FTSE 100 gained Friday with strong corporate update and positive mining stocks offsetting the losses on the index from banking shares provoked by investor concerns over the Bank of England’s meeting next week.

The Ukraine conflict, China’s COVID restrictions, and rising inflation have all weighed on the global economy, causing uncertainty ahead of the Bank of England’s widely anticipated meeting next week, that could see interest rates rise for the fourth time in a row.

“The UK stock market continued its recovery from the big falls seen at the end of last week and beginning of this week amid some solid corporate updates and strong trading in Asia and on Wall Street,” said Russ Mould, Investment Director, AJ Bell.

Mining stocks continued to support the FTSE 100 with gains across the sector during times of volatility caused by China’s lockdown and Russia’s invasion.

Mining stocks such as Anglo American, Glencore, Antofagasta and Rio Tinto saw shares climb between 0.8% to 1.9%, where Anglo American, Glencore, Antofagasta and Rio Tinto shares rose to 3,517p, 489p, 1,548p and 5,677p respectively.

Smurfit Kappa shares rose 4.2% to 3,411p after the company reported YoY revenue growth of 33% to €3.02bn and EBITDA at €514m despite headwinds at the start of the year, in the first quarter of 2022.

Pearson shares gained 2.5% to 790p after the group reported a 7% underlying sales growth in its first quarter on a strong contribution of 22% from its Assessment & Qualifications and English Language Learning divisions.

Pearson also announced the acquisition of Mondly on Friday which is expected to deliver mid-teens margins for the English Language Learning division by 2025.

Reckitt Benckiser shares rose 0.5% to 6,235 despite the company reporting a slip in revenue of 2.3% to £3.4bn from £3.51bn in the first quarter of 2022. However, the group’s expectations of net revenue growth remaining at the upper end of its guidance supported the stock.

Hikma Pharmaceutical shares tumbled 6% to 1,903p after the group announced that its Generics business has experienced some headwinds due to increased competition and a challenging pricing environment, resulting in a “slow” start to the year. However, the group expects full-year Generics revenue growth between 8% to 10% for 2022.

Hikma reported a good performance in its Injectables and Branded businesses, and the company expects Branded revenue to be in line with 2021 as it maintains its focus on key therapeutic areas and chronic medications. 

NatWest shares dropped 3.8% to 214p as the company reportedly booked a £38m credit provision release in the first quarter, down from a £98m in 2021, in times when peers are beginning to prepare for potentially slowing economic growth. 

However, the banking group is confident in securing income above £11bn in 2022 from its core operations.

NatWest noted a 41% surge in operating pretax profit to £1.25bn from £885m in Q1 2022, and attributable profit rose 36% to £841m from £620m. 

“Like several of its rivals NatWest smashed forecasts but for investors the focus is much more on the outlook, which despite the boost to profit implied by rising interest rates, is heavily clouded by the risk of an increase in bad debts linked to the cost-of-living crisis,” added Mould.

AstraZeneca shares fell 1% to 10,462p after the company reported a decrease of 66% to £553m from £1.6bn in pretax profit in 2022. The company however did record a rise in revenue of 56% to £11.39bn from £7.32bn in 2021 due to the 21% contribution from its oncology arm.

Travis Perkins shares were trading down 1.5% to 1,248p despite the company posting a 14% rise YoY in sales during its Q1 trading update. However, an uncertain outlook for 2022 due to material inflation hindered the stock.

Russ Mould stated, “The most encouraging takeaway from building materials supplier Travis Perkins was its apparent ability to pass on an increase in raw material costs amid strong demand for housing.”

“Crucially while prices are still high, the supply chain issues which affected the sector throughout 2021 are beginning to ease.”

BP gained 0.2% to 388p after the oil and gas company announced the strategic partnership with Volkswagen AG to “boost” the adoption of electric vehicles across Europe. The pair plans to “rapidly” build a fast-charging EV network across Europe by 2024.

However, BP’s peer Shell saw its shares dip 0.8% to 2,167p on Friday despite oil prices rising 1.8% to $109 a barrel.

Price Targets

Smith & Nephew shares were trading up 0.4% to 1,316p after UBS and Citigroup raised the company’s rating to ‘neutral’ and increased its price target to 1,295p and 1,430p respectively.

Glencore’s price target was raised by Barclays and Goldman Sachs to 730p, however, JPMorgan cut it to 630p.

