Drax Group shares were up 4.5% to 830p in late afternoon trading on Wednesday, after the company reported an adjusted EBITDA for 2022 at the top range of analysts expectations in its trading update for Q1 2022, pending strong operational performance.
The firm said it estimated a net debt to adjusted EBITDA to come in significantly below 200% by the end of the year.
Drax Group highlighted a rate of over 99% in energy generated from renewables, including sustainable biomass, hydro and pumped storage.
“In the first quarter of 2022 we delivered a strong system support performance as our reliable, renewable electricity continued to support UK energy security and helped to keep the lights on for millions of British homes and businesses,” said Drax Group CEO Will Gardiner.
“With the right government support, Drax is ready to invest £3bn this decade in delivering vital renewable energy technologies including BECCS, a carbon removal technology that is cost-effective but also the only one that generates reliable, renewable electricity while removing millions of tonnes of CO2 from the atmosphere.”
WH Smith shares were down 5.1% to 1,433 in late afternoon trading following the company’s release of its interim results, reporting a swing back to pre-tax profit of £14 million compared to a loss of £19 million in 2021.
The group reported a total travel trading profit of £10 million against a loss of £28 million the previous year, alongside a high street trading profit of £26 million from £24 million.
“The Group has delivered a good performance with a strong rebound in profitability. We have seen a recovery across all our travel markets despite the impact of the Omicron variant in Q2, and we are in a strong position to capture growth as the recovery continues,” said WH Smith CEO Carl Cowling.
The company said it had a new store pipeline of over 125 outlets in its travel sector, including 63 in North America and 31 in Spain.
The firm also noted 28 new InMotion technology stores across UK airports in its global rollout.
“We have opened 28 new technology stores in the UK under our InMotion brand, including our recently opened flagship store at Heathrow Terminal 5,” said Cowling.
“These stores have received excellent feedback from landlords and customers. Outside of the US and the UK, we have opened and won a further 11 InMotion stores across 6 countries and we see significant potential to grow the brand globally.”
The group added that it had £336 million in headline debt, with access to £315 million of liquidity, consisting of £65 million cash on deposit and £250 million undrawn revolving credit facility.
WH Smith confirmed continued recovery across its travel stores in its outlook for 2022, with its high street stores positioned to maintain cash generation across the company.
The group added that its low ticket-value categories and strong supplier relationships helped it in mitigating the impact of inflationary pressures.
“Looking ahead, we continue to invest in the business where we see attractive growth opportunities and have positioned the Group well to benefit from the return of passenger numbers,” said Cowling.
“We have improved the scale and footprint of the business and are operationally stronger than prior to the pandemic.”
“While there are some uncertainties in the broader global economy, the Group is well positioned to capitalise on the ongoing recovery in our key markets and take advantage of the many opportunities ahead.”
Shaftesbury is a Real Estate Investment Trust that owns a 16-acre portfolio in London’s West End.
The wholly-owned portfolio’s indicated external valuation was £3.26bn on March 31, 2022, compared to £3.01bn in September 2021.
On a like-for-like basis, this reflects a 7.5% growth in the six months since 1 October 2021, compared to a 5.2% gain in the six months prior to 30 September 2021.
The increase in valuation was primarily driven by 6.4% like-for-like ERV growth, with increases across all uses, demonstrating ongoing occupier demand and low vacancy levels as footfall and trading in its locations continue to rebound to pre-pandemic levels.
The strength of our occupational market, together with increased investor optimism, has resulted in a 5 basis point tightening of the portfolio’s equivalent yield, which was 3.92% in September 2021.
Brian Bickell, Chief Executive Officer, Shaftesbury commented, “I am pleased to report that confidence, footfall and sales across our villages continue to recover well.”
“Demand/supply tension in our locations, reflecting strong interest from potential occupiers across all uses and low vacancy, is driving a recovery in rental levels which has been the main component of the valuation increase over the six months to 31 March 2022.”
“We are now looking forward to an extended period of uninterrupted trading as we enter the important summer season.”
LondonMetric paid £28.8 million for two urban logistics properties in separate transactions, implying a blended return of 4.5% and a reversionary yield of 5.0%.
