British American Tobacco revenue climbs 3.7% on New Category growth

Natasha Doris
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British American Tobacco revenue climbs 3.7% on New Category growth

British American Tobacco shares dipped 0.1% to 3,465.5p in early morning trading on Wednesday following a 3.7% revenue climb to £12.8 billion in HY1 2022, led by New Category growth.

British American Tobacco highlighted a 45% expansion in its New Category sector to £1.2 billion in revenue, with a 2.1 million increase in non-combustible product consumers to 20.4 million.

The company reported 14.6% of group revenue was sourced from non-combustible products, representing a 2.2% growth from FY 2021.

“I am very proud that our continued New Categories growth momentum is driving Faster Transformation, with revenue growth of 45% in the first half of 2022, on top of 51% growth in FY2021,” said British American Tobacco CEO Jack Bowles.

“We are delivering both strong operational performance and transforming the business.”

Its vapour revenue climbed 48%, with an extension in Vuse global category share leadership to the number one US product in the sector.

Glo revenue rose 44%, with Glo hyper volume expanding its share gains across Europe, while Modern Oral revenue grew 37% on the back of Velo sales with continued volume share leadership across the continent.

British American Tobacco reported its New Category losses reduced by over 50% to £222 million.

The tobacco group announced a 0.6% rise in combustible revenue and a price/mix increase of 4.8%, along with a 0.1% value share uptick in Cigarettes.

British American Tobacco mentioned £1.5 billion in Quantum savings delivered six months ahead of scheduled, with an expected delivery in excess of £1.5 billion by the end of FY 2022.

However, the group mentioned a £957 million impairment charge linked to its exit from the Russian market following the invasion of Ukraine in late February this year.

The company highlighted an adjusted operating profit increase of 4.9% to £5.6 billion, including an adverse transactional FX impact of 1.5%.

Meanwhile, the firm noted a 0.9% rise in adjusted operating margin and an adjusted diluted EPS growth of 5.7% to 163p.

British American Tobacco confirmed an operating cashflow conversion of 77% on the back of strong continued cash generation.

FY 2022 guidance

The company said it was confident in its FY 2022 outlook, despite macro-economic headwinds.

“From an innovation perspective, the second half promises to be exciting. We are launching our new glo system proposition, hyper X2, and a new consumables range in the THP category, where we are enjoying strong growth,” said Bowles.

“In addition, we continue to build on our international leadership position in Vapour, expanding our portfolio with the launch of Vuse Go, our new disposable Vapour platform. This will be scaled-up and rolled out into a number of new markets following our successful UK pilot launch in the first half of 2022.”

“We are not immune, of course, to the increasing macro-economic pressures, exacerbated by the conflict in Ukraine. However, we are well positioned to navigate the current turbulent environment due to our powerful brands, operational agility and continued strong cash generation.”

British American Tobacco highlighted a dividend of 217.8p per ordinary share of 25p for the end of calendar year 2021.

The dividends were scheduled to be paid out in equal quarterly instalments in May 2022, August 2022, November 2022 and February 2023.

The first payment was issued on 4 May 2022, with the additional three payments scheduled for 17 August, 10 November and 2 February for shareholders on the London Stock Exchange.

Lloyds benefits from higher interest rates as mortgage book grows

UK Investor Magazine
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Lloyds benefits from higher interest rates as mortgage book grows

Lloyds added to the list of recent positive updates by FTSE 100 companies as the bank said it was thriving in the higher interest rate environment while their mortgage book jumped.

Despite putting aside £377m provisions for bad debts, the surge in net interest income to £6.1bn in the six month to June 2022 helped drive underlying profit of £3.7bn.

“Lloyds has stepped onto the half-year court fighting. Half year results show a serious improvement in net interest income, as rate rises and accelerated UK consumer activity boosted performance, with the difference between what Lloyds earns in interest on loans and the amount it pays in interest on deposits, moving in its favour,” said Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown.

“Impairment charges look large on paper but were in fact rather benign in nature. This, combined with the improved efficiency profile bodes well for future returns. The framework is set for much improved profitability too, which increases the chasm between expectations and the group’s valuation, potentially setting the scene for further buybacks.”

Lloyds highlighted a plethora of positive moves in key metrics including an enviable increase in net interest margin to 2.77% from 2.5% in the same period a year ago.

Lloyds mortgage book rose £3.3bn to £296.6bn as overall loans rose to £456.1bn. Total deposits also grew as the bank enjoyed inflows from customers.

The banking group’s outlook was particularly encouraging as the group said they expect net interest margin to rise further and capital regeneration to in excess of 200 basis points.