Barclays also raised the price target of other miners such as Anglo American, Antofagasta, Endeavour Mining and Fresnillo to 3,400p; 1,645p; 3,000p; and 880p respectively, however, cut Rio Tinto to 4,800p.

Standard Chartered shares dipped 0.8% to 543p despite Goldman Sachs, Berenberg and Barclays raising their price target to 945p, 750p and 700p respectively, and upgrading it to a ‘buy’ rating.

Barclays shares rose 1.4% to 148p after Credit Suisse raised its price target to 240p from 205p.

Aveva shares gained 4.6% to 2,149p despite facing cuts in its price target from Deutsche Bank and Bank of America to 2,400p and 3,000p.

GlaxoSmithKline shares dropped 1% to 1,791p despite Barclays raising its price target to 1,800p from 1,775p and giving it an ‘equal weight’ rating.

Dechra Pharmaceuticals shares gained 2.5% to 3,664p despite Jefferies cuttin its target from 4,600p to 3,630p.

AB Foods gained 0.3% to 1,620p despite facing price cuts from Deutsche Bank and Credit Suisse to 1,900p and 2,410p respectively.

Sovereign Metals announced its Q1 2022 report on Friday where the company said their recent Mineral Resource Estimate (MRE) upgrade confirmed Kasiya in Malawi is the largest rutile deposit ever discovered,

Sovereign Metals shares rose as much as 4% on Friday following the release of their Q1 update.

Kasiya is now a Tier 1 mineral project, with the world’s largest natural rutile deposit and second-largest flake graphite deposit, according to the updated MRE.

The project’s good economics was reaffirmed in the initial Scoping Study, which was based on a prior resource estimate issued in December 2021.

In the quarterly results, Sovereign reported finding 1.8bn tonnes @ 1.01% rutile and 1.32% graphite (Indicated + Inferred) equating to 18m tonnes contained rutile and 23m tonnes contained graphite.

Kasiya was confirmed as the world’s largest rutile deposit and one of the world’s largest flake graphite deposits in the revised MRE. 

A total of 662m tonnes which was 37% of the total MRE reports to the Indicated category @ 1.05% rutile and 1.43% TGC, with a recovered grade of 1.73% RutEq and the high global resource grade was @ 1.64% RutEq.

An updated Scoping Study to expand on the earlier study and analyse the influence of higher grades, larger production volumes, and increased mine life on the MRE scale is underway.

Rutile Market

The rutile market remains robust and current rutile spot prices, according to Iluka Resources, are at ten-year highs.

Demand for high-grade TiO2 feedstocks climbed during the quarter, according to major producers Base Resources and Iluka Resources, as western TiO2 pigment makers raised their production volumes and the welding consumable and titanium metal industries continued to expand.

A lack of titanium feedstock is restricting production rates and hampering the ability of major western pigment producers to meet demand from their end clients, according to reports.

Rutile prices grew dramatically during the quarter, and price increases for the June quarter have been negotiated.

The conflict in Ukraine has wreaked havoc on the titanium feedstock and finished goods supply chains, with bulk exports of ilmenite for pigment production and rutile for welding consumables being particularly hard hit. Ukrainian rutile producers in aggregate supply the world’s welding market with the most rutile.

Titanium metal manufacturing and export have also been harmed as continued disruptions to “mining and processing of titanium feedstock and finished goods” would further restrain supply in an already competitive industry.

Sovereign Metals Life Cycle Assessment

Sovereign’s potential to reduce carbon footprint is demonstrated by industry-leading independent Life Cycle Assessment (LCA).

When compared to other titanium feedstocks and flake graphite products on the market, Scope 1, 2 and 3 benchmark LCA studies for natural rutile and graphite produced from Kasiya offer the potential for a significantly reduced carbon footprint.

The LCA study found that each tonne of natural rutile produced at Kasiya is predicted to have a Global Warming Potential (GWP) of only 0.1 tonnes CO2 eq., which corresponds to a 95% to 97% decrease in total greenhouse gas emissions.

The total greenhouse gas emissions produced at Kasiya are 20 to 33 times less than that of titania slag and synthetic rutile, which are both alternative titanium pigment feedstocks produced by upgrading ilmenite using energy and carbon-intensive processes. 