One of the properties is a 125,000sqft urban logistics forward fund development consisting of two units at Crosslink 646 in Leicester, which is planned to be completed at the beginning of 2023.
It is the largest unit, with a total area of 90,000sqft which has been pre-let to EM Pharma for a new 15-year lease at £7.25 per sqft with RPI linked rent reviews.
The smaller 35,000sqft property will be built on the speculative market and is estimated to offer a 5% return on investment with the benefit of a solar PV system, the property is likely to be certified BREEAM “Very Good”.
The other acquisition is a piece of land in Droitwich that amounts to 9-acre and is now utilised for car storage which has been leased to Amazon for another five years with CPI-linked rent increases.
It’s in the front of a well-established industrial development near the A38, two miles from M5 J5.
The property’s parking area features EV charging facilities for 100 vans, thanks to Amazon’s contribution and has a 200,000sqft distribution warehouse which has been approved for the site.
Andrew Jones, CEO of LondonMetric, commented, “We are continuing to allocate capital into the strongest geographies within the distribution sector, where we can benefit from attractive entry yields and structurally supported occupier demand to capture superior rental growth.”
On Wednesday, Moscow cut off gas supplies to Poland and Bulgaria as the countries refused to breach sanctions imposed by the West on Russia for invading Ukraine. Germany also confirmed that was on its way to cutting its dependence on Russian gas supplies.
Russia cuts gas
In a huge escalation of Russia’s broader fight with the West over its invasion of Ukraine, Russian energy giant Gazprom has informed Poland and Bulgaria that gas supplies will be cut off to both countries as of Wednesday.
Since Moscow began what it terms a military campaign in Ukraine on February 24, Poland and Bulgaria would be the first nations to have their gas supplies shut off by Europe’s principal supplier. The decision to cut off supply came after Warsaw slapped restrictions on Russian persons and corporations.
Europe has stated that doing so would be a violation of sanctions and would significantly boost Russia’s hand. Poland has been particularly vocal in its condemnation of Russia during the conflict.
PGNiG, Poland’s largest gas provider, has been warned that all gas flows will cease on Wednesday. Minutes earlier, Gazprom, the Russian gas company, had warned Poland that it would have to pay for its gas supplies on Tuesday in Russian currency.
“I can confirm we’ve received such threats from Gazprom which are linked among other things to the means of payment,” said Poland’s Prime Minister Mateusz Morawiecki
“Poland is sticking to the arrangements and maybe Russia will try to punish Poland” by cutting deliveries.
Cutoffs have been looming for weeks, but there was some hint last week that the European Union was considering a way out of the impasse.
The payments for April for the first batch of Russian gas supply under the new terms are due in late April and early May, and European politicians and executives are still figuring out how to respond. Europe is heavily reliant on Russian gas and has thus far mostly avoided sanctions on the energy sector.
Poland has been prepping for life without Russian gas, and the government declared on Tuesday that it had sufficient fuel in store. Warsaw has been advocating for stronger measures against Russia, but other EU countries have objected.
Germany has previously stated that it might wean itself off of Russian oil by the end of the year, under pressure to lessen its reliance on Russian energy following Moscow’s invasion of Ukraine. However, it has rejected the concept of a blanket ban on imports into the European Union.
Before the Ukraine conflict, Russian oil supplied around a third of Germany’s needs. Robert Habeck the Vice Chancellor of Germany announced a month earlier that Germany’s reliance on Russian oil had been reduced to 25% of total imports.
Habeck stated on Tuesday that Russian oil now made up only 12% of Germany’s supply and that it went to only one refinery, the PCK refinery in Schwedt, near Berlin. Rosneft, the Russian state-owned oil business, owns and operates PCK.
Computacenter is a technology transformation company that has declared that it will achieve carbon neutrality for Scope 1 and 2 emissions in 2022, five years ahead of schedule.
Despite the group’s tremendous growth in scale and reach throughout that time, the group’s Scope 1 and 2 carbon emissions in 2021 were roughly 74% lower than in 2019, according to Computacenter’s Sustainability Report for 2021.
Direct emissions, such as facilities, and indirect emissions, such as power utilised, are included in Scope 1 and 2 according to Computacenter.