“In February we announced an ambitious strategy to transform our business, generate a stronger growth trajectory and enable the Group to deliver higher, more sustainable returns,” said Charlie Nunn, Lloyds Group Chief Executive.

“While the world has changed significantly since February, our strategic focus remains clear and disciplined. Our strong financial performance demonstrates the resilience of our business model and customer relationships, and has enabled us to enhance guidance for 2022.”

Everyman Media Cinema Group revenues climb to £40.7m on new cinema venues

Natasha Doris
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Everyman Media Cinema Group revenues climb to £40.7m on new cinema venues

Everyman Media Cinema Group shares gained 1.8% to 111p in early morning trading on Wednesday after the company announced a revenue of £40.7 million in HY1 2022 from £11.8 million in HY1 2019.

The group reported an EBITDA growth to £7.5 million compared to £900,000 in 2019.

Everyman Media commented its results were especially noteworthy, due to its comparative 2019 bringing a record set of figures to the firm.

The company attributed its strong results to an increased number of venues, high admissions and a rise in average spends, alongside a reduced VAT in Q1 2022.

The group ended the period with 37 cinemas in operation against 28 cinemas three years previously, after its opening of a five-screen venue in Edinburgh.

Everyman Media confirmed a well-progressed pipeline for HY2 2022 and 2023, with a minimum of six additional venues contracted to open.

Everyman Media said it expected to meet market expectations for FY 2022 following its positive results for the HY1 financial term.

“It has been a busy six months for the Group, as our exceptional venue teams entertained guests across the country,” said Everyman Media CEO Alex Scrimgeour.

“Despite well publicised headwinds we have managed to deliver record half year sales and EBITDA.”

“We remain confident that people’s enjoyment of cinema and specifically Everyman remains undiminished”.

Reckitt Benckiser shares jump on surge in health product sales and positive margin outlook

UK Investor Magazine
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Reckitt Benckiser shares jump on surge in health product sales and positive margin outlook

Reckitt Benckiser shares rose on Wednesday after the consumer group said it enjoyed higher like-for-like sales with health and nutrition products seeing a sharp increase.

Reckitt’s largely shook off the impact of a rising prices and pointed towards a portfolio of products that were less impacted by COVID and cost of living concerns.

“Reckitt’s resilient performance so far this year continues to impress. Price hikes were all but guaranteed given the double-digit inflation in certain costs the group’s seeing, but impressively volumes are still growing,” said Matt Britzman, Equity Analyst at Hargreaves Lansdown.

“That’s testament to the defensive nature of Reckitt’s portfolio, cleaning and hygiene products are hardly going to be the first things left off shopping lists when wallets are stretched.”

Reckitt Benckiser overall like-for-like group Q2 sales rose 11.9% as Health product sales rose 24.2% while Nutrition revenue increased by 26.8%.

An upbeat Q2 helped H1 actual revenues rise 4.4%, and 2.2% on a constant currency basis.

The stronger sales helped boost adjusted operating profit by 23.9% to £1,765m while margins rose by 290bps to 25.6%.

“We have delivered an excellent first half performance in 2022.  Innovation and improved in-market execution are driving sustained, broad-based revenue growth and market share momentum across our portfolio,” said Laxman Narasimhan, Reckitt Benckiser at Chief Executive Officer.

“Our brands less sensitive to the impact of Covid are growing ahead of our mid-single digit target, whilst our disinfection brands are performing as expected, well above pre-pandemic levels. The actions we have taken to broaden the shoulders of our Lysol and Dettol franchises, combined with our innovation and penetration building initiatives have built a significantly larger, sustainable base from which we will grow.”

Reckitts also said they expected to see LFL net revenue growth of +5 – 8% for 2022. Reckitt Benckiser shares were 4% higher at 6,636p at the time of writing.

musicMagpie revenues fall as Disc Media & Books demand slides

Natasha Doris
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musicMagpie revenues fall as Disc Media & Books demand slides

musicMagpie shares fell 9% to 45.5p in early morning trading on Wednesday following a reported revenue dip to £71.3 million in HY1 2022 compared to £72.8 million in HY1 2021.

The technology upcycler confirmed its growth in Consumer Technology mostly offset the expected post-Covid drop in Disc Media and Books demand.

musicMagpie announced Consumer Technology revenue made up 65% of total revenue, with a 15.9% growth year-on-year to £46 million against £39.7 million.

“I am pleased that the business has delivered a strong performance in our strategically important Consumer Technology division, which now represents two-thirds of our total revenue,” said musicMagpie CEO Steve Oliver.

