Spectris profits fall in HY1, share buybacks to recommence and dividend raised

Natasha Doris
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Spectris profits fall in HY1, share buybacks to recommence and dividend raised

Spectris shares dropped 5.8% to 2,930p in late afternoon trading on Monday following a reported pre-tax profit fall of 77% to £41.8 million in HY1 2022 compared to £181.9 million the last year.

The precision measuring firm announced a statutory operating profit dip of 2% to £54.3 million against £55.4 million, along with an operating margin fall of 0.8% to 9.5% from 10.3%.

Spectris confirmed a 6.1% growth in sales to £570.2 million compared to £537.5 million, with a 20% rise in like-for-like order growth and a record order book, providing strong visibility for HY2.

The firm also drew attention to an 11% like-for-like sales growth driven by market shares gains, with a 6% increase in statutory reported sales.

The group mentioned a 55.1% decline in cash generated from operating to £43.4 million against £96.7 million.

Spectris further noted an EPS from continuing operating tumble of 82.6% to 26.5p compared to 152.4p year-on-year.

The company highlighted its completed sale of Omega for £410 million headline proceeds in July, delivering additional shareholder value.

“Over the past three years, we have transformed the Group into a more focused, more profitable and more resilient business, with the ability to compound growth at a higher rate through the cycle,” said Spectris CEO Andrew Heath.

“Today, Spectris is in a position of strength with a robust balance sheet, well positioned in attractive end markets, with strong fundamentals, supported by key sustainability themes to deliver structural growth. We have fantastic, engaged people all contributing to a purpose-led, high-performance growth culture.”

“I am pleased with our progress in the first half of 2022. We are continuing to see healthy demand for our products and services, with strong LFL growth in both orders and sales. While vigilant to the macro environment and alert to signs of changes in demand, we have confidence in our business and have increased our investment for growth in R&D, to enhance our customer offerings.”

The group confirmed an expected high-single-digit order growth and margin expansion for FY 2022, boosted by its Spectris Business System and pricing already present in the order book.

Spectris raised its dividend 5% to 24.1p against 23p the year before. The company also reported the completion of its £150 million share buyback, with the remaining £150 million scheduled to recommence.

FTSE 100 starts week on front foot following strong HSBC and Pearson results

Natasha Doris
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0
FTSE 100 starts week on front foot following strong HSBC and Pearson results

The FTSE 100 started the week on a positive note gaining to 7,465.9 in early afternoon trading on Monday as results from bank heavy weight HSBC helped lift the index.

The positive corporate results continued to roll in, with banking giant HSBC and education company Pearson hitting the ground running with high-flying HY1 reports.

“The FTSE 100 started the week higher following some relatively positive corporate updates, notably from index heavyweight HSBC,” said AJ Bell investment director Russ Mould.

“Education publishing specialist Pearson was among the winners on Monday as it stuck with full year guidance and reported a significant increase in profit following stronger sales.”

HSBC

HSBC shares soared 10.3% to 834.8p after the banking group reported a $9.2 billion post-tax profit in HY1 2022.

The company announced an adjusted pre-tax profit drop of $900 million to $10.7 billion, and a small decline in revenue to $25.2 billion.

The results still came in ahead of market expectations, as analysts noted the money HSBC set aside to cover bad debts over the financial term.

Meanwhile, firm remained set in its decision to not break off its Asian operations and list them in Hong Kong, despite intense pressure from major shareholder Ping An.

“Breaking up is never easy to do and HSBC is being pretty steadfast in resisting the push from major shareholder Ping An to divorce its Asian operations from the rest of the bank and list that part in Hong Kong,” said Mould.

“As evidence for the merits of HSBC’s current strategy, today’s first half results were, for the most part, pretty favourable.”

“Profit came in ahead of expectations, if a little below last year’s total as the company was forced to set aside cash to cover bad debts.”

HSBC reported a dividend of 9c per share for the HY1 period, and pledged to reinstate quarterly dividends from next year, with an eventual return to historical shareholder payouts.

Pearson

Pearson shares climbed 9.9% to 831.7p after the education firm announced an adjusted operating profit rise of 22% to £160 million in HY1 2022.

The group credited its profit growth to a positive trading performance, FX benefit and property savings, offset slightly by inflation, portfolio investment and phasing costs in FY 2021.

Pearson confirmed an underlying sales increase of 6% to £1.7 billion, driven by its 16% Assessment and Qualifications expansion and a 22% growth in its English Language Learning sector.

