easyJet takes off on narrowed £545m loss, leisure bookings soar

Natasha Doris
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easyJet takes off on narrowed £545m loss, leisure bookings soar

easyJet shares were up 0.4% to 502.3p in early morning trading on Thursday, after the budget airline reported a narrowed pre-tax loss of £545 million in its HY1 2022 results compared to £701 million in HY1 2021.

The travel company struck an upbeat tone with a revenue growth of 524% to £1,498 million against £240 million year-on-year on the back of its increase in capacity flows and ancillary products, which delivered continuous incremental revenue.

easyJet noted a 117% increase in group headline costs to £2 billion compared to £941 million the last year, as a result of the firm’s increase in flown capacity.

Passenger Recovery

easyJet commented that it had allocated aircraft to markets where it experienced the strongest demand, alongside measures to transform its ancillary offering to deliver a growth in revenue without cannibalising its ticket sales.

“easyJet has reduced its losses year on year, at the better end of guidance. The pent-up demand and removal of travel restrictions provided for a strong and sustained recovery in trading which has been further boosted as result of our actions,” said easyJet CEO Johan Lundgren.

“These include the radical reallocation of aircraft which has seen more than 1.5m seats moved to the best performing markets and the step-change in our ancillary products delivering increased revenue – both of which have contributed to our total yield increasing by 9% compared to the same period in FY19.”

“All of this is not only delivering now but with more to come in the future as even more passengers take to the skies.”

The company announced that forward bookings for Q3 were 76% sold, with 36% booked for Q4 along with ticket yields for the quarter 15% above 2019, and load factors estimated above 90%.

easyJet said Q3 capacity was anticipated to be 90% of FY2019, alongside a 97% capacity of pre-pandemic levels across Q4 2022.

The airline firm also noted a 6% growth in bookings over the past 10 weeks compared to the same term in 2019, with load factors of 90% across the Easter holidays this year.

easyJet announced that leisure travel demand picked up alongside domestic capacities, with HY1 2022 leisure at 113% of FY 2019 capacity and domestic at 104% of FY 2019 levels.

Meanwhile, the company reported a 70% rate of sale in its holidays business, with the sector on track to deliver a medium-term goal of £100 million.

“Since Easter we have been flying up to a quarter of a million customers and 1600 flights every day and in the second half leisure and domestic capacity will be above 2019 levels,” said Lundgren.

“It has been well documented that the industry is experiencing some operational issues so, as you would expect, we have been absolutely focused on taking action to ensure we have strengthened our operational resilience for this summer so we can deliver a great, reliable operation to our customers.”

“We expect to operate 90% of FY19 capacity in Q3 and we have capacity on sale of around 97% of FY19 flying in Q4 with easyJet holidays now on track to carry over 1.1 million customers this financial year.”

Fuel

The budget travel group confirmed its fuel was 71% hedged for HY2 2022 at $619 per metric tonne, 49% hedged for HY1 2023 at $701 and 20% hedged for HY2 2023 at $807.

The spot price was approximately $1,225 per metric tonne on 17 May 2022.

easyJet highlighted that its carbon obligation for calendar year 2022 was 100% covered at €19 per metric tonne.

Inflation sees gloomy skies

However, easyJet caveated its positive report with a nod to the short-term uncertainty of the global economic situation, which has seen inflation sweep the UK and bite chunks out of consumers’ wallets, especially the potential cost of travel plans.

The firm commented that it had some level of uncertainty concerning its summer earnings, and said it would not provide any further financial guidance for the year, as a result of continued levels of unpredictability in the coming months.

“The group’s also confident that the cost-of-living crisis isn’t touching performance,” said Hargreaves Lansdown equity analyst Sophie Lund-Yates.

“It was quick to point out that holidays are more important to people these days, after two years without travel abroad.”

