NWF’s bumper year fuelled by volatile oil prices

Andrew Hore
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NWF’s bumper year fuelled by volatile oil prices

Bumper fuel profit meant that NWF (LON: NWF) produced record results in the year to May 2022. All three divisions improved their profit during the year and NWF has net cash of £9m.

More than 30% of fuel sales are for heating and 12% used in agriculture. There is also significant demand from lorry fleets. There is still potential to fill in the gaps in the regional fuel depot network.

NWF has historically tried to achieve a profit of just over 1p per litre. The volatility of the oil market and availability constraints have enabled it to make around 2.6p per litre, although it will not be able to maintain that margin. Fuels operating profit jumped by 85% to £17.2m, even though volumes fell by 4.6%.  

In the year to May 2022, group revenues were 30% ahead at £878.6m, while underlying pre-tax profit jumped from £11.9m to £20.9m. That was excluding a £8.3m impairment charge for feeds division assets. There was a continued steady increase in the total dividend to 7.5p a share.

The food distribution division is fully using the additional capacity at Crewe, which is doing better than expected. That pushed up revenues from £54.8m to £62.6m, while operating profit jumped from £1.9m to £2.8m. Additional fulfilment and packing work helped margins. A new managing director has taken charge. Further expansion of capacity will be based on additional contract wins.

There was a small improvement in feeds profit, but it is still not back to previous levels. The milk price has been rising, so that farmers will be able to cope with the rising commodity prices that push up feed prices.

The pension deficit has been reduced from £15m to £9m. The next pension assessment will be at the end of 2022. That helped net assets improve to £6.8m.

Acquisitions

There were no acquisitions last year, but the cash in the balance sheet will help to finance further fuels deals. The unusually high profit levels may make that difficult in the short-term, but management knows the businesses it would like to buy and can be patient.

The plan is to spend £10m a year, paying around six times operating profit. That will enhance earnings.

Assuming a profit of 1.2p per litre for the fuels division, group pre-tax profit is expected to decline to £12m.  At 223p, the shares are trading on 12 times prospective 2022-23 earnings, while the yield is 3.3%.

Filtronic invests in sales and R&D

Andrew Hore
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Filtronic invests in sales and R&D

Filtronic (LON: FTC) narrowly beat June’s upgraded full year results for the year to May 2022. The RF components and products developer and supplier has a strong balance sheet, and it is investing in its sales team and the development of space products.

A new facility has been set up in Manchester to house a dedicated mmWave space products development team. Last year, R&D spending was maintained at £1.7m and there are plans to spend 12% or more of revenues in the future.  

In the year to May 2022, revenues improved from £15.6m to £17.1m, while pre-tax profit jumped from £200,000 to £1.5m. The mix of product sales boosted margins. Higher margin defence and critical communications sales grew, while lower margin Xhaul telecoms revenues fell, although they were stronger in the second half.

Net cash was £4m. Inventories increased from £2.19m to £2.6m so that difficult to obtain electronic components were available when needed.  

Expectations

The easing of Covid restrictions will mean more travel costs this year and there will also be more sales and development personnel. That will hold back short-term profitability, making it difficult to maintain the current level of profit.

There is likely to be a greater proportion of Xhaul sales in this year’s forecast revenues of £19m. That means that group margins will decline. Pre-tax profit is expected to be £800,000 and net cash could rise to £4.4m.

Filtronic recently won additional contracts, including a £400,000 aerospace and defence contract for the design and manufacture of microwave filters. This will be delivered this year and there could be follow-on business.

It should be remembered that there were upgrades during last year, so there could be scope for upgrades later in this financial year. The latest investment should start to pay off over the next couple of years. At 15.25p, the shares are trading on 50 times prospective 2022-23 earnings. That multiple could reduce significantly in the coming years and the technology developed could be highly valuable.

Rotork order intake rises on price increases, revenue decreases on supply chain problems

Natasha Doris
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Rotork order intake rises on price increases, revenue decreases on supply chain problems

Rotork shares increased 2% to 263.2p in late afternoon trading on Tuesday following an adjusted order intake rise of 14% £340.1 million in HY1 2022 compared to £298.2 year-on-year.