Computacenter’s new Net Zero target, which includes Scope 3 emissions, is 2040, ten years earlier than its previous goal.
All additional indirect emissions, such as those from business transportation, as well as those from sources that Computacenter does not own or actively control, such as the supply chain and products from its technology partners, are included in Scope 3.
Solar output at Hatfield, which generated 1.8m kWh in 2021, saving around 400,000kg of annual carbon emissions, and Kerpen, which is scheduled to create 1.5m kWh in 2022, are examples of investments in new and existing facilities to reduce electricity usage.
The switch to electricity contracts from green energy suppliers and the investments aimed at reducing the use of electricity are initiatives Computacenter took over recent years to contribute to achieving the Carbon Neutral milestone in 2022.
As a result, renewable energy provided 73% of Computacenter’s electricity in 2021. This indicates Computacenter can become carbon neutral for Scope 1 and 2 in 2022 with minimum carbon offsets.
Tony Conophy, Group Finance Director and Chair of Computacenter’s Climate Committee said, “Achievement of Carbon Neutral (Scopes 1 & 2) in 2022 will be a major milestone on our journey to Net Zero, based on years of carbon reduction efforts across the business that we are confident can be sustained and improved upon. We’re proud that will be one of the first companies in our industry to achieve this.”
“We’re proud of what our people have achieved to hit this milestone. We haven’t talked much about it, we’ve just delivered. We will continue to improve, invest and innovate in all areas of sustainability in line with our broader Sustainability Strategy. We’ll be the best that we can be; a company that our people, customers, partners and communities can be proud of,” added Mo Siddiqi, Computacenter’s Group Development Director.
The FTSE 250 was up 0.2% to 20,536.3 and the AIM was down 4.2% to 1,020 in midday trading on Wednesday after a raft of London-listed companies reported.
“In the first quarter of 2022 we delivered a strong system support performance as our reliable, renewable electricity continued to support UK energy security and helped to keep the lights on for millions of British homes and businesses,” said Drax CEO Will Gardiner.
Network International shares rose 1.9% to 247.6p after the group announced a 33% boost in revenue for Q1 2022 against Q4 2021.
“We have started the year strongly with 33% year-on-year first quarter revenue growth, supporting our ambition to be the fastest growing and most innovative customer centric payments business in the Middle East and Africa,” said Network International CEO Nandan Mer.
WH Smith shares dropped 5.8% to 14,227p following its swing back to a pre-tax profit of £18 million compared to its £38 million loss over the interim period.
“Our High Street business delivered a resilient and profitable performance in the period, despite the challenges facing the UK high street. During the period, our online businesses continued to perform well against a strong pandemic-related performance in the prior year,” said WH Smith CEO Carl Cowling.
“Looking ahead, we continue to invest in the business where we see attractive growth opportunities and have positioned the group well to benefit from the return of passenger numbers.”
LoopUp Group shares spiked 91% to 13,375p following the firm’s two-year €200,000 contract win with Telefónica, along with a management update noting that the company was on track to acquire its targeted 50 additional contract wins over 2022.
Sportech shares increased 13.5% to 37p after the group announced a 7p cash distribution per share amounting to £7 million following the £9.25 million sale of the company’s ‘Dominican Republic Lottery contract’ terrestrial lottery business reported in January 2022.
City Pub Group shares enjoyed a boost of 10.2% to 82.5p on the back of the firm’s 37% rise in revenue to £35.4 million against £25.8 million the previous year in its 2021 results.
The company said it expected continued strong trading across 2022.
“Following the reversal over the festive season, trading is now beginning to build in momentum and we look forward to an uninterrupted summers’ trading,” said City Pub Group chairman Clive Watson.
“We are emerging from the pandemic in the strongest financial position that we have ever been in and therefore have signalled our intention to recommence dividends in the autumn.”
1Spatial shares increased 8.9% to 42.5p following the group’s reported 10% rise in revenue to £27 million and a swing back to pre-tax profits of £220,000 against a loss of £1.4 million the previous year.
“This year has been one of solid organic growth, fuelled by a number of landmark wins, including high profile and national level contracts in each of our target markets,” said 1Spatial CEO Claire Milverton.