When compared to natural graphite produced in China, each tonne of graphite produced from Kasiya is predicted to have a GWP of only 0.2 tonnes of CO2e, representing an 80% reduction in greenhouse gas emissions.

MoU with Hascor

Sovereign Metals and international ferroalloy and metal powder supplier Hascor signed a non-binding memorandum of understanding in March for the possible supply of 25,000 tonnes of natural rutile per annum from Kasiya to Hascor’s processing units and clients on five continents.

The MoU with Hascor envisions a five-year supply arrangement for up to 25,000 tonnes per annum of natural rutile to the group and their existing clients, starting from the start of nameplate production.

Volumes can be increased or decreased by mutual agreement. Pricing will be based on market rates in the welding sector at the start, with agreed-upon price fluctuations over the supply period.

With production and distribution centres on five continents, the company is a major processor and global distributor of natural rutile products for the welding industry.

This first MoU is part of Sovereign’s product marketing strategy, as natural rutile demand and pricing are both high, and the global structural supply shortage continues to increase.

Kasiya’s natural rutile has superior chemical properties, indicating that it is suited for all main end-use markets, including welding, TiO2 pigment feedstock, and titanium metal.

Sovereign Metals appointment

Mr Nigel Jones, a well-known international mining executive, has been named Non-Executive Director of Sovereign Metals and Chairman of the ESG Committee.

Mr Jones has over 30 years of mining industry expertise, including 22 years in senior management roles such as the Managing Director of Rio Tinto’s Simandou iron ore project, amongst the world’s largest projected mining developments.

UK’s Critical Minerals Association  

During the quarter, Sovereign joined the Critical Minerals Association in the UK, which aims to improve supply chain self-sufficiency in support of the UK’s industrial policy.

Sovereign Metals made a presentation before the UK Houses of Parliament about its potential to become a major producer of low-carbon natural graphite.

The Q3 Trading Update from this fast-expanding bar-owning group has shown continued growth.

It reported that the 14 weeks to 3 April experienced sales 27.7% ahead on a like-for-like basis, even more impressively it was 52.7% better than the similar period in 2019.

The strong returns from the November 2021 acquired Barrio Familia group helped to boost the whole group’s growth trajectory.

Sales revenues were well up at £9.6m for the Q3, against £7.9m in Q2 and £7.6m in Q1.

The group has seen its two recently opened bar sites in Cardiff and Exeter already trading profitably within their first week of opening.

More sites are due to open before the end of next month – at Bristol, Liverpool, Cardiff, and with a ‘flagship’ The Cocktail Club in Birmingham.

There are another 23 sites currently under negotiation or offer that are due to be progressed before the group’s June year-end. The company reported that its Q3 cash at bank position was a healthy £7.6m.

The number of operating bars in situ at the year-end is likely to be 30 against just 19 previously.

We are expecting the group to see revenues rise to £34.5m for the current year against just £5.9m in 2021, enabling a significant turnaround from operating losses of £5.3m to a pre-tax profit of £2.1m. That should see earnings coming out at about 1.45p per share.

Looking into the coming year analyst Matt Butlin, at the group’s brokers Allenby Capital, has estimated that group revenues will jump to over £54m and that it will catapult its pre-tax profits by another 150% to around £5m, worth 2.5p in earnings.

Sarah Willingham, Chief Executive Officer, is obviously very confident and delighted about her group’s progress.

“We continue to deliver on our promise to build the leading premium bar group in the UK. As seen from our Q3 revenue numbers, our run rate revenue is developing nicely.”

“We are mid-build on several new openings, we continue to negotiate on a string of new attractive leases and we have the cash required for our incredible teams to deliver on the strategy for their individual brands.”

Looking ahead the group could well repeat the announcement of a Trading Update just ahead of the year-end, early next month.

The company’s next trading year is getting ever closer upon which its shares will be trading on prospective earnings based upon a 2.5p estimate. 

That would see them well undervalued at just 19.25p.

Travis Perkins announced its Q1 trading update on Friday where the group said its recorded an encouraging first quarter which reflects the group’s strategic progress and voiced its concerns regarding material inflation resulting in an uncertain outlook for 2022.

Travis Perkins reported total sales for the first quarter of 2022 were 13.6% higher than in 2021, indicating a solid start to the year for the group.

Total sales increased 17.9% in the Merchanting area, with all businesses functioning in line with expectations, owing almost two-thirds of the rise to pricing as manufacturers continued the raises which will be passed through promptly.

