Rio Tinto reports weakened economic outlook, Q2 production results

Natasha Doris
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Rio Tinto reports weakened economic outlook, Q2 production results

Rio Tinto shares declined 2.8% to 93.2p in early morning trading on Friday, after the company reported a weakened economic outlook as a result of the Ukraine war, tighter monetary policy and Covid-19 restrictions in China.

The mining group acknowledged prices for its commodities fell over the period, linked to rising recession concerns and a drop in consumer confidence.

Rio Tinto further mentioned inflationary pressures hitting its supply chains were currently exacerbated by trade disruptions, food protection and the international focus on securing energy supplies.

Rio Tinto Q2 Production

The company also reported its Q2 production results, which included the delivery of its first ore at its Pilbara greenfield mine, Gudai-Darri, and the firing of its first draw bell at its Oyu Tolgoi underground project in June.

“We strengthened our operational performance at a number of sites, which we will now replicate across the portfolio. The delivery of first ore at Gudai-Darri, our first greenfield mine in the Pilbara for over a decade, increases mine capacity and supports production of our flagship Pilbara Blend,” said Rio Tinto CEO Jakob Stausholm.

“We also fired the first draw bell at the Oyu Tolgoi underground project in June, and started producing scandium and tellurium. These critical minerals are being extracted from existing waste streams at our titanium operation in Quebec and copper operation in Utah, without the need for new mining.”

“We are committed to transforming our culture and building better relationships. In May, we signed a Heads of Agreement with the Puutu Kunti Kurrama and Pinikura (PKKP) people which will guide the co-management of PKKP country where mining takes place.”

Rio Tinto reported a 5% growth in its Pilbara iron ore shipments on a 100% basis to 79.9 Mt and a 4% rise in its Pilbara iron ore production to 78.6 Mt against Q2 2021.

The mining company mentioned a 3% increase in Bauxite to 14.1 Mt, a 10% slide in Aluminium to 731 kt and a 9% climb in mined copper to 126 kt.

Rio Tinto also noted a 2% drop in titanium dioxide slag to 293 kt and a 4% fall in IOC iron ore pellets and concentrate to 2.6 Mt.

Production Guidance

The firm commented its iron ore shipments and bauxite production guidance remained subject to weather and market conditions.

The company said its Pilbara shipments guidance remained dependent on ramp-up of Gudai-Darri and Robe Valley, alongside the availability of skilled labour and the mangement of cultural heritage, including any possible impacts from the Aboriginal Cultural Heritage Act 2021.

Rio Tinto confirmed its Pilbara iron ore 2022 unit cost guidance remained unchanged at $19.50 to $21.00 per tonne, with an operating cost guidance based on an Australian dollar exchange rate against the US dollar of 0.71.

Rio Tinto highlighted a Copper C1 unit cost guidance in 2022 of 130 to 150 US cents per pound, remaining unchanged year-on-year.

Burberry Q1 sales suffer from China lockdowns

Natasha Doris
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Burberry Q1 sales suffer from China lockdowns

Burberry shares fell 5.6% to 1,555p in early morning trading on Friday after the fashion company announced its Q1 2023 sales suffered from the impact of lockdowns in Mainland China in its latest trading update.

The retailer reported a 1% increase in store sales compared to a 90% rise in Q1 2022, with the lockdowns in China contributing to the drag on sales growth.

“Burberry’s first quarter performance has sorely disappointed the market, with concerns around lacklustre growth rates,” said Hargreaves Lansdown analyst Sophie Lund-Yates.

“Mainland China is acting as a serious drag for the group, which is overshadowing successes elsewhere, including increased domestic spending in other markets, which is needed to offset lost tourism spending from Chinese visitors to Europe.”

Burberry highlighted a retail revenue of £505 million against £479 million year-on-year, marking a 5% change in reported FX.

Burberry confirmed comparable store sales outside mainland China rose 16%, with a 47% climb in Europe, the Middle-East, India and Africa (EMEIA) store sales.

It further mentioned a 4% decrease in America against “very tough comparatives”, with reported growth in its outerwear and bags businesses.

However, the fashion group noted double-digit comparable growth in leather goods and outerwear outside mainland China, with good performance in its Lola handbag range and strong performance in its rainwear and jackets segments.

Burberry commented its sales were driven by a programme of brand activators to boost customer engagement, including its Lola campaign, pop-ups and pop-ins and TB Summer Monogram takeovers.

