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.
“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.
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 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 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.
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...
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 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.
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.
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.
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.”
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.
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.
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.
China manufacturing growth report misses market expectations on Covid lockdowns impacthttps://t.co/xNpJGgJNSO
“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 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.
