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.

Greggs profits remain flat despite sales growth as cost inflation bites

Natasha Doris
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0
Greggs profits remain flat despite sales growth as cost inflation bites

Greggs shares rose 2.2% to 2,124p in early morning trading on Tuesday after the food company reported trading in-line with management expectations and a growth in total sales to £694.5 million in HY1 2022 against £546.2 million the year before.

Greggs confirmed a 22.4% like-for-like sales rise in the period, with a 12.3% growth compared to 2019 levels.

The UK baked goods chain announced a pre-tax profit increase to £55.8 million compared to £55.5 million the last year, with the relatively flat profit attributed to the re-introduction of business rates, rising VAT and higher levels of cost inflation.

“The return of business rates means bakery-favourite Greggs has been unable to lift profits, despite an impressive increase in sales. This disappointing development is wholly outside the group’s control, but it also comes at a time when cost inflation is taking a real bite out of things,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.

“For the full year, higher food, packaging and energy costs are expected to push overall cost inflation for the chain to 9%. It’s reasonable to expect that number to be revised upwards, putting pressure on Greggs to shift more pastry-encased goodies.”

The franchise highlighted a good cash position and liquidity, with net cash at the close of HY1 of £145.7 million after payment of its special £40.6 million dividend in April 2022, representing 40p per share.

“Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering,” said Greggs CEO Roisin Currie.

The company is well-placed in the cost of living crisis for its reputation as a more budget-friendly food option, however with inflation set to hit 11% later this year and soaring energy costs eating into consumer budgets, Greggs might find its offerings cut out of UK diets entirely as the crisis worsens.

“Its position at the lower end of the value spectrum means Greggs is well placed to capture demand from those looking for a bite to eat, while times are tough,” said Lund-Yates.

“However there comes a point when cash-strapped consumers rein in that sort of spending altogether, which would be problematic for Greggs.”

“Ultimately, Greggs has a sturdy balance sheet and room to stomach disruption, but an abrupt change in consumer spending habits could see the much-needed strategy rejuvenation taken off the boil, which would have far reaching implications.”

Greggs noted a diluted EPS rise to 44.8p from 43.2p, and commented its FY 2022 outlook remained unchanged despite the currently volatile market.

Greggs announced an ordinary interim dividend per share of 15p against 15p year-on-year.

Why companies left AIM in July

Andrew Hore
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0
Why companies left AIM in July

There were three departures from AIM during July, including one that moved to the Main Market. The other two were taken over. On top of that, Immediate Acquisition was cancelled and immediately returned as digital bank Fiinu (LON: BANK).
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7 July 2022
Secure Income REIT
Fully listed LXi REIT (LON: LXI) made an agreed offer for Secure Income REIT, which valued the property investor at £1.5bn. The bid was based on the comparative March net tangible asset valuations and is 3.32 LXi shares for each Secure Income REIT share. There is a partial cash alternative of 118.88p and 2.488 LXi shares fo...

New standard listing: First Class Metals explores Canada

Andrew Hore
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0
New standard listing: First Class Metals explores Canada

First Class Metals is seeking gold, base metals and/or battery metals in Canada. The cash raised will finance ongoing exploration at North Hemlo and other projects.
AIM-quoted Power Metal Resources (LON: POW) has a 28.2% stake in First Class Metals, having sold its Schreiber-Hemlo project interests in Ontario for 333,334 shares at 300p each in September 2011 and then subscribed for a further 9,588 shares at the same price. There was a subsequent bonus issue. The value of the stake has increased from £1.03m to £1.85m. There are warrants to subscribe for 517,705 shares at 10p each.
The shares in...

RHI Magnesita profits rise as inflation costs successfully passed onto consumers

Natasha Doris
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0
RHI Magnesita profits rise as inflation costs successfully passed onto consumers

RHI Magnesita shares fell 8.4% to 2,062p in late afternoon trading on Monday, despite a reported revenue growth to €1.5 million against €1.2 million year-on-year in its HY1 2022 results.

The group mentioned a reported EBITDA climb to €177 million from €136 million, along with a pre-tax profit of €142 compared to €125 million the year before.

RHI Magnesita confirmed €293 million in price increases successfully passed off to consumers since HY1 2022 in a move to fight the impact of rising inflation in energy, raw materials and labour costs.

Meanwhile, the company noted significant market share gains in steel on the back of investment in production network and inventory support earnings, linked to customer prioritisation of supply security.

The group commented its net debt climbed to €1.2 million against €1 million in the previous year, in line with management expectations as reduction in inventory volumes was offset by the growth in inventory and accounts receivable values due to cost inflation and soaring prices.

The firm said its FY 2022 expectations remained unchanged, with margins set to be maintained via price increases and support from cost saving initiatives.

However, the company added its global growth outlook was impacted by inflation and monetary policy response, labour and energy market tightness and ongoing supply chain challenges.

“In the first half of 2022 we further demonstrated the benefits of prioritising customer deliveries in an environment of continued supply chain volatility,” said RHI Magnesita CEO Stefan Borgas.

“Our investment in inventories to ensure our customers remain supplied with essential refractories has underlined the importance of supply reliability and has enabled us to simultaneously increase prices and gain market share.”

“Following major investments in our production network, SG&A reduction and progress on our sales strategies, the Group is in a strong position to maintain its leadership position in the refractory industry and to navigate future challenges.”

RHI Magnesita announced an EPS of €2.06 from €2.01 in HY1 2021, and a flat dividend per share of €0.50.

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