Rotork credited an encouraging performance from its Chemical, Process and Industrial, and Oil and Gas businesses for its raised order intake, along with successful price increases implemented in January and May.

However, the firm reported a statutory revenue dip of 2.9% to £280 million compared to £288.3 million as a result of supply chain challenges.

Rotork confirmed an operating profit fall of 12.9% to £44 million from £50.6 million, alongside an operating margin slide of 1.8%to 15.7% against 17.5%.

The company noted a pre-tax profit decrease of 12% to £44.6 million compared to £50.7 million.

The engineering firm said it forecast profit and revenue growth in HY2, and added it was positioned to deliver positive FY 2022 results despite macro-economic headwinds.

“We enter the second half with encouraging momentum, a record order book, and with our supply chain improvement actions taking effect,” said Rotork CEO Kiet Huynh.

“Whilst forecasting remains challenging due to geopolitical and macroeconomic uncertainties we continue to expect our full year results will have a greater than usual weighting to the second half, which will be even more pronounced than our previous expectations if recent sterling weakness continues.”

“Our progress to date confirms that we are well positioned to deliver profitable growth.”

Rotork announced an EPS drop of 11.4% to 3.9p from 4.4p the year before.

However, Rotork raised its HY1 dividend 2.1% to 2.4p compared to 2.3p in HY1 2021.

Synthomer EBITDA falls 46.2% on decreased Performance Elastomers demand

Natasha Doris
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0
Synthomer EBITDA falls 46.2% on decreased Performance Elastomers demand

Synthomer shares tumbled 10.3% in early afternoon trading on Tuesday following an underlying EBITDA fall of 46.2% to £173.1 million in HY1 2022 against £322.7 million in HY1 2021.

Synthomer said all businesses delivered EBITDA growth except for its Performance Elastomers sector, following a 2021 swell of demand for Nitrile Butadiene Rubber (NBR) linked to the Covid-19 pandemic.

The UK-based polymers supplier noted a double-digit EBITDA rise in its Functional Solutions and Industrial Specialties businesses.

The group confirmed an underlying operating profit drop of 56% to £132 million from £288.6 million, alongside an underlying pre-tax profit decline of 54.6% to £114.7 million compared to £272.4 million.

Synthomer reported an underlying revenue climb of 8.6% to £1.3 billion against £1.2 billion, and a statutory revenue growth of 8.5% to £1.3 billion compared to £1.2 million year-on-year.

“All parts of the business except NBR generated EBITDA growth against a strong H1 2021 comparator, demonstrating the strength and diversity of Synthomer’s portfolio,” said Synthomer CEO Michael Willome.

“Our performance reflects the benefits of recent acquisitions with Functional Solutions continuing to leverage its increased global reach and portfolio depth and Adhesive Technologies having a strong first quarter in our Group, in line with our expectations. We have successfully managed higher costs and have passed them through, helping to enhance our profitability.”

“Whilst NBR market conditions have yet to normalise following a period of exceptional COVID-19 related demand, we are focused on the tremendous opportunities available elsewhere in the Group. I am confident that the Group’s enhanced scale, portfolio depth and geographic diversity will continue to underpin our resilience, supporting further progress in the second half and into 2023.”

The firm mentioned an EPS slide of 61.1% to 19p from 49.3p the last year.

Synthomer recommended a dividend of 4p against 8.7p the year before.

FTSE 100: BP profit soars as housing market outlook hurts housebuilders

Natasha Doris
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FTSE 100: BP profit soars as housing market outlook hurts housebuilders

The FTSE 100 saw a sleepy session of trading on Tuesday, with the index rising 0.1% to 7,419.5 in early afternoon trading.

The market dodged the panic across the Asian markets, however, US House Speaker Nancy Pelosi’s visit to Taiwan set off renewed alarm bells as geopolitical tensions flared.

“The FTSE 100 was in consolidation mode on Tuesday morning, trading broadly flat but avoiding the falls seen in Asia overnight,” said AJ Bell investment director Russ Mould.

“As if the market needed something new to worry about, there is now renewed concern about relations between the USA and China as Nancy Pelosi is primed for a visit to Taiwan.”