Meanwhile, the company’s Disc Media and Books revenue fell 23.6% to £25.3 million from £33.1 million in HY1 as a result of Covid-19 lockdowns.

The circular tech economy group highlighted a gross profit slide to £19 million from £23.7 million, along with a gross margin decrease to 26.6% compared to 32.6% on the back of a change in overall product mix towards Consumer Technology, with a rising proportion sourced from intermediary wholesale partners.

The firm also reported a pre-tax loss of £1.0 million from a HY1 2021 loss of £17.7 million, with a post-tax loss of £3.2 million against £17.7 million in HY1 2021.

musicMagpie noted a net debt climb to £3.3 million against £1.8 million, in line with management expectations.

The company announced an investment into Consumer Technology with rental assets of £3.6 million from £1.4 million year-on-year, and investment in IT platforms of £2.2 million against £900,000 the year before.

The firm also confirmed its new committed three-year £30 million revolving credit facility with HSBC UK and Natwest, signed post-period, in a move to drive future rental growth.

FY 2022 guidance

musicMagpie commented its outlook included an expansion of Consumer Technology, with an expected rise in rental subscribers.

“I am also delighted with the progress being made in our device rental subscription service,” said Oliver.

“In light of the continuing squeeze on consumer spending, we believe that this will become an increasingly attractive option to a wider range of consumers seeking to replace their non-discretionary technology products in a cost-effective way.”

“Whilst the successful growth of this offering has a short-term compression on the financial performance of the business relative to a one-off sale, it will deliver higher revenue and EBITDA over the life of the device.”

The company added it anticipated growth from its partnership with sales channel Back Market, alongside additional listings with partners such as Amazon.

musicMagpie said it was confident in revenue and EBITDA for HY2 2022, with expected resilience in Disc Media and Books gross margins and sales from Back Market projected to carry the group into a strong HY2 financial period.

“Notwithstanding the challenges presented by the current macroeconomic uncertainty, we expect consumers will continue to seek ways to raise cash and save money and as a result, we are confident that the business is well positioned for future growth in H2 2022 and beyond,” said Oliver.

Peel Hunt believes that ITM Power will be a leader in electrolyser sector

Andrew Hore
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Peel Hunt believes that ITM Power will be a leader in electrolyser sector

Peel Hunt has initiated research on ITM Power (LON: ITM) and the broker believes it is in a good position to be a leader in the electrolyser market. Peel Hunt has set a target price of 500p.

Sheffield-based ITM Power develops and manufactures electrolyser technology that can produce hydrogen from green sources. This could be in the form of gas, ammonia or methanol.

An electrolyser uses electricity to split water into hydrogen and oxygen through electrolysis. The hydrogen can be stored as compressed gas or liquified.  

Electrolyser market

In 2020, there was 90 million metric tons of hydrogen produced using natural gas that was used by industrial businesses. There was 50% used in chemical manufacturing, 40% used in oil refining and 10% in iron and steel production. There are new uses that replace fossil fuels.

By 2030, the IEA expects green hydrogen to provide 85 million metric tons out of 210 million metric tons of hydrogen production. By 2050, green hydrogen should account for 340 million metric tons out of a total of 545 million metric tons.

Peel Hunt believes that ITM Power could become profitable in the year to April 2025. That is based on revenues of £233.8m. On that basis, there should not be any need for further cash injections in the next few years. ITM Power raised £250m last year.

Cash could still be around £135m by the end of April 2025, if the forecasts are proved correct. This could then help to fund the expansion of capacity.

The full year figures are due to be published on 8 August. Total backlog was 755MW at 1 June 2022. Revenues of £5.1m and a loss of £27.7m is estimated. ITM Power has been quoted for nearly two decades. It has taken a long time but it is getting to an important point in its development.

Franchise Brands revenues and profits surge on 20% rise in Metro Rod and Metro Plumb sales

Natasha Doris
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0
Franchise Brands revenues and profits surge on 20% rise in Metro Rod and Metro Plumb sales

Franchise Brands shares rose 3.1% to 148.4p in late afternoon trading on Tuesday following a reported 60% surge in revenue to £44.5 million in HY1 2022 against £27.8 million in HY1 2021.

The multi-brand franchise business highlighted an adjusted EBITDA growth of 74% to £7.3 million from £4.2 million the last year, alongside a statutory pre-tax profit spike of 83% to £4.8 million compared to £2.6 million.

The firm’s Metro Rod and Metro Plumb system sales grew 20% to £28.5 million, with its results exceeding management expectations in part linked to its recent acquisition of Filta, which served to expand the company’s international footprint.

