DS Smith rides Covid recovery wave to 26% revenue growth, passes inflation onto customers

Natasha Doris
-
0
DS Smith rides Covid recovery wave to 26% revenue growth, passes inflation onto customers

DS Smith shares were up 0.3% to 1,467p in early morning trading on Tuesday after the group reported a 26% increase in revenue to £7.2 billion in FY 2022 as a result of corrugated box volume growth and higher selling prices across the firm.

The company announced an adjusted operating profit rise of 29% to £616 million, with its price recovery serving to offset increased input costs, along with a pre-tax profit leap of 71% to £378 million compared to the last year driven by higher operating profits and a reduction in financing costs.

Smith highlighted a return on sales uptick of 0.1% to 8.5%, falling below its target of 10% to 12% as a result of significant cost inflation limiting annual performance.

The firm delivered a ROACE growth of 2.6% to 10.8% year-on-year, which fell within its target of 12% to 15% within HY2 with a climb to 12.1% on the back of improving returns from recent investments and acquisitions, including its acquisition of Europac in 2019, alongside a higher operating profit.

“We have delivered strong operational, environmental and financial results. The actions we have taken, driven by our strategic focus on our customers and their changing needs, including an ever-increasing focus on sustainability, have resulted in record volume growth,” said DS Smith CEO Miles Roberts.

“This, together with price increases which have offset significant cost inflation, has driven a strong improvement in profitability and high cash generation.”

“We continued to recycle capital out of mature, non-core assets with the disposal of the De Hoop paper mill, whilst reinvesting in new packaging sites that meet customer demand and offer attractive financial returns.”

Smith confirmed an estimated continued recovery in price and cost management to offset inflationary costs, and noted strong early momentum in FY 2023.

The group mentioned it expected corrugated box volume rise in the range of 2% to 4% and a capital expenditure rise to approximately £500 million in customer-led growth opportunities at attractive financial returns.

“The new financial year has started well, building on the momentum from the previous year. Whilst there remains considerable uncertainty about the overall economic environment, our expectations remain unchanged,” said Roberts.

“Strong customer demand reinforces our confidence to invest in the business, with capital expenditure expected to further increase in the current year. We currently expect to see 2-4 per cent growth in our volumes, aided by our focus on resilient end markets, a strong performance in the US and the opening of new sites in regions where demand is buoyant.”

“This growth, combined with the benefits of ongoing pricing momentum and careful management of our cost base gives us confidence for the year ahead and is expected to result in a further substantial improvement in our performance.”

However, analysts warned to keep an eye on Smith’s financials as the cost of living crisis continued to bite.

“DS Smith saw demand for the cardboard boxes it makes continue with strength even though the group passed input cost inflation on to consumers. This is the benefit of DS Smith’s business—from the Amazon boxes lining the streets to the brightly coloured packages lining supermarket shelves, the group has an endless pool of consumers,” said Hargreaves Lansdown equity analyst Laura Hoy.

“The only question mark is whether demand will hold up moving forward. DS Smith’s customers won’t need more boxes if existing ones remain on the shelves, and ecommerce could start to slow  as people rein in their spending.”

“With the cost of living squeeze looming large in the background, this isn’t out of the question. But with a finger in several different industries, DS Smith is well placed to cope with this.”

Smith noted an adjusted EPS climb of 35% to 30.7p and a 24% rise in dividends to 15p per share for FY 2022.

Directors dealings: Continuing share purchases at Alphawave IP

Andrew Hore
-
0
Directors dealings: Continuing share purchases at Alphawave IP

Sutardja Family LLC, an organisation associated with Alphawave IP (LON: AWE) executive director Sehat Sutardja, has been buying shares in the data transmission technology business. The latest is the purchase of 387,668 shares at 139.52p each. The current share price is 141.4p
This £541,000 investment follows share purchases on Monday, Tuesday, Wednesday and Thursday of last week and the Friday before that. They totalled around 1.6 million shares, which were purchased at prices between 144.51p and 159p each. Despite the buying the acquisition price has fallen with every purchase. Back in May, f...

Euromoney one-quarter higher on bid approach

Andrew Hore
-
0
Euromoney one-quarter higher on bid approach

Financial information publisher and events organiser Euromoney Institutional Investor (LON: ERM) has received a bid approach at near to its all-time high share price. Back in September 2019, the share price ended the day at 1498p and the possible cash offer is 1461p a share.

The potential bidder is a consortium of Astorg Asset Management and Epiris. The initial approach was at 1175p, and it has been increased four times since then. The share price ended the day 26.1% higher at 1380p. The interim dividend of 6.1p a share will still be paid on 24 June.

The potential offer represents 27 times prospective earnings for the year to September 2022, falling to 22 next year.