The company also launched its £400 million share buyback scheme over the term, with the total repurchase scheduled for completion by the close of FY 2023.

Burberry announced a target of high-single digit revenue growth and approximately 20% margins in its medium-term.

The firm noted the volatile macro-economic environment, and commented that its mainland China store sales were currently providing promising returns at reopened stores in the region.

The retailer also confirmed it was working to manage the headwind from inflation.

Burberry added it expected a currency tail wind of £190 million in revenue and £90 million in adjusted operating profit in FY 2023 based on FX rates at 11 July 2022.

“The group’s medium-term ambitions for revenue growth are admirable, but exactly how this will be achieved is the big question for newly minted CEO – ex-Gianni Versace leader Jonathan Akeroyd,” said Lund-Yates.

“The heavy lifting for Burberry’s strategic pivot is largely over, and the question now turns to one of delivery.”

“The group’s done very well to forge all these new commercial tools – now it’s time to use them.”

Lloyds share price: how much will a recession cap gains?

Natasha Doris
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Lloyds share price: how much will a recession cap gains?

Lloyds has remained a darling of UK investors despite the crushing cost of living crisis and ongoing recession alarm bells. With market commentators increasingly suggesting there may be a recession on the horizon, how much could Lloyds shares be capped in the short-term by a period of economic contraction in the UK?

The Lloyds share price has thus far remained resilient and held the important support level at 40p. Indeed, at these lower levels, Lloyds does seem attractively valued.

Lloyds has a current PE ratio of 5.4 and a forward PE ratio of 6.4, indicating analysts expect a mild drop in earnings in the coming months.

The firm is currently undervalued when compared to its UK banking peers, so even with the anticipated drop in earnings, the shares are still great value against their competitors.

Compared to other FTSE 100 banking groups, Barclays has a PE ratio of 3.6 and a forward PE ratio of 5, however Natwest has a PE ratio of 9.1 with a forward PE ratio of 7.7, while Standard Chartered has a similar PE ratio of 9.1 against a forward PE ratio of 7.2.

It is worth noting that Lloyds boasts a strong dividend yield of 4.8%, and a dividend cover of 3.9, which suggests the bank has ample room to increase dividends, despite the risk of a recession.

Furthermore, the stock price has fallen 14% year-to-date, leaving a key opening to potentially buy the dip and take advantage of the shares while they remain undervalued compared to peer banking groups.

Recession Fears

As a retail bank, Lloyds is sensitive to reduced consumer spending, however. The bank is the largest mortgage lender in the UK, and the company already highlighted trouble in that department in its Q1 2022 financial results.

The firm noted a £72m impairment to its mortgage book in Q1 2022 which suggests the first sign of pressure of mortgage holders after an impairment credit in the same period a year prior. A downturn in economic activity could see further impairments.

The cost of living crisis has already seen hints of a slowdown in the UK housing market as the house prices become unattainable for a rising number of consumers who currently have their sights set on paring spending back to the essentials.

However, despite the recession alarm bells, interest rates are set to continue rising from their current levels of 1.25% as the Bank of England seeks to stamp out the secondary effects of surging 9.1% inflation. This will benefit the Net Interest Margin for Lloyds and the general banking industry.

Furthermore, the generous dividend payments seem to be locked in for the coming months, and the company appears well-positioned to weather the short-to-medium term shocks of a recession.

Lloyds handed out a dividend of 2p per share at the end of 2021, and launched a £2 billion share buyback earlier this year as a reflection of its strong capital position.

The Lloyds share price will probably suffer a dent if recession settles in, but the company will likely recover, and its capital position appears sufficient to handle the disruption and bounce back from any market chaos.

Trustpilot Group shares plummet despite 25% revenue climb

Natasha Doris
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Trustpilot Group shares plummet despite 25% revenue climb

Trustpilot Group shares plummeted 21.8% to 73.3p in late afternoon trading on Thursday despite a reported 25% total revenue climb at constant currency to $73 million in HY1 2022 against $62 million in HY1 2021 in its latest trading update.

The group confirmed an annual recurring revenue (ARR) rise of 23% to $149 million compared to $134 million.

Trustpilot further mentioned a 22% increase in total bookings to $87 million from $75 million over the financial term.