Franchise Brands confirmed an adjusted EPS climb of 51% to 4p from 2.7p and a basic EPS growth of 89% to 3p compared to 1.6p.

The group mentioned net cash of £4.7 million at 30 June 2022 against £6.5 million year-on-year, after £1.3 million of costs associated with its Filta acquisition and its £1.7 million Willow Pumps contingent consideration payment.

“The Group has had a highly productive and successful first half, with record organic growth primarily driven by Metro Rod and the transformational acquisition of Filta bringing highly complementary services, an international footprint and considerably enhanced scale,” said Franchise Brands executive chairman Stephen Hemsley.

“Beyond the near term, we are confident our largest businesses, Metro Rod and Filta, are well positioned to capture the clear opportunities to grow from their current small share of large, fragmented markets where scale is becoming still more of a competitive advantage, including through the implementation of efficiency-enhancing technology.”

Franchise Brands announced a 50% interim dividend climb following its strong interim performance to 0.9p per share against 0.6p per share.

“As a highly profitable and cash generative business, with a strong ungeared balance sheet, we are in a robust financial position to weather uncertain economic conditions, take advantage of future organic growth and acquisition opportunities, and deliver growing returns to shareholders, as we have today through a 50% increase in our interim dividend,” said Hemsley.

Uniphar confirms strong outlook on steady M&A pipeline

Natasha Doris
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0
Uniphar confirms strong outlook on steady M&A pipeline

Uniphar shares declined 2.3% to 310p in late afternoon trading on Tuesday after the group confirmed an EBITDA and gross profit performance in line with management expectations in its HY1 trading update.

The healthcare services company reported a gross profit rise of 5%, driven by organic growth across each sector and outperformance in its Supply Chain and Retail segment.

Uniphar highlighted a normalised free cash flow conversion in line with medium term guidance and a strong liquidity position, despite macro-economic pressures.

The firm said it remained focused on is strategy of building a pan-European presence across its Commercial and Clinical business, and completed three acquisitions in 2021 to advance its ambitions in the region.

The group confirmed its integration of BETMSLs, CoRRect Medical and E4H were progressing according to schedule, and reported a targeted mid-to-single digit organic growth in gross profit in the segment for the medium term.

Meanwhile, Uniphar commented its Product Access platform delivered mid-to-single digit organic growth over the period, with similar expectations for the FY and targeted double-digit growth in the medium term.

The company added the integration of its Devonshire acquisition from 2021 was ongoing and making good progress.

Uniphar confirmed its acquisition of Navi Group for its Supply Chain and Retail business was expected to close later in 2022. The group highlighted a target of low-to-single digit organic growth in gross profit across the medium term for the sector.

FY 2022 guidance

The firm commented its outlook remained strong, with M&A continuing to play a key role in its compounding growth strategy, while maintaining a disciplined approach to capital allocation.

“The Group has performed strongly during the period. The resilience of our business model and the diversity of our product offering has once again been demonstrated with each division delivering organic growth in gross profit during the period,” said Uniphar CEO Ger Rabbette.

“Once again, our Supply Chain & Retail division has outperformed its medium-term guidance demonstrating the benefits of our market leading position and the importance of continued investment in this division.”

“While the macro-economic environment remains uncertain, we have been successful in using our scale and deep relationships with our long-term partners to mitigate inflationary headwinds. We remain confident and are on track to achieve our strategic objective of doubling EBITDA within 5 years of IPO.”

Ergomed revenue climbs 24%, ADAMAS integration brings additional benefits

Natasha Doris
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0
Ergomed revenue climbs 24%, ADAMAS integration brings additional benefits

Ergomed shares increased 7.5% to 1,086p in late afternoon trading on Tuesday after the group announced a total revenue growth of 24.8% to £69.9 million in HY1 2022.

Ergomed commented it anticipated total revenue and adjusted EBITDA for the FY term to be in line with market expectations.

The group said it currently had a strong operational cash flow, with a cash balance of £12 million after its £24.2 million net cash purchase of international specialist consultancy ADAMAS.

Ergomed mentioned its integration of ADAMAS was progressing well, with further synergistic benefits expected to materialise down the timeline.

The firm reported it was debt free with available debt facilities which recently increased from £30 million to £80 million.

The company noted a total order book of £284.5 million, with a climb of 18.7% since 1 January 2022. The group subsequently confirmed high visibility into HY2 2022 and beyond.

“Ergomed has delivered further significant strategic progress in H1 2022. Our strong organic growth has continued, with expansion into new territories and further strengthening of the Company’s Board and leadership team,” said Ergomed executive chairman Dr Miroslav Reljanović.