The Euromoney board is continuing discussions with the bid consortium. The bid would value Euromoney at £1.6bn. Net cash was £12.5m at the end of March 2022.

Fastmarkets

One of the attractions of the Euromoney business is Fastmarkets, the price reporting and analytics services business. This has extensive data covering minerals, metals, mining, forestry products and some agricultural products. The London Medical Exchange (LME) has adopted Fastmarkets pricing for contracts.

It is important that clear and independent analysis on pricing of commodities is available, particularly in inflationary times. Fastrack revenues grew 17% in the first half compared with 14% for the group, which included a sharp recovery in events revenues.

Ocado seeks £575m for investment

Andrew Hore
-
0
Ocado seeks £575m for investment

Online shopping technology and services provider Ocado (LON:OCDO) is raising £575m via a placing and retail offer via PrimaryBid. The share price will be determined by a bookbuilding process. The cash is required to ensure that the company can fund existing and expected customer commitments in the mid-term and continue to grow.

The share price has risen 41.4p to 872.7p on the day, although the fundraising was not announced.  until 4.52pm. The share price was £16.78 at the beginning of 2022, although it has recovered from its low in May.

Ocado expects the shift to online grocery shopping will continue and it has been accelerating the roll out of the Ocado Solutions Platform globally. This puts it in a strong position and many large grocery retailers have signed up.

Management believes that existing customer commitments provide a path towards revenues of more than £6.3bn and group EBITDA of £750m plus.

Debt

Management has also agreed a £300m revolving credit facility. Peel Hunt had forecast net debt of £1.06m at the end of November 2022, rising to £1.71bn one year later. That was mainly due to £800m of capital investment this year and a further £771m next year.

Ocado needs to continue to invest in technology development to stay one step ahead of competitors. The potential EBITDA mentioned would not be enough to cover the cost of this investment and its funding, however, spending

Ocado is expected to be cash generative after interest payments, but it would not be able to cover the investment it is making in the business. The additional cash will reduce net debt, but it will be substantial given that it will be years before enough cash to cover investment spending.

Union Jack Oil hits landmark $7m revenue from Wressle project

Natasha Doris
-
0
Union Jack Oil hits landmark $7m revenue from Wressle project

Union Jack Oil shares were up 1% to 27.8p in late afternoon trading on Monday following a reported $7 million in net revenues achieved from the Wressle hydrocarbon development located within licenses PEDL180 and PEDL182 in North Lincolnshire.

Union Jack Oil holds a 40% economic interest in the development, which has a current constrained flow-rate of 750 barrels of oil per day (bopd) with the well in-excess of the prognosed 500 bopd from the Ashover Grit reservoir.

The company reported that the well continued to produce under natural flow with zero water cut, with Union Jack Oil remaining cash flow positive covering all G&A, OPEX and contracted or scheduled CAPEX expenses, including any budgeted drill activities for at least the next year.

The oil and gas firm has cash balances and short term receivables over £8.4 million on 20 June 2022 and confirmed it was also debt free.

Union Jack Oil mentioned an expected maiden profit in the coming unaudited HY results ending 30 June 2022.

“The ongoing excellent operational and financial performance at Wressle continues to bolster the Company’s cash position, balance sheet and income statement,” said Union Jack Oil executive chairman David Bramhill.

“Net revenues from Wressle have now exceeded US$7,000,000 and, as a result of this exceptional performance, plus revenue contributions from the Keddington oilfield, the Fiskerton Airfield oilfield and North Sea Royalties.”

“The Board now expects to report a maiden profit in the forthcoming unaudited half year results ending 30 June 2022”.

Agronomics picks up 47% equity stake in Liberation Labs

Natasha Doris
-
0
Agronomics picks up 47% equity stake in Liberation Labs

Agronomics led the founder’s round of precision fermentation group Liberation Labs through an initial investment of $627,000 for a 47% equity stake, the company announced today.

Agronomics is set to make the investment using its own funds in a bid to address the “pressing need” for full-scale precision fermentation facilities.

The move follows Agronomics’ existing investments in precision fermentation-produced proteins from its portfolio companies including Perfect Day, The EVERY Company, Motif FoodWorks and Geltor. Investment in the precision fermentation sector reportedly hit $1.7 billion in FY 2021.

Agronomics commented that the investment in full-scale production came as more companies looked to commercialise and scale-up their offerings for the consumer market.

The current fermentation facilities were made primarily for pharmaceutical purposes and lack the manufacturing capacity and equipment to produce protein alternatives on a massive consumption scale.

Liberation Labs was founded to tackle the widening gap in fermentation capacity, with companies making alternative proteins such as egg and dairy replacements lacking the resources to scale up production to hit customer demand.