“The increasingly digital-focused company is less exposed to some of the cost pressures facing other types of businesses and this is helping it in the current environment,” said Mould.

“For a long time Pearson has been negatively impacted by structural changes in its market which saw demand for high-margin sales of expensive physical, academic textbooks disappear.”

“Now the business seems to have got its act together to face a world where an increasing amount of learning is done online.”

The company recommended a dividend of 6.6p for HY1, with its £350 million share buyback continuing and over £165 million in shares repurchased as of 29 July 2022.

China Manufacturing Slowdown

China’s manufacturing purchasing managers’ index dropped to 49.0 in July from 50.2 in June, missing analyst expectations of 50.4 for the month.

The results reflected a dramatic slowdown in the country’s production after a summer of intensive Covid-19 lockdowns pumped the brakes on Chinese production.

Stocks tied to the country took a hit, with Asia-focused fashion group Burberry dipping 0.3% to 1,789.2p and Scottish Mortgage Investment Trust falling 0.6% to 856.3p.

The price of Brent Crude oil fell to $102 per barrel as fears of reduced consumption in the largest global consumer dragged the commodity’s price down.

“Elsewhere, oil prices were under pressure after weak Chinese manufacturing figures which really show the continuing impact of lockdowns on the country’s economy,” said Mould.

“China remains one of the biggest consumers of oil and other commodities.”

Lloyds share price: should I buy as a core dividend allocation?

Natasha Doris
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0
Lloyds share price: should I buy as a core dividend allocation?

Lloyds has maintained a strong slate of results in its latest HY1 report, and the banking group has remained on solid ground in the last few months despite a current trend of macro-economic volatility.

There is an argument to be made that Lloyds shares are not an ideal investment right now, especially as its position as the UK’s largest mortgage lender might be on track to become somewhat more of a liability than an asset in the current housing market.

The company reported a mortgage book growth of £3.3 billion to £296.6 billion year-on-year, suggesting the slowing housing market is yet to catch up to the bank.

However, the firm’s guidance for the coming year included an anticipated growth in net interest margin above 280 basis points, return on tangible equity of 13% and capital generation in excess of 200 basis points.

Lloyds share price chart

Lloyds confirmed its margin headwinds from mortgage book growth and pricing were sufficiently offset by UK interest rate rises, deposit growth, structural hedge earnings and continued funding and capital base optimisation.

Lloyds dividend

The strong performance saw Lloyds share price jump in the wake of the results, helped by positive news on the Lloyds dividend.

The company increased its dividend 20% to 0.8p per share in the HY1 financial period, reflecting confidence in its returns going forward.

Lloyds boasts a dividend yield of 4.5 and a more than adequate dividend cover of 3.9 to cover the group in the event of shocks to the sector, and leaves plenty of room for dividends to increase substantially in the future.

The bank has a PE ratio of 5.8, indicating the shares are still somewhat undervalued despite the possibility of tricky and volatile market environment in the coming months.

The housing market is showing mild signs of slowing down, however the bank appears well-positioned for growth despite any risk to its mortgage income.

The shares are currently undervalued, and the company is in a strong position to increase payouts in the years to come, making Lloyds shares a solid choice for long-term income seekers.

Oil prices fall to $102 on China manufacturing slowdown

Natasha Doris
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Oil prices fall to $102 on China manufacturing slowdown

The price of oil took a hit on Monday after China reported a manufacturing purchasing managers’ index result below analyst estimates of 49.0 from the expectation of 50.4.

The price of Benchmark Brent Crude fell to $102 per barrel, with the soaring prices enjoyed by the commodity on the back of the Ukraine war starting to tumble as the world’s largest consumer felt the impact of Covid-19 lockdowns over summer this year.

On similar ground, mining groups have downgraded their production guidance on expectations of lower consumption across China, including FTSE 100 mining giant Rio Tinto.

“Questions over demand are outweighing serious supply constraints, suggesting industrial outlooks are bleak,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

“The biggest contributor to this recent shift is without a doubt the news that factory activity in the world’s largest oil importer, China, has fallen unexpectedly.”

“For the global consumer, this is likely to be met with relief as the cost to fill up cars recedes, but the broader theme of uncertainty sadly outweighs these short-term wins.”

China manufacturing growth report misses market expectations on Covid lockdowns impact

Natasha Doris
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0
China manufacturing growth report misses market expectations on Covid lockdowns impact

China reported a manufacturing growth below market estimates, following on from its dramatic slowdown in economic activity last month to 0.4% growth, coming far below analyst expectations of a 1.2% forecast.

