Reach shares tank 20% as revenue falls

Anshula Kumar
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Reach shares tank 20% as revenue falls

Reach announced strong strategic development and digital revenue growth amid a more competitive market, but shares dropped 20% to 127p in early afternoon trading on Thursday.

Reach noted a decline in group revenue by 0.9% YoY as the war in Ukraine impacted advertiser demand.

The group recorded a 9.3% YoY growth in digital revenue, whereas print revenue fell by 4.2% in the latest trading update.

Reach said that the market has seen weaker advertiser demand and average yields over the last two months, with the war in Ukraine dramatically decreasing the amount of ‘brand safe’ material available to news publishers.

While this has resulted in lower growth than anticipated, the group is strengthening the quality of our digital sales, with significant growth in higher-yielding revenues such as PLUS+ becoming a larger part of the mix.

PLUS+ data has recently been integrated into three of the top advertising agencies’ online marketplaces, and Reach is continuing to develop customer profiles and employ technology, such as its AI contextual tool Mantis, to encourage greater consumer time on site.

Reach is continuing to invest in the Customer Value Strategy, with its cost base being reshaped to support data and technology investments.

However, the group has observed substantial rises in operating expenses since the middle of March, particularly in print, where the impact of newsprint hikes would now surpass previous projections.

Additional measures, such as the acceleration of efficiency programmes, modifications in print manufacturing, and activities regarding print cover prices, have been made to help counteract this.

As a result of the more adverse economic conditions, Reach forecasts a flat group revenue for the year, with a higher mix of circulation revenues and lower digital contribution than originally expected.

The impact of recent newsprint inflation is fully reflected in the group’s cost forecasts for the current fiscal year, and efforts are already being taken to help offset the impact on operational profit.

Jim Mullen, CEO of Reach said, “We’re developing a more sustainable and profitable long-term future for the business, with delivery of the strategy progressing well, despite a more challenging economic backdrop.”

“The effective collection and use of data are supporting the growth of our higher yielding digital products, which are becoming an increasing part of our revenue mix. We’ve taken swift action to address the impact of inflation on our cost base and the business remains strongly cash generative, supporting the investment in data and technology that is key to future growth.” 

Endeavour Mining reports 14% gold production rise

Natasha Doris
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Endeavour Mining reports 14% gold production rise

Endeavour Mining shares spiked 8.4% to 2,104p in late morning trading following a slate of positive results from the company, including a 14% Q1 2022 gold production to 357koz and a relatively flat AISC at $848 per oz.

The mining group reported that it was well-positioned to hit its FY2022 guidance of 1,315 to 1,400koz at an AISC of $880 to $930 per oz.

Endeavour added that its adjusted net earnings rose $22 million to $122 million, representing a 2% increase on a per share basis to 49c per share, with an operating cash flow saw a boost of $96 million to $299 million and a 23% rise on a per share basis to $1.21.

The company said its net cash position increased by $90 million over Q1 2022 to $167 million, despite $101 million paid in capital returns to shareholders.

The mining firm paid out a dividend of $70 million over the quarter, amounting to $200 million in dividends paid out since Q1 2021.

Endeavour Mining reported the continuation of its share buyback programme, with $31 million in shares repurchased across the quarter, totally $169 million since the programme started in April 2021.

“We are pleased to have started the year on a strong footing with both production and all-in sustaining costs well positioned to meet full year guidance,” said Endeavour Mining CEO Sebastien de Montessus.

“This performance has resulted in robust cash flow generation during the quarter which, in line with our capital allocation framework, was used to further strengthen our balance sheet, to continue our attractive shareholder returns programme, and to reinvest back into our business.”

“Our net cash position has improved by $90 million to reach $167 million by the end of the quarter, and we also returned more than $100 million to shareholders over the period through dividends and buybacks.”

Derwent London to acquire City Road Island EC1

Anshula Kumar
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0
Derwent London to acquire City Road Island EC1

Derwent London announced that it had exchanged a conditional contract to purchase the freehold of City Road Island EC1, which houses the Moorfields Eye Hospital and the University College London Institute of Ophthalmology for £239m on Thursday.

Derwent London said that Moorfields Eye Hospital NHS Foundation Trust and UCL, as part of the Oriel joint project, are selling the facility for £239m before costs which is contingent on final Treasury approval, which is expected in the second half of 2022.

Completion of the purchase is also contingent on Oriel delivering the new eye hospital at St Pancras and then vacating City Road Island, which is expected to happen in early 2027.

Derwent London has hired architects AHMM and a whole professional team, and as part of its regeneration plans, it will engage the community extensively.