“This idea does ring true to some extent, but there’s no getting away from the fact that if faced with a recession, a holiday – whether a hop down the road or a city break to Prague, simply isn’t going to happen for millions of people. This isn’t a flashing red indicator at this juncture, but it’s something to keep one eye on.”

Smiths Group announces 4.2% organic revenue growth

Natasha Doris
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Smiths Group announces 4.2% organic revenue growth

Smiths Group shares were down 1.9% to 1,482.5p in early morning trading on Thursday, after the company announced its fourth quarter of consecutive growth in its Q3 trading update.

The UK engineering firm reported a 4.2% rise in organic revenue from a 3.4% growth in HY1 2022.

However, Smiths Group mentioned a slight decline in some business sales linked to supply chain disruptions and cost inflation reported in its Q3 trading update.

The group commented that its John Crane sector saw modest growth and strong order intake in its Industrials and Energy segments, however, performance was negatively impacted by supply chain issues and elevated input costs, which dented the group’s margins.

The company mentioned that its Smiths Detection segment declined on the challenging Aviation OE market.

Meanwhile, Smiths Group experienced growth in Other Security Systems OE and in aftermath across both sectors, alongside strong growth recorded in Smiths Interconnect driven by positive demand for its products across its end markets.

The engineering group highlighted accelerated growth in its Flek-Tek business over Q3, with demand for Industrials and recovery in its Aerospace sector reportedly in progress.

The company maintained its FY2022 guidance of 3% organic revenue growth, and noted that it is currently on track to deliver a strong comparator in Q4, despite international inflationary challenges and macroeconomic uncertainty across its supply chain.

Smith Group commented that its executive leadership appointments announced on 14 April 2022 were currently in place, with the company reportedly responding well to the new executive shuffle.

The firm added that its £742 million share buyback programme announced on 11 November 2021 was on schedule, with £310 million already repurchased, and the remainder scheduled for delivery in early 2023.

“We delivered our fourth consecutive quarter of growth, demonstrating further progress against our strategy, towards our medium-term target of 4-6% organic revenue growth,” said Smith Group CEO Paul Keel.

“As we enter the final quarter of FY2022, macro uncertainty remains high and supply chain and inflationary challenges continue. We are leveraging the Smiths Excellence System to help manage these headwinds, and confirm our full year organic revenue growth guidance of 3%.”

“We are laser focused on our top priorities of accelerating growth, improving execution and supporting our great people, whose hard work and ingenuity make this progress possible.”

Lekoil switch to Aquis

Andrew Hore
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Lekoil switch to Aquis

Nigeria-focused oil company Lekoil Ltd (LON: LEK) made the switch from AIM to Aquis on 18 May. Trading in the shares was suspended last September. Although the shares have been admitted to Aquis they will continue to be suspended until the latest audited accounts are published. That could be in June.
Lekoil is in dispute with Lekoil Nigeria, where it has a major interest, and former chief executive Mr Olaekan Akinyanmi, who is being funded by Lekoil Nigeria. The main source of assets will be the recovery of intercompany debts and there is likely to be little value in the oil and gas operations...

N Brown Group shares surge on 108.7% pre-tax profit spike

Natasha Doris
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0
N Brown Group shares surge on 108.7% pre-tax profit spike

N Brown Group shares surged 28.6% to 33.9p on the back of the fashion group’s pre-tax profit spike of 108.7% to £19.2 million in its 2022 results, against £9.2 million the previous year.

N Brown Group highlighted an adjusted EBITDA growth of 11.9% to £95 million compared to 84.9 million, alongside an adjusted EBITDA margin increase of 1.7% to 13.3% against 11.6%.

The company reported a revenue slip of 1.8% to £715 million from £728.8 million, as a result of its 0.6% decline in product revenue and a 4% reduction in Financial Services revenue due to a smaller debtor book at the start of the financial year.

The firm also noted an operating costs decline as a percentage of revenue to 36% against 39.8% at pre-pandemic levels in 2020 in light of increased efficiencies and retained cost flexibility.