“Liberation Labs will deliver precision fermentation without compromise for its customers, and aims to become the global leader for alternative protein production, by commercialising modern and purpose-built manufacturing facilities at a cost structure that frees the world from the costs of industrialised agriculture,” said Liberation Labs co-founder and CEO Mark Warner.

Agronomics confirmed that Liberation Labs was currently evaluating six geographies to locate its initial fit-for-purpose facility, which is set to have a total fermentation capacity of millions of litres upon completion.

“This is a hugely exciting investment for us, and it is a privilege to help facilitate the first and only precision food fermentation facility,” said Agronomics co-founder and executive director Jim Mellon.

“Existing contract manufacturing capacity will need to be scaled up by 1,000x in the coming decades to facilitate broad based production and adoption of proteins produced via fermentation.”

“Liberation Labs’ solution will set the standard for the precision fermentation industry with cost effective, reliable and strategically situated facilities to meet growing consumer demand across the globe. It is a crucial step in the advancement of cellular agriculture.”

Forward Partners shares tumble on crumbling ventures portfolio

Natasha Doris
-
0
Forward Partners shares tumble on crumbling ventures portfolio

Forward Partners shares tumbled 21% to 47p in late afternoon trading on Monday after the company announced that its previously estimated commercial progress across its venture portfolio reported in its February update had taken a downward slide in the last quarter.

The technology capital firm cited the turmoil in the public markets, with the ratings of fast-growth listed technology stocks being hit particularly hard amidst ongoing geopolitical volatility.

Forward Partners added that it had seen continued downward pressure on valuations and funding rounds which were taking longer to close as investor confidence weakened.

It noted that the delay in funding rounds would result in key portfolio companies moving from being valued with reference to the price of the last round of investment to being valued on a revenue multiples basis, with the multiple calculated from the enterprise values of listed peers, which are trading at far lower values year-on-year.

Forward Partners commented it expected continued downwards pressure on the valuations at which it holds its investments over FY 2022.

The group said that it expected a mid-to-high 20s percent decline in its ventures portfolio for HY1, down on previous market guidance of approximately £117 million for 31 December 2021.

The company reported significant cash reserves of £31 million at the close of FY 2021, which is being managed conservatively with the firm’s existing cost base.

Forward Partners commented that it remained confident in the longer term growth aspects of its portfolio, with good momentum in HY1 2022 including strong performances from portfolio companies Spike, Silico and Gravity Sketch.

SysGroup revenues fall 16% on Covid-19 disruption

Natasha Doris
-
0
SysGroup revenues fall 16% on Covid-19 disruption

SysGroup shares were down 1.6% to 26p in early afternoon trading following a reported 19% slide in revenue to £14.7 million in FY 2022 against £18.1 million in FY 2021, alongside a gross profit decline of 15% to £8.9 million from £10.5 million as a result of disruption from Covid-19.

SysGroup highlighted an adjusted EBITDA fall of 3% to £2.8 million compared to £2.9 million, along with an adjusted EBITDA rise of 3% to 19% from 16% year-on-year, and noted its performance delivered in line with management expectations.

The company mentioned an adjusted pre tax profit decrease of 2% to £2.04 million from £2.09 million, with a 192% surge in pre-tax profit to £600,000 against £210,000 the year before.

The firm reported a 16% drop in cashflow from operations to £2.4 million compared to £2.9 million and a net cash jump of 59% to £2.9 million compared to £1.8 million.

“The Adjusted EBITDA performance and strong cash generation in a year when turnover was impacted by COVID highlights the strength of our business model. We have invested to drive future growth whilst maintaining prudent financial discipline throughout the business,” said SysGroup CEO Adam Binks.

“Operationally, the Group is ideally placed to take advantage of conditions as they begin to normalise and we have started to see the early green shoots of such a recovery.”

SysGroup mentioned two acquisitions in its post period-end developments, with the purchase of Edinburgh company Truststream Security Solutions, a cyber security solutions firm which provides Sysgroup with a base in Scotland.

The company also bought Independent Network Solutions, which trades as Orchard Computers and additionally enhances the firm’s Southwest presence and complements its South Wales operations.

“The acquisitions of Truststream and Orchard added further customers, expertise and geographical reach and demonstrate our ongoing commitment to be consolidators in this highly fragmented market,” said Binks.

“M&A activity in our sector is picking up and we believe there will be further opportunities that we can take advantage of during the course of this year.”

“With a clear strategy for both organic and inorganic growth, the Board is confident in the future.”

The technology company said it saw initial “green shoots of recovery” in its outlook, with M&A activity and its client pipeline supporting its businesses going forward in FY 2023.