This significant 2.5-acre site, which includes approximately 400,000sqft of existing buildings, is in the heart of the Tech Belt, where the group has significant assets.

According to our first assessments, the site has the potential to provide a large 750,000+ sqft campus with ample public space and high environmental credentials.

Paul Williams, CEO, Derwent London, said, “We are delighted to have secured such an important central London regeneration opportunity in the heart of the Tech Belt, where we aim to deliver the next generation of distinctive ‘long-life, loose-fit, low carbon’ commercial space.”

“This is a significant step towards realising the Oriel joint initiative. Oriel will bring together UCL’s formidable research base with Moorfields’ world-class healthcare delivery in one integrated centre of research, education and care,” added Professor Alan Thompson, Dean of the UCL Faculty of Brain Sciences.

The acquisition is likely to have a minimal impact on the company’s profitability once it is completed.

The £239m payment that Derwent London will pay upon completion of the transaction is in accordance with the market value of the estate, which does not yet have planning consent, and will be funded by undrawn lending facilities and cash.

The contract also includes potential overage provisions that may be payable if the site receives planning approval and/or is sold within a certain time frame.

The potential sums payable under such overage arrangements are subject to an aggregate cap, which includes the purchase consideration due at completion.

Martin Kuper, Chief Executive of Moorfields Eye Hospital NHS Foundation Trust stated, “This is an important step forward for our plans for Oriel, a new eye care, research and education centre. The sale of our City Road Island, which is conditional on Treasury approval of Oriel, is a key element of our funding strategy.”

“All proceeds will be reinvested in the new centre to secure the long-term future of world-leading eye care, research and education in a way that represents value for money and benefits our patients. We will continue to maintain our strong links with Islington Council as plans for City Road Island progress.”

Derwent London shares rose 3.5% to 3,003p in early morning trade on Thursday.

Barratt Developments on track to deliver 18k homes

Natasha Doris
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Barratt Developments on track to deliver 18k homes

Barratt Developments shares were up 1.2% to 490.4p in late morning trading on Thursday, after the company announced that it was on track to deliver total completions between 18,000 to 18,250 homes in FY2022, including around 750 houses from joint-ventures in line with management expectations.

Barratt confirmed a projected growth of 4% to 6% year-on-year for FY2022 on the back of the building firm’s home completions.

The group noted net private reservations per active outlet for each average week of 0.93 against 0.83 in 2021, alongside good progress throughout its construction activity with 362 equivalent homes built per week against 321 the previous year.

Barratt Developments confirmed a balance sheet with year-end net cash anticipated to come between £1 billion to £1.1 billion.

The housing firm said it was fully forward sold for FY2022, with total forward sales at £4.3 million on 1 May 2022, compared to £3.6 million year-on-year.

The company noted that continuing global events placed its outlook in a degree of uncertainty, due to factors including cost inflation and supply chain issues from the war in Ukraine.

However, Barratt Developments assured investors that it believed the overall strength of the housing market and the group’s operational performance, along with its strong balance sheet, would provide it with sufficient flexibility to respond to any market impacts going into 2022.

“We are seeing strong demand across the country for our high quality, energy efficient homes and our excellent operational teams are working hard to meet this demand,” said Barratt Development CEO David Thomas.

“We expect to deliver full year trading results in line with the Board’s expectations as we remain focused on growing towards our medium-term target of 20,000 homes a year, delivering high quality sustainable developments the country needs, creating jobs and supporting the economy across England, Scotland and Wales.”

“As our business grows, we remain committed to leading our industry in quality, service and sustainability.”

M&G Credit Income Investment Trust presentation May 2022

UK Investor Magazine
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M&G Credit Income Investment Trust presentation May 2022

The M&G Credit Income Investment Trust presents at the UK Investor Magazine Investment Conference May 2022.

We were thrilled to host, Adam English, Fund Manager of the M&G Credit Income Investment Trust for a deep dive into fixed income investing in 2022.

The M&G Credit Income Investment Trust aims to generate high-quality, reliable income from a diversified credit portfolio, while seeking to preserve investors’ capital through low net asset value (NAV) volatility. The trust has the flexibility to invest in both public and private debt, which allows individual investors to access potential opportunities normally only available to large institutions.

Download the presentation slides here.

Playtech shares rise 5% on excellent quarter

Anshula Kumar
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0
Playtech shares rise 5% on excellent quarter

Playtech noted an excellent start to the year with unaudited Adjusted EBITDA greater than €100m in the first quarter of 2022 said the company in an announcement on Thursday, which led shares to rise 5.2% to 541p.