N Brown Group confirmed a strong balance sheet with unsecured net cash of £43.1 million, alongside an additional £60.1 million in accessible cash voluntarily undrawn on the securitisation funding facility at the year end.

The group added that it expected a 7% revenue growth with a 13% EBITDA margin in the medium-term, and remained confident in its outlook despite inflationary pressures and shifts in consumer behaviour.

“In what has been another volatile period in the consumer environment, I would like to thank all of my colleagues for their continued commitment to serving customers, and their role in delivering a strong performance in the year,” said N Brown Group CEO Steve Johnson.

“The work we have done means we are significantly better placed than we were before the pandemic and, although cautious in the short-term due to inflationary impacts and consumer behaviour, we remain confident that over the medium-term our strategy will support the delivery of 7% product revenue growth with a 13% EBITDA margin.”

The fashion company announced that it would consider the introduction of a dividend payment in FY 2023.

The firm also commented that it would be moving its focus to boost growth in its most promising brands, such as its recent sustainable clothing brand with JD Williams, in a bid to capitalise on its popular offerings as inflationary-related problems kicked off.

“I am pleased with our continued progress in transforming N Brown into a more focused digital business, with a distinct and improving offer across our strategic brands,” said Johnson.

“Our strategic brands returned to growth in the year with growing customer numbers. As we move forward, we are evolving our priorities to concentrate our growth focus on Simply Be, JD Williams and Jacamo, where we see the strongest market potential.”

“We’re executing on our investment plans to unlock these opportunities including through new websites which will be rolled out progressively over the coming months.”

Arrow Exploration RCE-2 well strikes 90 net ft oil

Natasha Doris
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Arrow Exploration RCE-2 well strikes 90 net ft oil

Arrow Exploration shares increased 20.8% to 16.3p in late afternoon trading on Wednesday, after the company reported six hydrocarbons bearing intervals at a total of 90 net feet of oil pay in its Rio Cravo Este-2 (RCE-2) well.

The oil and gas firm commented that its Colombia-based project targeted a large, three-way fault bounded structure with several high-quality reserve objectives on the Tapir Block in the Llanos Basin, which was drilled to a total measured depth of 9,600 feet.

The RCE-2 well was spud on 2 April 2022, and all operational costs reportedly came in line with the project’s budget.

“We’re encouraged by the material results of RCE-2, the second well on the Tapir block. RCE-2 identified new zones for further exploitation with flowing results returning better than expected,” said Arrow Exploration CEO Marshall Abbott.

“We’re currently completing the C7 zone, targeting to be on stream early next week. This effectively doubles Arrow’s production. The Company’s procedures will be to bring RCE-2 on slowly and increase production to best manage the oil reservoir.”

Arrow Exploration confirmed that strong production rates from existing tied-in wells, alongside encouraging results from new drills in Colombia, collectively supported the group’s aim to hit a production rate of 3,000 barrels of oil per dau (boe) within 18 months of its AIM listing in October 2021.

“We are now moving the rig to our next well location, the RCS-1 well, which is expected to spud before the end of May. Arrow’s current production exceeds 1,000 boe/d, producing positive cashflow for the Company during a high commodity price environment. This is an exciting time for Arrow, and we look forward to providing further updates on our progress,” said Abbott.

Power Metal Resources report promising Ditau core sample

Natasha Doris
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0
Power Metal Resources report promising Ditau core sample

Power Metal Resources reported the extraction of a core sample from the DIDD004 hole in its Botswana Ditau drill programme, which provided promising magnetic susceptibility readings.

The core displayed visible siliceous and haematitic zones, alongside local pervasive pyrite presented as disseminations and in veins.

Power Metal Resources also said extensive fracturing was observed throughout the core and elsewhere in the drilled hole.

The sample was extracted following a drill hole depth of 389 metres reached in the DITDD004 hole, the second operation at the Ditau project.