BP

BP shares gained 3.4% to 405.8p after the oil and gas giant reported a banner Q2, with an 85% surge in revenues to $69.5 billion and a $9.3 billion profit after its $20.4 billion loss related to its Rosneft stake in Q1.

BP also announced the launch of a $3.5 billion share buyback scheduled for completion before its Q3 results, straight after the close of its $2.5 billion share buyback in Q2.

The company hiked its dividend 10% to 6c compared to 5.4c the last year.

“BP’s expecting higher oil prices to continue into the third quarter and whilst that’s not good news for consumers, who are battling with higher energy and petrol prices already, it’s good news for cash flows,” said Hargreaves Lansdown equity analyst Matt Britzman.

“In the accommodative environment we’re seeing, BP’s able to push up its dividend and push on with a fresh $3.5bn buyback having only just finished a $2.5bn programme.”

“Markets reacted favourably to what was a set of results that beat estimates across pretty much all metrics.”

Fresnillo

Fresnillo shares sank 5.6% to 687p, falling to the bottom of the FTSE 100 after the gold mining company reported a slate of poor results in HY1 2022.

The mining giant announced a revenue drop of 14.2% to $1.2 billion and a gross profit decrease of 39.7% to $365.9 million, alongside an EBITDA decline of 38.5% to $459.1 million.

Fresnillo blamed its bad results on lower gold volumes and falling silver prices.

The company slashed its dividend 65.7% to 3.4c per share compared to 9c the year before.

Housing market shows signs of slowdown

The housing market saw prices climb 11% in their 12th consecutive month of growth, however the sector appears to have shown initial signs of a slowdown in the months ahead.

The latest report from Nationwide revealed an 11% rise against a 10.7% climb in June, but cracks of weakness in the market included a fall in mortgage approvals as the cost of living crisis started to weigh down the gravity-defying industry.

The market has also been set on alert for the approaching Bank of England meeting, which is expected to hike interest rates as high as 0.5% in a move to tackle soaring inflation and possibly pump the brakes on the runaway housing market.

“Zoopla figures published earlier today there are early signs that the market is starting to slow,” said Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey.

“Mortgage approvals are starting to decline so we can expect to see activity become more muted as people tighten their belts as their bills continue to increase.”

“The prospect of further interest rate increases on the horizon may also make people think twice about whether they can afford to move home.”

Housing stocks took a hit, with Taylor Wimpey falling 3.9% to 122.9p, Barratt Developments decreasing 3.8% to 486.4p, Berkeley Group Holdings sliding 3.5% to 4,145p and Persimmon dropping 3.1% to 1,843.7p.

AIM movers: Revolution Beauty slump and GYG set to leave AIM

Andrew Hore
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AIM movers: Revolution Beauty slump and GYG set to leave AIM

Cosmetics supplier Revolution Beauty (LON: REVB) is the latest of the crop of 2021 AIM new admissions to put out a trading warning that has led to a 57.9% slump in the share price to 25.95p. The July 2021 placing price was 160p. Revolution Beauty has delayed its 2021-22 results and cut its expectations for 2022-23. Poor retail demand in the US and the loss of £9m of Russian and Ukraine revenues have hit the early part of the new financial year. Online demand is switching to store sales and cost increases have hit profitability. Zeus has cut its 2022-23 EBITDA forecast by 38% to £19m, while higher net debt means that earnings are reduced by 64% to 1.5p a share.

Yacht services provider GYG (LON: GYG) is asking shareholders to agree to drop its AIM quotation at a meeting on 31 August. The shares fell 34.9% to 20.5p. Poor trading in recent years and lack of investor interest are two reasons for the proposed cancelation. Costs can be reduced by €700,000 a year. The half year trading update says that revenues are in line with expectations and the order book is strong. However, there is a lack of capital to grow the business. EBITDA of €5m is forecast for 2022.

Tower Resources (LON: TRP) shares have slumped after it raised £1.5m at 0.175p a share. The share price declined 31.6% to 0.195p. The oil and gas company is progressing with the financing of its NIOM-3 well in Cameroon and the cash raised will go towards payments on account for services associated with the well and for working capital.