Playtech’s excellent start to the current financial year has continued since the FY 2021 results were disclosed on March 24, 2022, with unaudited Adjusted EBITDA of more than €100m for the first quarter.

The group’s encouraging first-quarter trend has continued into April. Both the B2B and B2C industries have contributed to the outstanding growth.

The same patterns have continued for Snaitech since H2 2021, with a strong start to the year fueled by its internet business, retail rebound, and favourable sports outcomes said Playtech.

B2B performance has been fueled by strong momentum from the Americas, particularly Caliplay in Mexico, as well as solid performance across the board, including Live Casino with several more licenses and games being added.

Following the opening of the Ontario market, Playtech has secured numerous new customers in the US and announced new partnerships in Canada.

Outlook

The Board of Directors is optimistic about the prospects for FY 2022, based on the strong start to the year.

Given that we are still early in the year and that the macro background is unpredictable due to the pandemic and the crisis in Ukraine, the Board is remaining careful and vigilant.

The Board is also aware that the current level of business strength cannot be guaranteed to continue for the balance of the year.

However, the company’s recent performance and present business trends have placed Playtech in a strong position, and the Board hopes to be able to provide additional market updates as the year progresses.

Future Opportunities

The TTB investment group has made some headway in discussions about its potential bid for Playtech. However, it is impossible to predict whether or not an offer for the company will be made, or the terms on which such an offer will be made.

Despite the current difficult capital market conditions, Caliplay and Playtech are still exploring the possibility of a transaction that would allow Caliplay to access the US market more quickly.

Finalto’s sale is still on schedule to be completed in Q2 2022, with two of the four essential regulatory clearances now in hand.

Shell profits triple to $9.1bn as oil prices surge

Natasha Doris
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Shell profits triple to $9.1bn as oil prices surge

Shell shares were up 3.1% to 2,294.5p in early morning trading on Thursday, as the energy giant’s profits tripled on the back of surging oil prices.

The escalating conflict in Ukraine sent the price of Brent crude to $110 per barrel, boosting Shell to a quarterly profit of $9.1 billion, its highest on record and triple its previous $3.2 billion profit year-on-year.

Russia Impact

Shell confirmed it took a $3.9 billion charge as a result of suspending its Russia operations.

However, the Russian invasion of Ukraine has driven oil prices to heights in excess of $120 per barrel over the past few months since the conflict began in late February.

“The Cinderella story we’ve seen among the oil majors continued this week as Shell posted record profits thanks to an extremely accommodative environment,” said Hargreaves Lansdown equity analyst Laura Hoy.

“The group’s exit from Russia took a $4bn bite out of the bottom line, but excluding this one-off expense, the group’s been firing on all cylinders as rising prices offset minor volume declines.”

Shell Dividend and Shares Buyback

Shell also announced a dividend of $5.4 billion, amounting to 25c per share for Q1 2022, with an increase of 4% over the dollar dividend for Q4 2021.

The company confirmed that $4 billion of shares had been repurchased under its $8.5 billion share buyback programme for HY1 2022, with the remaining $4.5 billion expected for completion in advance of Shell’s Q2 2022 results.

Windfall Tax Calls and Renewable Energy Growth

Energy company BP also reported skyrocketing profits, despite the $25.5 billion impact from pulling out of its 19.75% stake in Rosneft earlier in the year.

Soaring profits from the UK’s two major energy firms have sparked renewed calls for a windfall tax to help consumers mitigate the soaring cost of oil and gas, as April’s 54% rise in the energy price cap saddled households with an extra £700 in energy costs per year.

However, it appears that oil and gas companies are scrambling to grow their green energy credentials in an attempt to kick extra tax discussions to the curb.

“Calls for a windfall tax have been rebuffed by claims that the majors will start to clean up their acts, spending some of the excess to build out their renewables divisions,” said Hoy.

“While renewables is just a drop in Shell’s $19bn bucket, it’s likely to become a much larger slice of the pie as the energy transition ramps up.”

“This technology is largely unproven, so oil and gas investors that have become accustomed to generous returns are taking a leap of faith. If the group’s able to build out this part of the business to become a reliable profit driver while oil prices are still high, it would make the transition all the smoother.”

US sees sharpest hike in interest rates in 20 years

Anshula Kumar
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0
US sees sharpest hike in interest rates in 20 years

The US Federal Reserve (Fed) announced the steepest increase in interest rates in over 20 years by raising its benchmark interest rate by 0.5 percentage points, in an effort to cool the country’s skyrocketing inflation.