The Ditau project is currently held as a 50/50 joint-venture listed as Kanye Resources with Kavango Resources, who also operate the project, which has been identified as a potential source of carbonatite hosted rare-earth element, base-metal and possible precious-metal mineralisation.

The core was sourced from the group’s i10 target, which is a discrete 2.2 kilometre in diameter magnetic anomaly which the venture had previously modelled as a possible carbonatite.

Power Metal Resources confirmed that preliminary magnetic susceptibility readings were recorded on the core between 293-321 metres on the “zone of interest”, representing a combined 28 metres of core length.

The readings reportedly coincided with a visibly altered section that Kanye Resources is set to immediately cut half-core samples from to send to the assay laboratory for multi-element analysis.

“The core extracted from hole DITDD004’s Zone of interest, spanning a combined 28m, is fascinating from a geological perspective and we are eager to see the results from further analysis thereon – including laboratory multi-element assays,” said Power Metal Resources CEO Paul Johnson.

“The magnetic modelling undertaken to develop this target appears to be reliable, which is also particularly encouraging for DITDD004 and future drill holes within Ditau.”

“I look forward to reporting further plans and progress over the coming weeks.”

Future Steps

Power Metal Resources mentioned that a one kilometre Audio-Magnetotelluric (AMT) survey would be performed over the i10 target over the coming weeks, in a move to record data to additionally define the shape and form of the zone of interest.

The company added that Mindea Exploration and Drilling Services was in the process of mobilising the diamond core drill rig to target i1 at Ditau, which is the largest of three geophysical targets which Kanye Resources intends to drill in its current campaign, including i10, i1 and i8.

Power Metal Resources confirmed that a future update on the condition of the project would be released shortly regarding the drill hole.

The joint-venture added that its plan moving forward was to collect high-frequency AMT profiles over potential near-surface carbonite targets in order to resolve the location of breccia zones and intrusive sills/dykes intersected in drill hole DITDD003.

Kanye Resources said it had identified 12 geophysical targets at the Ditau Project, i1 to i12, which were believed to be caused by potential carbonatites or intrusive complexes that might host carbonatites, which account for the primary source of mined rare-earth minerals, and are valuable across a selection of high-tech industries.

Spin-Out Companies

Power Metal Resources also commented in its recent quarterly results that the company had made progress in its plans to spin out Golden Metal Resources, which is currently targeting listings on the London capital markets in Q2 2022, alongside First Class Metals.

The company added that First Development Resources and New Ballarat Gold Corporation were targeting listings in the London and Australian markets in early Q3 2022.

Power Metal Resources shares were down 1.7% to 1.4p in early afternoon trading on Wednesday, following the mining firm’s report.

FTSE 100 remains flat as investors seem unshaken by 9% inflation

Natasha Doris
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0
FTSE 100 remains flat as investors seem unshaken by 9% inflation

The FTSE 100 was down 0.1% to 7,507.6 at midday on Wednesday, as record-high rates of 9% inflation seemed to surprise few people, with investors having accounted for the estimated spike in advance and little panic spotted on the market.

“Investing is an expectations game so it’s not really a surprise that the market has shrugged off the highest levels of inflation in the UK in 40 years given the number was actually slightly behind forecasts,” said AJ Bell investment director Russ Mould.

A selection of positive results also boosted the FTSE 100 higher, as the market brushed the gloomy economic outlook off its collective shoulder.

British Land Co shares climbed 3.9% to 526.7p as the company swung to a pre-tax profit of £958 million compared to a £1 billion loss the previous year.

The property development and investment group further announced a 12% growth in net assets.

“Operationally, our leasing volumes across Campuses and Retail & Fulfilment were the highest in ten years and were ahead of estimated rental value,” said British Land Co CEO Simon Carter.

“In London, demand continues to gravitate towards the best, most sustainable space where our Campuses are at a distinct advantage.”