China’s manufacturing purchasing managers’ index slid to 49.0 in July from 50.2 in June, dropping beneath the market estimated of 50.4.

Analysts confirmed the effects of Covid-19 lockdowns were seen in core trends, along with overall concerns linked to the economy as a result of drastic monetary tightening moves.

The report pointed out contractions in output, new orders, buying levels and export levels.

The news has served to make the market uneasy, adding to the pressures of soaring inflation in the UK and US, and recession fears spiking across the global market scope.

“The latest National Bureau of Statistics of China manufacturing purchasing managers’ index unexpectedly fell to 49.0 in July, from 50.2 in the previous month and missing market forecasts of 50.4,” said Hargreaves Lansdown lead equity analyst Sophie Lund-Yates.

“There was a very mixed bag hidden within the results, with core trends showing the negative effect of new lockdowns in key cities and general concerns over the global economy, following sharp monetary tightening efforts.”

“Output, new orders, buying levels and export orders all shrank. This latest data set does very little to offset concerns around darkening global economic output, especially when put together with a further easing of sentiment.”

AIM movers: Wishbone Gold encourages and Alien Metals disappoints

Andrew Hore
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AIM movers: Wishbone Gold encourages and Alien Metals disappoints

Wishbone Gold (LON: WSBN) has announced encouraging drilling results at the Red Setter project in Western Australia. It is the best performer on the day with a 23.3% share price increase to 13.25p. The current hole has been drilled to a depth of 370 metres and the core will be sent for assay in the coming weeks. The previous hole intersected visible mineralisation and it will be re-entered after the current hold is completed.

Vast Resources (LON: VAST) says that it will commence molybdenum concentrate production in August at its Baita Plai polymetallic mine in Romania. The mine produced 268.8 DMT of copper concentrate in the second quarter, which was a 17% increase on the previous quarter. Last week, it was announced that there will be an official opening ceremony for the Takob joint venture in Tajikistan. Vast receives a participation equivalent to a 12.25% royalty over sales of non-ferrous concentrate and other metals produced by the Takob processing project. The share price jumped 21.1% to 0.775p.

Fulcrum Utility Services (LON: FCRM) recovered by 13.6% to 5.85p. The utility connections business is still struggling. Full year revenues were 31% ahead at £61.8m, but it continues to lose money.

Franchise lettings group Belvoir Group (LON: BLV) revenues increased 11% in the first half of 2022 with lettings growth offsetting lower property sales. The main growth came from financial services. Net debt is £3.1m. Full year pre-tax profit is expected to dip to £9.7m before returning to growth in 2023. The share price firmed 6.25% to 4.25p.

Minoan Group (LON: MIN) shares have risen 14% to 1.225p following Friday afternoon’s interim results announcement. Minoan reduced its interim loss, and the repayment of secured debt has been extended to the end of 2022. Discussions continue about the resort development of the project in Greece.

Deepverge (LON: DVRG) subsidiary Modern Water has gained orders worth £2.1m to treat wastewater from chemical plants in India and provide desalination services in North Africa. All Membrane Brine Concentration technology will be used. These orders will be delivered in 2022 and 2023. The share price rose 4.92% to 16p.

Alien Metals (LON: UFO) has received the laboratory analysis results for its Mexican projects at San Celso and Donovan 2. There were no significant intersections at San Celso and access has been denied for drilling of the priority target. There was an anomalous section at Donovan 2 which returned an assay of 0.33% copper with lead and zinc. However, the sample recovery was sub-standard for the industry. A zone of weakly anomalous zinc was identified, and this could indicate a potential target at greater depth. The share price fell 11.1% to 0.6p.  

Symphony Environmental (LON: SYM) is raising £1m at 18p a share from Sea Pearl Ventures and there are four million warrants associated with the placing that are exercisable at 25p each. The share price declined 7.9% to 17.5p. Sea Pearl will own a 17.4% stake in the oxo-biodegradable plastics technology developer. First half revenues dropped from £4.9m to £3m due to logistics problems and orders delayed. Contracts that have been announced in recent weeks will help the second half to be much stronger. Zeus still expects 2022 revenues to improve from £9.2m to £11.9m and Symphony Environmental should break even.

Ascential widens operating loss to £35.2m despite double-digit revenue growth

Natasha Doris
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0
Ascential widens operating loss to £35.2m despite double-digit revenue growth

Ascential shares decreased 6.4% to 273.2p in late morning trading on Monday after a widened reported operating loss of £35.2 million in HY1 2022 compared to £2.4 million in HY1 2021.