“We also continued to execute our disciplined M&A strategy with the acquisition of ADAMAS. This progress once again demonstrates Ergomed’s robustness, resilience and ability to sustain high growth, notwithstanding the challenging macro-economic environment.”

“The Board expects to deliver the anticipated trading growth and financial results for the full year in line with current market expectations , and we look forward with confidence to the rest of this year and beyond.”

FTSE 100 gains on strong corporate results

Natasha Doris
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0
FTSE 100 gains on strong corporate results

The FTSE 100 gained a 0.5% boost to 7,343.5 after a slate of positive results from the UK and US markets helped the FTSE 100 outperform European indices and US futures.

“The FTSE 100 made some modest progress on Tuesday morning as earnings reports on both sides of the Atlantic turn from a trickle to a flood,” said AJ Bell investment director Russ Mould.

“Some really big hitters report in the US later today, including Coca-Cola, McDonalds as well as Microsoft and Alphabet.”

“These could really define an earnings season which, up until now, has been pretty resilient given the backdrop.”

However, US markets slid in advance of the looming US Federal Reserve interest rates decision tomorrow, which is currently predicted to see a rate hike of up to 75% to tackle soaring 9.4% US inflation.

The Dow Jones dipped 0.3% to 31,851 in pre-open trading, with the S&P 500 falling 0.3% to 3,954.5 and the NASDAQ decreasing 0.5% to 12,292.5.

“Another defining moment this week comes with tomorrow’s decision on US interest rates. How hard will the US Federal Reserve push – will it serve up another 75 basis point rise as is widely expected? Or will it dial back a touch?” said Mould.

Unilever

Meanwhile, the FTSE 100 saw Unilever shares climb 2.7% to 4,022.2p as the firm enjoyed a €29.6 billion turnover in HY1 2022.

However inflation made its worrying mark by eating into the company’s operating margins over the financial period.

Unilever operating profits gained 1.7% to €4.5 billion, but its operating margin fell 200 basis points to 15.2% year-on-year.

The consumer goods firm announced an underlying profit rise of 4.1% to €5 billion and an underlying profit margin fall of 180 basis points to 17% as a result of cost input inflation.

“It’s no surprise to see inflation and global uncertainty called out as headwinds, but importantly for Unilever work done raising prices is keeping sales and profits moving in the right direction,” said Hargreaves Lansdown equity analyst Matt Britzman.

“Juggling higher prices and weaker consumers is a tough act to nail, so far Unilever looks to be doing a decent job.”

Mould added: “Consumers trading down to cheaper alternatives is an obvious risk for Unilever but, rather than trying to compete on price, the company is better off protecting itself from inflationary pressures by testing its pricing power.”

“In fairness the volume declines weren’t too alarming, suggesting its brands retain their hold over shoppers for now. Longer term, protecting the integrity of these brands by not compromising on quality to reduce costs is important.”

Compass Group

Compass Group joined the top risers with a 2.3% increase to 1,887.5p after its Q3 2022 results displayed a return to thriving business post-Covid.

The foodservice company reported a 49.7% growth in revenue, with all regions operating above 2019 levels over the period.

Compass Group also noted a 40 basis point rise in its underlying operating margin from 5.8% in HY1 2022 to 6.2% in the term.

Its net new business expanded 9.1% and customer retention rate remained high at 96.1%.

“Some may be disappointed that Compass have not been able to fully absorb current margin pressures, given their renowned strengths in micro-managing costs within the group,” said Hargreaves Lansdown Select fund manager Steve Clayton.

“But the bigger picture is that the group has now put the pandemic firmly behind it, has restored margins above 6% and doubled its run-rate of new business growth, whilst keeping client retention above 96%.”

Oil rises on supply fears

The price of oil rose on supply fears, as Russian energy company Gazprom confirmed gas supplies through the Nord Stream 1 pipeline to Germany would fall to 20% of capacity.

The threat is set to throw European countries into hot water, as states struggle to stock up on supplies in advance of the winter season.

European Commission President Ursula von der Leyen previously asked European regions to reduce gas usage by 15% from August until March in a move to ration supplies after von der Leyen accused Putin of attempting to “blackmail” Europe into paying for gas in Roubles.

A draft law was passed today by EU energy ministers, which included voluntary steps to cut gas consumption and launch mandatory measures if insufficient supplies were saved across the trading bloc.

Benchmark Brent Crude hit $106 per barrel. Shares in the FTSE 100 oil giants gained, with BP increasing 1.7% to 393.5p and Shell climbing 1.6% to 2,103.2p.

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