Mould commented: “British Land is seeing demand for the ‘right’ kind of offices as it returned to profit for the first time since 2018 and eye-catchingly revealed it is leasing space at the fastest pace in a decade.”

“The easing of restrictions may not have led to an immediate return to the office en masse but there’s little doubt that employers are looking to tempt workers back for some of the working week and that means having attractive spaces for them to work in.”

Aviva shares enjoyed a boost of 2% to 414p as a result of record-high Q1 general gross insurance premiums of £2.1 billion, which the firm attributed to strong growth across commercial lines in the UK and Canada.

“Insurer Aviva, which has been busily slimming down under chief executive Amanda Blanc, helped demonstrate its credentials as a honed corporate animal with strong first quarter trading including the best first quarter general insurance sales in a decade,” said Mould.

“For Blanc, who has made an impressive start to her leadership of the business, the low hanging fruit has now been picked and the underperforming operations sold off. She needs to work out how to maintain the momentum behind the business.”

Burberry shares increased 1% to 1,600p, after the luxury brand announced an operating profit of £543 million in its full-year results, reflecting a 4.2% rise compared to its £521 million last year, reportedly in line with management expectations.

The brand has undoubtedly benefited from its wealthy clientele remaining predominantly unaffected by the snapping jaws of rising food and energy costs, with the company’s target consumer probably hardly realising the added expense to their weekly grocery shop.

“Burberry’s post-Covid recovery still has more to go, given it should see greater business once Asian tourists start travelling the world again,” said Mould.

“They have historically been keen buyers of Burberry products on their travels. China’s Covid resurgence is a headwind for now, but one might presume this is only a short-term issue.”

Experian shares fell 4% to 2,561p despite the credit-focused firm’s reported 17% revenue growth to $6.2 billion in FY2022 against $5.3 billion year-on-year as a result of high consumer-focused demand.

The company reported a moderate slowdown in expected growth in the range of 7%-9%, however, alongside a series of legal claims against the group “across all its major geographies.”

Experian confirmed that several claims were in enforcement, including a selection from the Consumer Financial Protection Bureau in North America and the Information Commissioner’s Office in the UK.

Stagflation, Burberry and Open Orphan with Alan Green

UK Investor Magazine
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Stagflation, Burberry and Open Orphan with Alan Green

The UK Investor Magazine is joined by Alan Green for a rundown of key market themes and Uk equities.

We start by looking at Stagflation at the implications for the UK economy and markets. Stagflation is a period of rising inflation, economic contraction, and rising unemployment.

The UK satisfies the first two of these, however, unemployment remains robust. We look at whether rising inflation will soon hit jobs activity and what it could mean for equities.

We also discuss the relationship between the FTSE 100 and US indices and how this may develop if we see recession in the US.

Burberry has posted a respectable set of results and is proving a possible choice for income investors. Margins have improved with sales as the luxury brand jumps back from COVID.

Open Orphan’s valuation is worth attention. One could argue the current market cap doesn’t pay justice to their revenue growth and forecast profitability.

We update on the latest from Tertiary Minerals and their portfolio of assets including a selection in Nevada and Nambia.

Experian revenue grows to $6.2bn on high consumer-focused demand

Natasha Doris
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0
Experian revenue grows to $6.2bn on high consumer-focused demand

Experian shares dropped 3.2% to 2,582.3p in late morning trading on Wednesday, after the company announced a 17% increase in revenue to $6.2 billion compared to $5.3 billion in its FY2022 results.

The credit-focused group said its positive performance was driven by strong demand for consumer-focused services across North America, Latin America and the UK.

The firm reported an operating profit growth of 16% to $1.4 billion from $1.1 billion year-on-year, and included a net gain from associate disposals of $90 million, which was offset by a business disposal loss of $43 million.

The group also incurred impairment charges net of reversals of $25 million, and restructuring and exceptional costs of $26 million.