“It is extremely encouraging to see such positive early indicators of the success of our strategic growth plan.”
Empyrean Energy shares tanked 72.6% to 2.3p after its Jade well reached total depth with a reported lack of oil pay in the target reservoir.
“We are extremely disappointed with the results of the well, particularly after conducting a systematic and comprehensive technical analysis followed by running a safe drilling operation,” said Empyrean Energy CEP Tom Kelly.
GYG shares fell 20% to 34p after the company reported an operating loss of €6.1 million in 2021 against an operation profit of €1.2 million in 2020, alongside a pre-tax loss of €7.2 million compared to a pre-tax profit of €0.2 million the previous year.
Tandem Group shares dropped 10% to 360p after the firm announced the resignation of CEO Jim Shears scheduled for 6 May 2022.
FTSE 100 edged up 0.8% to 7,445 on Wednesday with support from mining and banking stocks such as Fresnillo and Lloyds.
The FTSE 100 was lifted on Wednesday by various trading updates for companies like Fresnillo, WPP, Lloyds Banking Group and London Stock Exchange Group.
“On the UK stock market, higher commodity prices saw miners bounce back from their recent losses and advertising agency WPP also impressed off the back of a decent set of first quarter results and an increase in 2022 guidance,” said Russ Mould, Investment Director, AJ Bell.
Fresnillo shares rose 0.3% to 775p after the company confirmed its annual outlook on “a solid first quarter’s production, in line with expectations,” despite a sharp fall in gold output and labour concerns.
Lloyds shares gained 2.6% to 47p after the bank reported an increased margin outlook for 2022 due to its “solid” performance despite noting a drop in profit from £1.9bn to £1.6bn as it built its credit reserves in its Q1 trading update.
“Lloyds’ first quarter update reveals a lot about the state of the UK economy. The country has been getting back on its feet, which is reflected by an increase in lending and savings deposits for Lloyds. However, the outlook is less than rosy,” stated Russ Mould.
GlaxoSmithKline shares gained 0.6% to 1,765p following the company’s Q1 report where the group noted a 32% jump in revenue to £9.78bn and reported a 78% climb to £2.6bn in pretax profit.
Hikma Pharmaceutical shares were trading down 1.9% to 1,966p and Dechra shares increased 0.5% to 3,590p in early morning trade on Wednesday.
“Given advertising spend is typically heavily tied to the economy this resilient performance is testament to the changes Mark Read has made since he took over from founder Martin Sorrell in 2018,” commented Mould.
“The company continues to refine its focus, announcing plans to consolidate operations in its media buying agency GroupM. A move which is reflective of the approach under Read which has been to simplify a business which previously had a huge number of moving parts.”
Aveva said its revenue will take a hit from sanctions on Russia which would drop through to its operating profit this year, while wage inflation, increased travel costs and investment in the cloud would hamper gains.
Persimmon shares were trading down 1.9% to 2,139p despite it backing its annual volume growth and saying it would maintain “industry-leading margins,” even though the housebuilder faced cost pressures and buyers struggled due to the UK cost of living crisis.
Russ Mould said, “Unlike its peer Taylor Wimpey, housebuilder Persimmon did not impress the market with its latest trading statement. Nothing too alarming was revealed but build rates are lagging behind a little and overall, the company seems a little less bullish than Taylor Wimpey.”
LSEG did note an 8% increase to £1.75bn in total income excluding recoveries in the first quarter of 2022 and saw a 7.6% climb to £1.59bn in gross profit. The revenue hit from Russia’s invasion of Ukraine is anticipated to be around £60 million in 2022.
London Stock Exchange Group however did say that it had gained £25m in run-rate revenue synergies in March from its acquisition of Data & Analytics firm Refinitiv.
Price Target
Deutsche Bank cuts Diageo to ‘hold’ from ‘buy’ and reduced its price target to 3,900p from 4,650p, sending the group’s shares to decline 0.6% to 3,949p which dragged the FTSE 100.
Melrose Industries gained 1.4% to 115p despite Bank of America cutting its rating from ‘buy’ to ‘neutral’ and reducing its price target to 130p.