The Federal Reserve lifted its benchmark interest rate by 0.5 percentage points to a target rate range of 0.75% to 1%.

The rise is the greatest since 2000, and it comes after a 0.25% rise in March, the first since December 2018, and more rate hikes are likely.

The Federal Reserve is expected to hike rates seven times in 2022, hitting 2.9% in early 2023, according to the Economist Intelligence Unit.

Officials also expect to reduce their $9tr asset portfolio beginning in June, a strategic decision that will raise borrowing costs even more.

The Fed had addressed the rising inflation in terms of implications that the invasion of Ukraine has on the US economy and further supply chain disruptions due to Covid-related lockdowns in China are not helping.

When the pandemic hit the US in March 2020, rates were cut to near zero, but they were already low, and years of low rates had left the United States and other countries unprepared for a sudden rise in inflation.

The Fed had rejected growing prices as “transitory” until recently, expecting them to fall as economies recovered from the pandemic.

Inflation in the US is at a 40-year high, thanks to the coronavirus’s extraordinary impact on the global economy.

The Consumer Price Index was 8.5% higher in March compared to 2021, owing to higher gas, housing, and food prices.

The rising costs of basic goods and services are now outpacing typical pay increases and the Fed’s approach is already having an influence on the economy as a whole.

Mortgage rates have risen over 2% since the beginning of the year which is the quickest in decades. As a result, several hot real estate markets have begun to cool down.

Stock market selloffs have been triggered by the impact of tighter monetary policy as well said the Guardian.

Jerome Powell, Fed chair, said, “Inflation is much too high, and we understand the hardship it is causing. We are moving expeditiously to bring it back down.”

“Some of us are old enough to have lived through high inflation and many aren’t. But it’s very unpleasant. If you are a normal economic person, then you probably don’t have that much extra to spend, and it’s immediately hitting your spending on groceries, on gasoline, on energy, things like that. We understand the pain involved.”

Powell stated that the economy remained robust and that he was optimistic that the Fed could act without causing a recession, but he also stated that the Fed will engage aggressively to combat inflation.

Next announces 285% surge in retail growth, online sales fall

Natasha Doris
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0
Next announces 285% surge in retail growth, online sales fall

Next shares were up 0.7% to 6,132p in early morning trading on Thursday following the fashion group’s Q1 2022 trading update, which reported a giant leap of 285% in retail growth.

Next announced a 21.3% increase in total product full price sales, in line with the company’s guidance for the period, and an 11% decrease in online sales year-on-year.

The company attributed its slowdown for online retail to the re-emergence of consumers into society after the pandemic lockdowns, leading to its uptick in physical store sales.

Guidance for 2022-2023

The retailer confirmed that it would be maintaining its full year pre-tax profit guidance at £850 million, representing a 3.3% uptick from the previous year, alongside an earnings per share rise of 5% to 557.3p.

“What NEXT haven’t said today is more important than what they have. Markets were concerned that the group would be struggling with costs and availability of product, putting margins under pressure, even before customers struggled with the squeeze on their own incomes”, said Hargreaves Lansdown select fund manager Steve Clayton.

“Instead, the company have reiterated their guidance from March, suggesting that their cost controls are succeeding.”

Next reported a total online sales growth of 47% across the last three years, and a 21% boost in total product full price sales over the period.

Excluding online sales from Russia and Ukraine following the firm’s closure of its websites in the regions, overseas sales declined 7%, with a reported 60% growth against 2019.

The retail group mentioned expected guidance of 0.8% growth in full price sales throughout Q2-Q4 2022-2023 in the central guidance range, with a lower projection of a 2.9% drop and an upper guidance estimate of 4.6% growth.

“[The] year is unfolding as the group had planned and whilst back in March NEXT management were throwing caveats around like confetti, so great were the uncertainties, come May they are no longer stressing the downside risks,” said Clayton.

Next: Cause for optimism

Next also reported 1.6 million shares repurchased at 6,552p per share under its buyback scheme, amounting to £107.5 million, which reduced the number of shares issued by 1.2% since the group’s financial year close at the end of January 2022.

“The company have continued to buy back shares, spending £107m so far this year, which will help to boost earnings per share growth.”

The fashion group reported a strong slate of results, which should help them survive the cold bite of inflation and lowered consumer shopping as the difficult year ahead threatens to uproot the less essential expenses in the market.

“NEXT’s strength of cash flows leaves them far better placed than most retailers to continue prospering even when times get tough. And they certainly are tough right now,” said Clayton.

“The group’s digital strengths served them well through the pandemic and will help them prosper in the future. NEXT remains the retailer best placed to continue to thrive, both on the high street and online.”