Experian confirmed a pre-tax profit rise of 34% to $1.4 billion against $1 billion in 2021, boosted by a $186 million reduction in net finance costs from financing fair value remeasurements.

“We had a very good year with total revenue growth of 17% at both actual and constant exchange rates, and organic revenue growth of 12%,” said Experian CEO Brian Cassin.

“Benchmark earnings per share also progressed strongly, up 21%. Cash performance was very strong, with Benchmark EBIT to operating cash flow conversion of 109%, and actual exchange rates growth of 22%.”

“We have made major steps forward in Consumer Services, which is transforming the shape of our business, and we also progressed materially a series of strategic initiatives in Business-to-Business.”

The group announced an EPS uptick of 34% to 127.5c, reflecting the higher pre-tax profit, alongside a $16 million profit from discontinued operation, and a reduction in its effective tax rate and a higher level of shares in issue.

Experian also reported a total dividend increase of 10% to 51.7c against 47c year-on-year.

The group highlighted an estimated organic revenue growth in the slower range of 7%-9%, with modest margin growth at constant currency exchange rates supported by continuing investment in the execution of its strategy.

Experian said it was in a strong position to weather the current volatile macroeconomic disruptions on the back of its positive track record and robust, resilient performance.

The company furthermore pointed out an “increasing number of pending and threatened claims and regulatory actions involving the group across all its major geographies”, which Experian said were being “vigorously defended.”

Experian confirmed that some claims were in enforcement, including a series from the Consumer Financial Protection Bureau in North America and the Information Commissioner’s Office in the UK.

The firm commented that it did not believe the outcome of any individual enforcement notice would have a material impact on the company’s financial position, however, Experian noted that in the possible case of unfavourable outcomes to the legal proceedings, the group could benefit from applicable insurance recoveries.

Aviva hits record £2.1bn in Q1 general gross insurance premiums

Natasha Doris
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Aviva hits record £2.1bn in Q1 general gross insurance premiums

Aviva shares increased 0.7% to 408.5p in early morning trading on Wednesday, following the insurance group’s reported 5% rise to a record £2.1 billion in general gross insurance written premiums in Q1 2022.

The firm attributed its record levels to strong growth across commercial lines in the UK and Canada.

“First quarter trading was positive, and our performance shows the clear benefit of Aviva’s business mix across insurance, wealth and retirement,” said Aviva CEO Amanda Blanc.

“We delivered healthy sales numbers across all our major business lines, with UK customer numbers up by over 100,000 in the last year to 15.4m, increasing our confidence that we can transform Aviva’s performance and grow.”

The company confirmed a 2% growth in UK and Ireland Life sales to £8.4 billion, with a rise in Annuities and Equity Release, alongside Protection and Health, slightly offset by Wealth.

Aviva commented that its total BPA sales increased 29% to £843 million in the term, with a healthy pipeline weighted towards HY2 2022.

The insurance firm added that its UK and Ireland Life value of new business rose 31% to £144 million, with a VNB margin of 1.7% which was driven by Annuities and Equity Release VNB of £31 million.

Meanwhile, Aviva further noted a GI combined ratio of 96.4%, reflecting a £70 million cost for February storms in UK GI and more general motor claims frequency.

“We remain very well positioned to benefit from the long term growth trends in our markets, and to meet our upgraded financial targets,” said Blanc.

“This is underpinned by our strong capital position which benefits from rising interest rates.”

“Our financial strength and market leadership give us confidence that we can successfully navigate the current uncertain economic conditions.”

Aviva commented that it remained on track to meet its cash remittance, own funds generation and cost reduction targets announced at its FY 2021 results presentation.

The insurance group further assured investors that it was well-placed to navigate the volatile macro-economic environment, alongside its on-schedule acquisition, announced in March this year, of Succession Wealth to close in HY2 2022.

Aviva reiterated a dividend guidance of £870 million for 2022 and £915 million for 2023 following its capital return and share consolidation, which would amount to 31p and 32.5p per share, respectively.

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