The company said its total bookings reflected continued strength in the UK, Europe and rest of the world, alongside an 8% constant currency revenue growth in North America, where Trustpilot commented it expected its new market strategy to start delivering an acceleration in bookings growth starting in HY2 2022.

Trustpilot added that despite the volatile macro-economic environment, it anticipated constant currency revenue rises in line with previous expectations, and reiterated its outlook for adjusted EBITDA and breakeven in FY 2024.

SSP Group revenues climb to 87% of 2019 levels as transport recovery continues

Natasha Doris
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0
SSP Group revenues climb to 87% of 2019 levels as transport recovery continues

SSP Group shares were down 2.5% to 230.9p in late afternoon trading on Thursday after the travel food firm announced a revenue climb to 87% of 2019 levels in its Q3 2022 trading update.

The group reported its revenue was driven by an ongoing recovery in passenger numbers and longer passenger presence times in markets.

SSP Group confirmed its recovery had been led by domestic and leisure travel in its air and rail segments, with a slower rate of rail commuter recovery.

The company added it had seen good recovery across all regions, with sales in continental Europe leading its revenues with 93% of 2019 levels.

The firm noted a 91% level of 2019 sales in North America, 82% in the UK and an average of 75% across the rest of the world, with strong performances in India, Australia and Thailand.

However, SSP Group mentioned lower levels of recovery in China and Hong Kong linked to ongoing travel restrictions across both sectors.

The SSP Group highlighted an average of 72% 2019 revenue levels for the nine months from 1 October 2021 to 30 June 2022.

The company said its outlook saw it well-positioned to navigate the macro-economic uncertainty in the coming year, notwithstanding the current challenges of airport disruptions, labour shortages and industrial action in certain air and rail markets.

SSP Group commented its medium-term expectations for profitability remained unchanged, with its pipeline of contracts expected to add approximately £500 million in revenues by 2025 against 2019 levels.

The company further mentioned it expected to deliver sales in the general estimate of £2.1 billion and an EBITDA margin at the upper end of SSP Group guidance at 6%.

Dr Martens trading in line with expectations as Covid recovery continues

Natasha Doris
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0
Dr Martens trading in line with expectations as Covid recovery continues

Dr Martens shares were up 0.1% to 240.8p in late afternoon trading after the footwear company reported its trading was in line with market expectations.

The firm announced in its Q1 2023 trading update that Ecommerce was in line with Q4 2022, with a continued recovery in retail.

Dr Martens mentioned an increase over 85% of the FY financial term in its wholesale order book.

The company also noted the implementation of its AW22 price rises from early July, alongside the opening of 10 new stores over the period.

Dr Martens confirmed its third-party factories were open and operating at 90% to 95% planned capacity, along with a reported steady improvement in shipping lead times.

AIM movers: Kibo Energy extends power purchasing agreement and EQTEC falls after cash call

Andrew Hore
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AIM movers: Kibo Energy extends power purchasing agreement and EQTEC falls after cash call

Kibo Energy (LON: KIBO) has extended a power purchasing agreement in Gauteng, South Africa from ten to 20 years. This is for a waste to energy plant held by the 65%-owned subsidiary Sustineri Energy. The internal rate of return for the project is increased from 11-14% to 15-18%. Construction will start in the first quarter of 2023, and it could take just over one year to complete.  The Kibo Energy share price has risen by one-quarter to 0.125p.

EQTEC (LON: EQT) shares have slumped following the £3.75m fundraising at 0.5p a share This was announced at the end of yesterday’s trading although the share price did fall from 0.725p to 0.65p. Today, it has fallen below the placing price and it is 26.9% lower at 0.475p. The cash is required to push ahead with clean energy generation projects.

Atalaya Mining (LON: ATYM) reported second quarter copper production below forecast at 13,400t. Guidance for the full year has been reduced by 4% to 52,000t-54,000t. Costs will be 5%-10% higher even though a Spanish energy price cap is in force. The share price slumped 12.9% to 247.5p.

Quieter trading conditions meant that first half figures from broking services provider Jarvis Investment Management (LON: JIM) were lower, although this is not a great surprise. Revenues fell 23% to £6.3m and pre-tax profit fell by one-third to £3.1m. Net cash has risen to £4.2m. WH Ireland has cut its 2022 pre-tax profit forecast from £7.3m to £7m. Jarvis Investment Management shares fell 16.7% to 161.5p. A second quarterly dividend of 3p a share had already been declared.