Goldman Sachs and JPMorgan raised WPP’s price target to 1,270p and 1,330p respectively.
Aveva was rated as ‘overweight’ by JPMorgan and the group’s price target was cut to 3,625p from 4,500p.
Coca-Cola HBC shares gained 0.7% to 1,608p with Barclays raising its price target to 1,900p although Deutsche Bank cut it to 2,585p.
Land Securities shares dropped 0.5% to 754p after RBC cut its price target to 950p from 1,000p.
RBC also cut British Land’s price target to 475p and Segro’s price target to 1,250, resulting in their shares falling 0.8% and 0.3% respectively.
Amongst housebuilders, Persimmon and Taylor Wimpey’s price targets were raised to 3,110p and reduced to 180p respectively by JPMorgan.
Barclays, Goldman Sachs and JPMorgan cut AB Foods’ price target to 2,300p, 1,775p and 1,940p respectively, however, Associated Britsh Food shares gained 0.3% to 1,553p.
Natwest shares rose 1.4% to 223p as Bank of America raised its price target to 360p from 335p and upgraded it to a ‘buy’ rating.
Credit Suisse cut HSBC’s price target to 515p from 530p.
Anglo American’s price target was raised by DZ Bank from 2,250p to 2,350p.
Intercontinental Hotels’ shares rose 0.4% to 5,094 as Jefferies raised Intercontinental Hotels target to 6,000p from 5,750p.
The UK Investor Magazine Podcast is joined by Alan Green to focus on Lloyds shares, GSK and two London IPOs.
Lloyds released its quarterly trading update which alluded to a slowdown in profit from Q4 2021. We discuss their dividend and what it will take for the Lloyds share price to break through 50p and back up towards 70p. With Net Income dipping from Q4 2021, there is also consideration paid to the impact of actions at the Bank of England to Lloyds shares in 2022.
Despite cutting their full year dividend by 35%, GlaxoSmithKline produced a bumper 32% increase in sales in Q1 2021. Given the strong revenue growth, high valuation and reduced dividend, we question whether GSK is now a value, growth or income stock.
We also look at two upcoming London IPOs in Lift Global Ventures and SpectrumX.
Lloyds (LON:LLOY), GlaxoSmithKline (LON:GSK) and Lift Global Ventures (LON:LFT).
Persimmon shares were down 2.3% to 2,129p in late morning trading on Wednesday, after the housing firm reported rising cost pressures and a lowered level of outlet completions in its Q1 2022 trading update.
The group confirmed that completions would fall short of 2021 levels, and that the timing of outlet openings would result in them being weighted in H2 2022.
However, the company mentioned that private sales reservation rates in the current period increased 2% on 2021 levels, as consumer demand for new build homes continued to outstrip supply and mortgage availability stayed high.
“Persimmon are the second housebuilder this week to point out demand for UK houses remains strong, following Taylor Wimpey’s positive outlook yesterday,” said Hargreaves Lansdown equity analyst Matt Britzman.
The group noted that it was on track to deliver full-year volume growth of 4-7% while maintaining margins, estimating that price growth would mitigate rising levels of building cost inflation.
“Persimmon continues to perform well. We are currently trading in line with expectations, demand remains strong, our private average sales rates are 2% higher year on year and we have a robust forward order book of £2.8bn,” said Persimmon CEO Dean Finch.
“As expected, reflecting the profile of outlet openings, we anticipate that completions this year will be weighted towards the second half, with first half completions being lower than those delivered in the first half of 2021.”
“We continue to expect to deliver volume growth for the full year 2022 of around 4-7% of 2021 levels, with resilient industry-leading margins.”
Persimmon’s £2.8 billion order book represented a decline from its £3 billion result the previous year, along with a £75 million commitment set for the group’s initiative to strip its properties of flammable cladding more than three years after the Greenfell fire disaster.
“As is the case with most of the major housebuilders, the group’s signed the government’s fire safety pledge to fix cladding issues. For Persimmon, unlike many of its peers, the previously set aside £75m is expected to cover the full costs of remedial work so no extra costs are expected,” said Britzman.
Persimmon is set to pay out a dividend of 110p on 8 July 2022, following the firm’s 125p dividend distributed in April.