The company noted an adjusted EPS rise of 3% to 3.6p compared to 3.5p and a basic EPS increase of 80% to 0.9p from 0.5p. SysGroup did not declare a dividend for FY 2022.

Alien Metals completes acquisition of Vivash Gorge project from Zenith Minerals

Natasha Doris
-
0
Alien Metals completes acquisition of Vivash Gorge project from Zenith Minerals

Alien Metals announced its completed acquisition of 100% of the Vivash Gorge iron ore project in Pilbara, western Australia from ASX-listed company Zenith Minerals after satisfying all conditions in the Binding Heads of Agreement.

Alien Metals previously said it considered Vivash Gorge a strategic acquisition to its IOCA portfolio of direct shipping ore (DSO) projects based in Pilbara.

The Vivash Gorge project is located approximately 80 kilometres west of the Tom Price Township in the southern region of the Brockman Syncline, and is accessible through the Nanutarra-Wittenoom road, station tracks and purpose built exploration tracks.

The mining firm added that the addition of Vivash Gorge would bring its portfolio to a total number of three strategically located iron ore projects within the Pilbara sector, with a combined tenement package of 108k each surrounded by the iron ore majors with significant opportunities for further development.

“We are pleased to have completed the acquisition of the Vivash Gorge Iron Ore Project from Zenith Minerals,” said Alien Metals CEO Bill Brodie.

“We thank the team at Zenith for their support in this process and look forward to getting on the ground in the coming quarter.”

“We feel it’s a great fit to our iron ore portfolio which adds further potential to the Company’s growth in the high grade iron ore sector.”

FTSE 100 rebounds as bargain-hunters pick up cyclical stocks

Natasha Doris
-
3
FTSE 100 rebounds as bargain-hunters pick up cyclical stocks

The FTSE 100 was 1% higher in Monday trade as the market recovered from last week’s selloff after Bank of England and US Federal Reserve decisions to hike rates.

“Following last week’s brutal session for stocks globally, a 0.2% rise in the FTSE 100 is a good enough reason to be more optimistic about the equities market. Stability often comes before recovery and markets being more composed would suggest investors are no longer panicking,” said AJ Bell investment director Russ Mould.

Stocks rebounded after a dramatic decline, with cyclical sectors such as energy and financials on the move.

Retail companies were surprisingly on the rise despite the continued cost of living crisis as the UK speeds towards 11% inflation in autumn. Next shares were up 0.9% to 5,992p and JD Sports Fashion shares rose 0.4% to 106.8p.

“Fears over a slowdown in consumer spending have hurt shares in retailers and leisure operators in recent weeks, so it was interesting to see many of these stocks among the top risers on Monday,” said Mould.

Meanwhile, IAG shares gained 3.3% to 116.2p despite the slate of cancellations across UK airports as customers flocked to airlines for the summer holidays, and hospitality company Whitbread saw an uptick of 1% to 2,633.5p as the Premier Inn owner enjoyed a rise in holiday demand.

“International Consolidated Airlines … Next and Whitbread were among the FTSE 100 stocks nudging ahead.”

Hargreaves Lansdown senior investment and markets analyst Susannah Streeter added: “British Airways owner IAG is also flying higher … But the overall turbulence affecting the industry is continuing.”

“Capacity problems affecting airlines show little sign of easing any time soon, with fresh cancellations due to baggage handling faults now appearing on screens at Heathrow. [The] headwinds now constraining summer operations will be another delay to long awaited recovery for the industry.’’

Housing stocks fell as the Bank of England’s interest rates hike to 1.25% seemed to finally put a dent in the gravity-defying industry. Barratt Development shares dropped 3.5% to 454.9p, Berkeley Group shares declines 3.5% to 3,754p, Persimmon shares slid 3% to 1,878p and Taylor Wimpey shares dipped 2.5% to 117.8p.

Associated British Foods shares rose 0.5% to 1,618p after the company reported a Q3 revenue growth of 32% to £4 billion on the back of rising prices and Primark stores reopening after the Covid-19 lockdown.

Meanwhile, mining stocks dropped on widespread fears of an economic slowdown, with Anglo American falling 0.7% to 3,321.2p, Antofagasta dipping 0.4% to 1,268.2p, Endeavor dropping 0.6% to 1,783p, Fresnillo sliding 0.7% to 795.7p and Rio Tinto declining 2.1% to 5,068p.

Iron ore prices fell 9% in China overnight and started a route in the miners that spilled over into this morning’s session.

“Uncertainty about the global outlook is also weighing on miners and commodity firms with Rio Tinto, Anglo American, Antofagasta and Glencore among the fallers in early trade on the FTSE 100,” said Streeter.

1...661662663...1,773Page 662 of 1,773