Ascential attributed the loss to the amortisation of acquired intangibles at £17.5 million and share-based payments at £7.6 million, alongside non-trading items for acquisition earnouts, transaction and integration costs, and the expensing of build costs for its new ERP and Salesforce systems at £33.2 million.

The firm also noted a non-cash charge of £31.4 million for the impairment of the Edge Digital Shelf intangibles, along with the expenses of its strategic shift to refocus its foundational services on the leading global marketplaces.

Acential confirmed its results were in line with market expectations, with an adjusted EBITDA of £67.2 million against £42.8 million the last year, and a margin of 25.8% compared to 27.8%.

The company announced a revenue climb across all four sectors of £260.7 million against £154.3 million, reflecting continued structural growth in end markets, assisted by a bounce-back from major events.

The group highlighted an adjusted EPS profit from continuing operations of 8p against 5.7p the last year.

“Ascential has had an excellent first half of the year, with strong growth in group revenue and profit in line with expectations. Each of our segments delivered double digit revenue growth: all the more pleasing given the challenging macro backdrop,” said Ascential CEO Duncan Painter.

“We are making good progress with our mission to make Digital Commerce the number one, global real-time platform that powers eCommerce by enhancing our capabilities, expanding our partnerships with leading eCommerce marketplaces and increasing our addressable market through complementary acquisitions.”

Ascential commented its outlook included strong results for its Digital Commerce and Product Design businesses in FY 2022, with continued recovery anticipated for its Marketing and Retail and Finance sectors.

“Despite the current macro-economic uncertainty, all our businesses are well positioned to drive the success of Ascential now and in the long term, as we continue to invest to extend our market leadership and maximise our future profitable growth,” said Painter.

XP Power swings to HY1 loss on supply chain and inflationary challenges

Natasha Doris
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0
XP Power swings to HY1 loss on supply chain and inflationary challenges

XP Power shares fell 6.5% to 2,840.6p in late morning trading on Monday, after the company announced a reported operating loss of £45.2 million in HY1 2022 from an operating profit of £17.1 million the last year.

The power solutions firm announced a pre-tax loss of £47.4 million compared to a pre-tax profit of £16.4 million year-on-year, alongside a diluted loss per share of 180.6p against an earnings per share of 68.1p.

XP Power confirmed an operating cash flow loss of £13.1 million compared to an operating cash flow of £19.7 million in the previous year.

Meanwhile, the company highlighted a net debt of £102 million from £20.3 million in HY1 2021.

However, XP Power mentioned a 3% uptick in revenue to £123.6 million against £119.9 million the year before.

“While underlying demand remained strong across all sectors, a combination of external supply chain factors, which restricted our capacity to deliver to customers, and inflationary pressures have produced a challenging backdrop in the first half,” said XP Power chair James Peters.

“The team is working hard to mitigate these industry-wide challenges, with an improvement in performance in Q2 being sustained into the early weeks of the second half. While we are confident of a substantially better performance in the remainder of 2022 supported by the inventory on hand and a record, committed order book, there remains a wider range of full year outcomes than in prior years including scenarios where full year outturn is at the lower end of current analyst expectations.”

“Longer term, the Group’s prospects remain bright, we are excited by the additional capacity to come from our new Malaysian facility and the opportunities that will provide. We are confident of delivering strong revenue growth and significant long term value creation as we outperform our end markets.”

The group noted an interim dividend of 37p, remaining flat against the last year.

HSBC post-tax profits hit $9.2bn in HY1 2022

Natasha Doris
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0
HSBC post-tax profits hit $9.2bn in HY1 2022

HSBC shares gained 5.5% to 542p in early morning trading on Monday, after the banking firm announced an $800 million post-tax profit growth to $9.2 billion in HY1 2022.

The bank reported a reported pre-tax profit fall of $1.7 billion to $9.2 billion, reflecting a net charge for expected credit losses and additional credit impairment charges, against a net release in HY1 2021.

HSBC confirmed an adjusted pre-tax profit slide of $900 million to $10.7 billion.

The company highlighted a slight revenue drop to $25.2 billion as a result of foreign currency translation impacts and HY1 2022 losses on scheduled business disposals.

Meanwhile, HSBC reported an adjusted revenue rise of 4% to $25.7 billion on the back of higher net interest income and high revenue performance from Global Foreign Exchange in Global Banking and Markets.

The banking firm added its reported ECL were a net charge of $1.1 billion, reflecting stage three charges of $800 million, alongside extra allowances to reflect increased economic uncertainty and inflation, slightly offset by remaining Covid-19 reserves.