LifeSafe Holdings (LON: LIFS) joined AIM on 6 July and raised £3m in a placing at 75p. the share price went to a small premium, but it has fallen back, and it is down a further 13% to 60.5p today. All but one of today’s six trades are sells. The other is a deal that is worth less than £100 and classed as unknown. LifeSafe has developed fire safety products, using eco-friendly fluid.

TransGlobe Energy Corporation (LON: TGL) is merging with VAALCO Energy (LON: EGY) to create an Africa-focused exploration and production company. VAALCO is offering 0.6727 of one share for each TransGlobe share. TransGlobe shareholders will own 45.5% of the enlarged group. The transaction is valued at $307m. TransGlobe shares are 23.6% higher at 325p. VAALCO Energy shares have fallen by 4.32% to 498p.

Appreciate Group (LON: APP) chief executive Ian O’Doherty is leaving the board, which means that the redemption product provider does not have a permanent finance director or chief executive. The business has been reorganised since 2018 and the benefits are starting to show through. The share price has been relatively strong this year, but it fell 6.3% to 28.2p on the news.

Portmeirion Group (LON: PMP) remains cautious about the outcome for 2022, although analysts have maintained their full year forecasts. The share price indicates investor concerns and fell 10.4% to 367.5p. The first half trading statement of the homewares supplier states that interim revenues will be 5% higher at £45m. Shipping costs are reducing, although other costs have risen. Full year forecast revenues are 3110m and pre-tax profit is £10.1m, although this is dependent on fourth quarter trading.

Ex-dividends

Anpario (LON: ANP) is paying a 7p a share final dividend and the share price fell 5p to 525p.

Character Group (LON: CCT) is paying a 7p a share interim dividend and the share price is unchanged at 495p.

Caledonia Mining Corp (LON: CMCL) is paying a quarterly dividend of 14 cents a share and the share price fell 25p to 895p.

Crystal Amber Fund Ltd (LON: CRS) is paying a final dividend of 10p a share and the share price fell 4p to 112p.

D4T4 Solutions (LON: D4T4) is paying a final dividend of 2.07p a share and the share price fell 1p to 242.5p.

Elixirr International (LON: ELIX) is paying a final dividend of 4.1p a share and the share price fell is unchanged at 605p.

Oil and gas producer i3 Energy (LON: I3E) is paying a dividend of 0.1425p a share and the share price fell 0.275p to 23,875p.

Kitwave Group (LON: KITW) is paying an interim dividend of 2.5p a share and the share price fell 3.25p to 175.25p.

Marks Electrical (LON: MRK) is paying a final dividend of 0.67p a share and the share price fell 1p to 80.5p.

MS International (LON: MSI) is paying a final dividend of 7.5p a share and the share price fell 5p to 287p.

Sanderson Design (LON: SDG) is paying a final dividend of 2.75p and the share price fell 3p to 113.5p.

Shoe Zone (LON: SHOE) is paying an interim dividend of 2.5p a share and the share price fell 5p to 165p.

The Mission Group (LON: TMG) is paying a final dividend of 1.6p a share and the share price fell 0.5p to 56.5p.

FTSE 100 dips on lower commodities prices

Natasha Doris
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0
FTSE 100 dips on lower commodities prices

The FTSE 100 was down 0.7% to 7,099.8 in midday trading on Thursday after commodities prices fell and dragged mining groups down.

Anglo American shares declined 3.5% to 2,590p, Antofagasta dropped 1.2% to 1,029p, Endeavor slid 0.7% to 1,643.5p, Fresnillo fell 1.5% to 673.8p, Glencore decreased 1.9% to 410.3p and Rio Tinto sank 3.1% to 4,640.2p.

Meanwhile, the price of Brent Crude fell below the $100 per barrel mark which it had been so tenaciously remaining ahead of, dropping to $97 per barrel.

Shell shares fell 2.1% to 1,959.4p and BP shares dipped 1.8% to 370.3p on the sinking oil prices.

The bad news for commodities marked a slight relief for other companies on the index, as the lowering prices in materials represented a lower cost base for firms which have been struggling to keep their heads above water among surging cost inflation.

“As Morrissey woefully sang, ‘Stop me if you think you’ve heard this one before’. Investors are getting sick of hearing about inflation, interest rates and falling stock markets. While that tune is still playing loudly, some of the pains we’ve seen over the past year are starting to fade,” said AJ Bell financial analyst Danni Hewson.