BAE Systems guidance remains “unchanged”

Anshula Kumar
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0
BAE Systems guidance remains “unchanged”

BAE Systems announced its trading update on Thursday where the defence company reiterated that its full-year 2022 guidance is “unchanged”.

BAE Systems noted £21.3bn in sales during 2021 and expects the group’s sales to grow 2-4% in 2022.

The defence company reported an underlying EBIT of £2.2bn and an underlying EPS of 47.8p last year, and now the group is expecting 4-6% growth for both EBIT and EPS.

For 2022, the group predicts a Free Cash Flow of greater than £1bn and assumes that the cumulative Free Cash Flow between 2022 and 2024 of more than £4bn.

All of the guidance predicted by BAE Systems is based on an exchange rate where £1 is equivalent to $1.38.

If the present dollar rate holds, earnings will be hampered, with EPS sensitivity of about 1p for every 5 cent change.

Overall, programme execution has been “good” across all sectors this year, however, its supply chains, delivery lead times, and people resources remain under strain across BAE System’s operations.

The group is continuing to mitigate the main financial implications following the group’s recommendations.

BAE Systems expects a solid year of order intake, and order flow has been positive thus far, particularly on its long-term programmes.

The majority of the orders they have received have a long cycle, which will help the group meet its growth targets in the next years and there is a pipeline of opportunities across all industries to strengthen the growth prospects.

Some major contracts include Lifecycle management and sustainment of the US Navy’s C5ISR systems, an 11-year contract for support to the UK’s Royal Air Force Hawk fleet and F-35 Lightning II EW systems.

BAE Systems Defence Spending

US

The forecast for spending in the United States is optimistic for BAE Systems. On March 9, the bill for the Fiscal Year 2022 Omnibus Appropriations was signed into law.

Many of its essential programmes, such as combat vehicles, the F-35 and other electronic warfare programmes are funded in this $743bn budget for FY22.

The President’s request for $773bn for the Department of Defense in Fiscal Year 2023 is well-matched with the present US National Defense Strategy readiness and modernization priorities of the US military services.

With the introduction of the National Defense Strategy in 2022, BAE anticipates continuing alignment.

UK

The Defence Command Paper in the United Kingdom reaffirmed pledges to large long-term programmes in sophisticated warships, submarines, and combat aircraft design and manufacturing, providing for long-term investment in these critical sovereign capabilities as well as substantial support for the cyber domain.

BAE Systems can support its UK customer’s objectives, and the opportunity pipeline is positive, with domestic, export, and collaborative potential highlighted.

Europe

In Europe, Germany’s large increase in defence spending is critical for long-term defence funding.

Other countries are growing or are projected to increase their defence budgets in response to the threat environment, and NATO countries are moving closer to, if not already at, their 2% GDP pledges.

Through BAE Systems’ positions on the Eurofighter Typhoon, the group’s participation in MBDA, its BAE Systems Hägglunds and Bofors companies in Sweden, and through US Foreign Military Sales, the group remain well positioned in the region.

Rest of the World

In the Middle East, BAE expects defence and security to remain a top concern due to its long-standing connections with governments and companies, as well as prolonged regional volatility and the nature of the group’s long-term contracts.

Renewals of existing long-term support contracts are progressing as planned, and BAE Systems continue to pursue several opportunities with current clients.

Through its Australian business, which is already expected to grow significantly owing to the group’s contracted roles and through export prospects from its UK, US, and Australian businesses to the area, BAE Systems’ portfolio is well-positioned to profit from increased defence spending in the Asia Pacific.

The Board of BAE said that the 2021 final dividend of 15.2p will be paid with shareholder approval on 1 June 2022 and the group’s interim results are expected in July.

Allegra Dawes, Senior Analyst at Third Bridge, said, “BAE reconfirmed their guidance for 2022 despite supply chain and logistical challenges. The company projects sales growth between 2-4% and earnings growth between 4-6% compared to 2021.”

“Defence spending across BAE’s key geographies is set to increase in coming years which will provide positive momentum for current and future program development.”

Regarding the Russi-Ukraine war, Dawes thinks that it is “unlikely to have a dramatic impact on demand for BAE systems” and added that their experts do not foresee “major capital investment any time soon.”

Dawes also said that Third Bridge’s experts predict “more countries committing to meet NATO’s defence spending target of 2% of GDP,” however, those countries, such as the United Kingdom would want to keep those capabilities within their borders.

BAE Systems’ shares have fallen 0.65% to 760p despite the company stating unchanged guidance for 2022 in their latest trading update.

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