HSBC also noted an operating expenses decrease of 4% linked to foreign currency translation impacts, while its adjusted operating expenses fell 1%.

The group confirmed a return on tangible equity of of 9.9%, marking a 0.5% growth year-on-year, including a 2.3% annualised impact of a deferred tax asset gain.

Meanwhile, its CET1 ratio reached 13.6%, representing a 2.2% decline against 31 December 2021.

HSBC commented its FY 2022 outlook remained positive, with an anticipated net interest income of at least $31 billion for FY 2022 and a minimum of $37 billion for FY 2023.

“Our first-half performance reflects the continued impact of our strategy, with gathering revenue momentum and tight cost control,” said HSBC CEO Noel Quinn.

“The progress that we’ve made growing and transforming HSBC means we are in a strong position as we enter the current rates cycle.”

“We are confident of achieving a return on tangible equity of at least 12% from 2023 onwards, which would represent our best returns in a decade.”

The banking giant said it expended a dividend payout ratio of 50% for 2023 and 2024, with an intention to return to quarterly dividends in 2023.

However, HSBC confirmed it expected the quarterly dividend for the first three quarters to initially be reinstated at a lower level than its prior dividend of 10c per share paid until the end of 2019.

“As a result, we are providing more specific dividend payout ratio guidance of around 50% for 2023 and 2024. We understand and appreciate the importance of dividends to all of our shareholders,” said Quinn.

“We will aim to restore the dividend to pre-Covid-19 levels as soon as possible. We also intend to revert to quarterly dividends in 2023.”

HSBC announced a HY1 dividend of 9c per ordinary share, which is set to be paid in cash.

Pearson operating profits climb on English and Assessments sectors

Natasha Doris
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0
Pearson operating profits climb on English and Assessments sectors

Pearson shares rose 6.8% to 808.2p in early morning trading on Monday following an adjusted operating profit growth of 22% to £160 million in HY1 2022.

Pearson attributed its profit climb to a positive trading performance, FX benefit and property savings, slightly offset by inflation, portfolio investment and phasing costs in 2021.

The education group reported an underlying sales increase of 6% to £1.7 billion, driven primarily by a 16% rise in its Assessment and Qualifications business as a result of US Student Assessment and UK & International Qualifications after exam timetables started to normalise post-Covid.

Sales were also boosted by a 22% surge in Pearson’s English Language Learning sector, as improved global mobility aided expansion in the Pearson Test of English (PTE).

The company announced an adjusted EPS increase to 22.5p compared to 10.5p in HY1 2021.

Pearson noted an operating cash flow of £9 million against £10 million the last year, with the drop through of climbing profits offset by a growth in receivables on the back of strong revenue increases in HY1 which will be collected in HY2.

The group mentioned a HY1 net debt of £810 million from £646 million, with operating cash offset by dividends, share buyback and tax.

Pearson confirmed an available liquidity of £1.2 billion compared to £1.4 billion year-on-year at the end of HY1.

The company reiterated its outlook, including unchanged revenue and adjusted operating profit expectations for FY 2022.

The education firm highlighted the upside potential in English Language Learning, Virtual Schools and Clinical Assessment as a result of outperformance in HY1 and likely increased pressure in enrolments in OPM and higher education.

Meanwhile, the company said the growth in Pearson+ subscriptions would probably lead to a move in HE revenue recognition from Q3 to Q4.

“Pearson has delivered another encouraging financial performance in the first half of the year. We continue to make excellent strategic and operational progress, with momentum across the business,” said Pearson CEO Andy Bird.

“We are already seeing clear benefits from our increasingly diverse learning ecosystem, with Pearson serving more people across their lifelong learning journeys. Our digital strategy is progressing well; Pearson+ grew to 4.5m registered users, increasingly taking us direct to consumers.”

Pearson added it expected a net interest charge of £10-£15 million and an effective tax rate of 15% to 17%, reflecting the statute of limitations on a range of tax provisions which lapsed in April 2022.

“Our focus on delivery and execution remains and full year 2022 expectations are reaffirmed. In addition, the more integrated platform we are building across the company is creating efficiencies, underpinning our new guidance for accelerated margin improvement,” said Bird.

“We have a robust balance sheet which, together with our cash generation, will support continued investment in growth and create value for our shareholders.” 

Dividend and share buyback

Pearson recommended a HY1 dividend of 6.6p from 6.3p in HY1 2021, with a £350 million share buyback currently in progress and over £165 million in shares repurchased as of 29 July 2022.

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