in their investment business.

Hargreaves shareholders will enjoy a 3.6% increase in the half year dividend to 12.7p, but concern about lower new business and client assets hit shares.

Hargreaves Lansdown shares fell 6% and were the second biggest FTSE 100 faller behind Barclays.

UK inflation

UK inflation eased slightly in January and today’s 10.1% CPI reading acted as a counterbalance to weakness in the FTSE 100’s financial companies.

“Today’s UK CPI inflation data was followed by a sharp pullback in the pound as it added to the potential of a more dovish BoE as investors carefully follow any developments which may indicate the future steps of the central banks policy. GBPUSD pair retreated below 1.21 and is attempting to recover from this area,” said Walid Koudmani, Chief Market Analyst at online investment platform XTB.com.

With weakness in the pound, one would expect to see strength in the FTSE’s overseas earners. Shell, Diageo, BAE Systems, and BP provided some support for the index with minor gains.

Housebuilders also rallied on hopes lower inflation data would lead to easier monetary policy from the Bank of England and help the ailing UK property market.

The FTSE 100 was trading at 7,964, up 0.1%, at the time of writing.

After having fought off takeover bids over the last year, the £228m advertising and marketing group M&C Saatchi (LON:SAA) has defined its ‘Moving Forward’ strategy to deliver growth in its profits over the next couple of years.

Analyst Ciaran Donnelly, at the company’s brokers Liberum Capital, has upped his Target Price on the group’s shares to 260p. 

They closed last night at 186p after trebled dealing volume in the shares following a Capital Markets Day event for investors.

Established in 1995, the London-based M&C Saatchi group provides advertising and marketing services in the UK, Europe, the Middle East, Africa, Asia, Australia, and the Americas. 

It offers its services in the areas of media and performance, advertising and CRM, sponsorship, branding, and global and social issues. 

Last year it defeated takeover bids from NextFifteen and Advanced Advt.

Ahead of the group announcing its 2022 results on Thursday 23^rd March, Donnelly is estimating that the year will have seen revenues rise from £249m to £271m, with pre-tax profits having risen from £27.3m to £31.8m, generating earnings of 15.2p (10.0p) and enabling a return to dividend payments of 2.5p per share.

For the current year he is already going for £284m sales, £38.0m profits, 20.2p earnings and a 3.8p dividend.

The year to end December 2024 he forecasts could see £298m takings, creating £42.8m profits, with 24.7p of earnings and a 4.1p dividend.

Liberum Capital sees a 40% upside in the group’s share price as the new strategy shows through.

Barclays shares were reeling on Wednesday after the UK bank revealed a disappointing set of results for the 2022 full year. Fears of lower net interest margin and litigation costs were the source of investors discontent and shares in the bank fell over 8% in early trade.

Although Barclays top line income was 14% than last year at £25bn, increased costs due to litigation and impairment charges meant Barclays profit before tax fell 14% to £7bn.

Profit before impairment charges was £8.2bn but macroeconomic deterioration meant the bank set aside £1.2bn for credit impairments.

Barclays also incurred a £1.6bn charge due to the over-issuance of US securities.

“Barclays has bitterly disappointed the market with its full year numbers. Profits have been stunted partly because of a big increase in litigation costs relating to the over-issuance of US securities,” said Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown.

“This costly mistake has been known about for some time, but these are now the hard consequences biting the bottom line. Barclays is more than able to stomach this financially, the wider-reaching difficulties come from reputational damage. The tolerance margin for a similar mistake is now very thin.”

Net interest margins grew to 3.54% to 2022 but Barclays cast a doubt over the coming year’s earning potential as they said they expected Net Interest Margins would be above 3.20% – a target that could see Barclay’s NIM fall in the year ahead.

Barclays have increased their distributions to shareholders but the £500m buyback is below expectations.

Glencore shares were slightly weaker on Wednesday morning despite reporting a 60% increase in adjusted EBITDA for 2022, and an additional $1.5bn share buyback programme.

Glencore shares were off by 1.8% at the time of writing on Wednesday.

Unlike the other FTSE 100 diversified miners, Glencore operates a significant energy business and enjoyed the benefits of the elevated prices across hydrocarbons and coal last year.

Glencore’s decision to shrug of the pressure to become more environmentally friendly and push on with their coal business has provided a much needed source of revenue and earnings growth.

Indeed, it was the energy segment of Glencore’s business driving earnings growth in 2022. Their Industrial Assets unit saw EBITDA grow 59% to $27.3bn with energy products including coal adding $13bn to earnings.

Metals earnings were weaker across the board due to the impact of Covid-19 restrictions in China curtailing demand and trading activity.

“The top line may have missed market expectations, but Glencore’s taking full advantage of a messy energy market to line its coffers and there’s good news for shareholders as they get to share in the spoils, with a topped-up dividend and fresh $1.5bn buyback,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“Glencore’s marketing business is perfectly poised for a scenario like this, fragmented energy markets due to the war in Ukraine meant there’s been an abundance of price discrepancies across multiple world markets – that’s exactly the scenario that makes this business unit tick.”

Glencore will distribute a total of $7.1bn to shareholders for 2022. This includes already announced distributions and a fresh $1.5bn buyback.