“Commodity prices are easing back, implying input cost pressure will relax slightly. Shipping rates are also starting to fall, albeit due to softening demand.”

“Although it will take time for these factors to feed through into the system, the end of sky-high inflation could be in sight. It will hopefully soon be time to change the record, but for now, The Smiths’ song looks like it is stuck on repeat for just a bit longer.”

Barratt Developments

Barratt Developments shares were down 0.4% to 463.3p after the housing group announced an expected FY 2022 profit slightly ahead of market expectations between £1.05 to £1.06 billion.

The company further mentioned a return to pre-pandemic levels of completion with 17,908 completions compared to 17,243 the last year.

However, cost inflation took a toll on Barratt’s, with the group confirming a 6% rate of build cost inflation and levels currently at around 9% to 10%.

“Britain’s largest housebuilder, Barratt Development’s latest update is indicative of both the opportunities and challenges facing the sector right now,” said Hewson.”

“House prices may have risen rapidly enough to cover these higher costs so far but Barratt, like its peers, is running just to stand still in terms of profitability and there is a significant risk that raw material and labour costs continue to grow.”

“At least, unlike Persimmon, it is not being forced to downscale its volume targets just yet, suggesting its relationships with suppliers, procurement strategy, simplified build process and attractiveness as an employer are paying off.”

Severn Trent projects £50m in ODI outperformance payments for FY 2023

Natasha Doris
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0
Severn Trent projects £50m in ODI outperformance payments for FY 2023

Severn Trent shares were down 0.3% to 2,827p in late morning trading on Thursday following an announcement that the group expected at least £50 million in customer ODI outperformance payments in FY 2023 in its trading update.

The utilities company reported a rise in operating costs outlined in its technical guidance, in particular for its energy and chemical expenses.

Severn Trent said its environmental performance remained on track to match or exceed its target on 100% of its ODIs for the financial year.

The group also noted its was confident in retaining its four-star Environmental Performance Assessment Rating for 2021, and expected confirmation from the Environment Agency in the near term.

The firm mentioned it was benefiting from its decade of investment in renewable energy, with 145 GWh in green energy generated in Q1, equating to over 50% of its consumption and representing a 4% growth against Q1 2021.

Severn Trent commented it expected to release its updated Sustainable Financing Framework on its website in July, detailing its environmental, social and governance performance and targets, enabling the utilities company to raise financing for sustainable investment and expenditure.

Barratt Developments expects FY 2022 profits slightly ahead of market expectations on higher house prices

Natasha Doris
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Barratt Developments expects FY 2022 profits slightly ahead of market expectations on higher house prices

Barratt Developments shares were down 0.9% to 460.9p in late morning trading on Thursday, after the company announced an underlying pre-tax profit slightly ahead of market expectations between £1.05 billion and £1.06 billion in its FY 2022 trading update.

The housing developer reported a return to pre-pandemic completion levels, with 17,908 completions over the financial term against 17,243 the previous year.

The company noted total completions were impacted by the deferral into FY 2023 of a London apartment block comprised of 221 homes, reflecting resource delays in the construction process.

Barratt Developments highlighted an average selling price for private homes up to £341,000, rising to £375,400 for houses sold in the forward order book.

“Another housebuilder, another set of results pointing to resilient housing demand. Completions were slightly lower than expected but came in ahead of pre-pandemic levels,” said Hargreaves Lansdown equity analyst Matt Britzman.

“More crucially though, demand looks to be holding up in the forward order book despite rising house prices.”

“Testament to the ongoing resilience of the private house buyer, seemingly undeterred by a drop in real income as inflation and a cost-of-living crisis start to take their toll.”

The firm also mentioned build cost inflation of 6% across the period, although the level is currently at 9% to 10%.

“It almost feels inevitable that a broader easing of demand is on the cards given the wider conditions and news that build costs are running 9-10% higher at the minute is a little hard to stomach,” said Britzman.

“Nonetheless, Barratt’s doing all it can to make hay while the sun shines, with a significant increase in the value of land buying last year – propped up by a very healthy net cash position on the balance sheet.”

“Not for the first time, planning delays are being called out as a headwind – not something housebuilders want to battle with given everything else that’s going on.”

Barratt Developments commented it intended to declare an ordinary dividend based on FY 2022 dividend cover of 2.25 times its adjusted net income.

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