PHSC (LON: PHSC) moved into loss in the year to March 2022, although that was due to a £793,000 impairment charge relating to the security division. The health environmental and safety consultancy services provider. Increased revenues from £3.3m to £3.57m and there was a small underlying loss. Net assets are £3.51m, including £2.2m of goodwill. At 22.5p, down 15.1%, PHSC is capitalised at £2.7m.

Coal miner Bens Creek (LON: BEN) recovered 8.2% to 39.5p after is aid that most of its infrastructure was not hit by the flooding in West Virginia and Kentucky. The rail system was affected, but it has been repaired.  

Shareholder approval of its financing at 0.3p a share on Monday pushed the Ironveld (LON: IRON) share price up 7.4% to 0.29p.

Inflation cuts a slice off Domino’s Pizza profits in HY1

Natasha Doris
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0
Inflation cuts a slice off Domino’s Pizza profits in HY1

Domino’s Pizza shares fell 1.7% to 285.6p in late morning trading on Tuesday on the back of a HY1 2022 underlying pre-tax profit drop of 16.3% to £50.9 million compared to £60.8 million the last year.

The fast food company reported a 5.6% decline in system sales to £710.5 million against £752.3 million, and a like-for-like system sales fall of 6.4% year-on-year due to the change in VAT rates.

Domino’s Pizza highlighted a slight group revenue uptick of 0.2% to £278.3 million from £277.8 million.

The pizza franchise also mentioned an underlying EBITDA slide of 11.4% to £63.5 million compared to £71.7 million.

The firm added a statutory pre-tax profit growth of £800,000 to £42.1 million on the back of international losses and non-underlying items incurred in the last year offsetting inflation and costs incurred in HY1 2022.

Inflationary costs cut into profits

Domino’s Pizza commented it expected its profitability to be weighted in HY2, with food cost inflation passed onto franchisees on a lagged basis and the impact expected to come through in HY2.

“A £20 pizza may feel like a rather less affordable treat to many people, however, and there were some signals in Domino’s latest numbers to worry shareholders,” said AJ Bell investment director Russ Mould.

“There is always a slightly concerning situation if a company finds itself needing a strong second half to meet full year forecasts, often the recipe for an eventual profit warning.”

The group noted a net debt increase of 33.1% to £236.4 million from £177.6 million, along with successfully refinanced existing bank debt facilities with a new £200 million revolving credit facility and a £200 million private placement facility.

The takeaway group reported a statutory basic EPS rise of 6.7% to 9.5p compared to 8.9p the year before.

Domino’s Pizza said it was on track to meet market expectations in FY 2022, and reiterated its underlying EBITDA guidance for the financial term after passing on inflationary costs to customers.

“I’m proud that in the first half Domino’s grew order count, attracted more customers, and increased underlying sales despite unusually challenging market conditions,” said Domino’s Pizza CEO Dominic Paul.

“This is testament to the hard work of our world-class franchisees and all our colleagues across the system, and I’d like to thank them all.”

Share buyback and dividend

The company also announced the launch of a £20 million share buyback programme, which is set to launch immediately.

Domino’s Pizza hiked its HY1 dividend 6.7% to 3.2p against 3p in the previous year.

Fresnillo revenues spiral 14.2% on lower gold volumes and silver prices

Natasha Doris
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0
Fresnillo revenues spiral 14.2% on lower gold volumes and silver prices

Fresnillo shares dropped 5.5% to 687.8p in late morning trading on Tuesday after the miner’s HY1 revenue spiralled 14.2% to $1.2 billion.

Fresnillo highlighted an adjusted revenue fall of 12.6% to $1.3 billion, and attributed 91% of its decline to lower gold volumes and 9% to lower silver prices.

The FTSE 100 miner reported a gross profit drop of 39.7% to $365.9 million and an EBITDA slide of 38.5% to $459.1 million.

The company also mentioned a 53.8% fall in profit from continuing operations before net finance costs and income tax to $218.2 million, and a pre-tax profit decrease of 65.1% to $155.2 million.

Fresnillo confirmed a profit tumble of 54.3% for HY1 to $141 million.

Meanwhile, the firm highlighted a free cash flow of $93.5 million against $305.1 million the year before, and a 38.8% decline in cash generated from operations before changes in working capital to $459.5 million.

The mining group noted a strong balance sheet with cash and other liquid funds of $1.1 billion.

The company said it expected exploration costs of $180 million in FY 2022, with $10 million predicted to be capitalised.

“We benefit from a consistent strategy, exceptional assets, an exciting growth pipeline and a very strong balance sheet,” said Fresnillo CEO Octavio Alvídrez.

“We are well placed to deliver on our objectives this year. We look forward with determination and confidence.”

Fresnillo announced an interim dividend of 3.4c per share, representing a decrease of 65.7% from 9c in HY1 last year.

House prices climb 11% in 12th consecutive month of growth

Natasha Doris
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0
House prices climb 11% in 12th consecutive month of growth

The housing market still has some momentum as house prices rose 11% year-on-year in their 12th consecutive month of growth, according to the latest report by Nationwide.

Despite the ongoing cost of living crisis and soaring 9.4% inflation, high employment and a limited supply of homes kept prices climbing higher even amid the volatile market environment.

The 11% growth exceeded the 10.7% increase in June, however Nationwide said there were preliminary signs of a slowdown as mortgage approvals took a slight dip, and the cost of living crisis started to display some cracks in the market’s strength.

Analysts also pointed out the upcoming Bank of England meeting, which is expected to hike rates as high as 0.5% in a bid to tackle soaring inflation levels, and could serve to drag the housing market to a slowdown.

“High employment and a limited number of homes on sale have supported market growth with activity strong across all buyer types,” said Hargreaves Lansdown senior pensions and retirement analyst Helen Morrissey.

“However, like the Zoopla figures published earlier today there are early signs that the market is starting to slow. Mortgage approvals are starting to decline so we can expect to see activity become more muted as people tighten their belts as their bills continue to increase.”

“The prospect of further interest rate increases on the horizon may also make people think twice about whether they can afford to move home.”

Meanwhile, a return to office working could also dent the housing market, after a surge in workers searching for home offices in the lockdown era sent demand through the roof.

The rollout of back-to-office working might see fewer people looking for more green space and a work from home area away from the central city hubs.

“The pandemic and the growth of flexible working was a huge factor in recent house price activity,” said Morrisey.

“Not having to go into the office every day made people reconsider where they live and whether they could move elsewhere to get a bit more space.”

“This fuelled market behaviour in recent times but could dip as we emerge from the pandemic and more of us return to the office.”

BP revenues soar 85%, $3.5bn share buyback announced

Natasha Doris
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0
BP revenues soar 85%, $3.5bn share buyback announced

BP shares gained 3.6% to 406.7p in early morning trading on Tuesday following a reported strong Q2 for the energy giant, including an 85% surge in revenue to $69.5 billion.

The oil and gas company noted an underlying profit growth to $8.5 billion compared to $2.8 billion year-on-year, driven by strong realised refining margins, strong oil trading performance and higher liquids realisations.

BP added its profits were slightly offset by an average gas marketing and trading contribution, including an impact from the ongoing outage at Freeport LNG.

The company confirmed a profit of $9.3 billion compared to a loss of $20.4 billion in the last quarter, related to BP’s exit from its stake in Russian business Rosneft in March this year.

BP mentioned an operating cash flow of $10.9 billion against $5.4 billion the year before, and a net debt reduction to $22.8 billion compared to $32.7 billion.

Share buybacks and dividend

The energy firm also highlighted the completion of its $2.5 billion share buyback on 22 July, with $2.3 billion in shares repurchased in Q2.

The group announced an additional $3.5 billion share buyback scheduled for completion before its Q3 results, following its strong financial results for Q2 2022 and anticipation of high prices to continue going forward.

“BP’s expecting higher oil prices to continue into the third quarter and whilst that’s not good news for consumers, who are battling with higher energy and petrol prices already, it’s good news for cash flows,” said Hargreaves Lansdown equity analyst Matt Britzman.

“In the accommodative environment we’re seeing, BP’s able to push up its dividend and push on with a fresh $3.5bn buyback having only just finished a $2.5bn programme.”

“Markets reacted favourably to what was a set of results that beat estimates across pretty much all metrics.”

BP recommended a dividend of 6c per share, raising its dividend by 10% from 5.4c year-on-year.

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