The queue of social and economic infrastructure development, as well as the continued need for additional homes, continue to support strong customer demand across all end markets for Travis Perkins.

SME customers’ order books are still solid, with a growing interest in energy efficiency projects says the group.

Travis Perkins’ Toolstation total sales fell 6.0% in the first quarter, with LFL sales falling 11.9%, reflecting a difficult prior-year comparator and the return of Toolstation’s customer mix to its core trade base, which continues to realise the importance and convenience of the customer proposition.

As the comparison period passes the elimination of pandemic limitations leaves management to be hopeful that business drivers will normalise in the second half of the year.

By the end of 2021, the construction supply chain had mostly normalised, and while the crisis in Ukraine and its influence on the global economy may threaten that relative stability, the group’s stock levels remain robust.

The group’s outlook for materials price inflation, which was previously projected to moderate towards the second half of the year, is now more uncertain, with pricing likely to account for a larger share of sales growth throughout the year than previously anticipated.

Overall, Travis Perkins’ cost inflation is expected to be moderate.

Despite the current uncertain financial and geopolitical environment, order books in the construction industry in the United Kingdom remain strong.

Management’s full-year projections remain unchanged, owing to Travis Perkins’ stable end markets and trade-focused business strategy.

Nick Roberts, Chief Executive Officer, Travis Perkins, commented, “The Group has had an encouraging first quarter and, although the wider economic backdrop remains uncertain, we are well placed to build on this positive start in the coming months.”

“The energy efficiency of the UK’s built environment remains a key focal point for households and politicians alike and the current cost of energy is likely to prompt further demand for improvement in both new and existing buildings. Allied to the significant pipeline of investment in the UK’s social and economic infrastructure, we remain confident in the structural drivers of demand in our end markets.”

“As the UK’s largest building materials supplier and a leading partner to the construction industry, we are uniquely placed to support the country in this drive and are working closely with all key stakeholders, including government, housebuilders, tradespeople and developers, to address these challenges.”

Travis Perkins shares dropped 1.4% to 1,249p on Friday despite the group stating that the start of 2022 was encouraging in its Q1 trading update.

Computacenter shares dipped 4.2% to 2,623p despite the company announcing that its top-line grew strongly in the first quarter of 2022 on Friday.

Computacenter saw its top line grow strongly in the first quarter of 2022, as planned, but adjusted profit before tax grew more modestly, owing to one extremely large volume customer diluting our overall margin.

Furthermore, the significant elimination of lockdown measures in the areas where the group operates has resulted in a return to a more normal, and more sustainable, cost base post-COVID-19.

As Computacenter reported at the time of its final results, H1 2021 presented a more difficult comparison than the entire year, so being profitable ahead of 2021 after the first quarter is encouraging.

Computacenter Outlook

Although adjusted profit before tax at the end of H1 2022 will likely be lower than in 2021, Computacenter will still be operating in line with its business’s historical seasonality, giving the group confidence for the entire year even though much work remains to be done.

The group is optimistic that FY 2022 will be a year of continued improvement and Computacenter is currently on target for the entire year.

There are certainly numerous issues in the world, and the business, like most firms, is affected by wage inflation and supply chain limitations. However, these challenges provide Computacenter with the opportunity to differentiate itself from the competitors by providing superior execution.

The momentum that Computacenter has developed over many years, as well as the solidity of its balance sheet, invoked confidence in the group’s future and the group said its next scheduled trading update is its Interim Results, which will release on 9 September 2022.

Pearson continued the momentum with underlying sales growth of 7% in the first quarter of 2022 and acquired Mondly in English Language Learning said the group on Friday.

Pearson reported an underlying sales growth of 7% in the first quarter of 2022 with Sales of Assessment & Qualifications contributing 22%.

The group’s Sales of Assessments & Qualifications increased by 22% across the board. The outstanding performance of the US Student Assessment can be attributed in part to the normalisation of exam schedules and Clinical Assessment performed admirably, thanks to the phasing of orders.

Pearson enjoyed a strong retention rate in Virtual Schools and growth in OPM helped boost Virtual Learning sales by 3%, where the OPM contract with ASU will expire in June 2023, as revealed on April 19th.

Borders re-opening and improved worldwide mobility boosted English Language Learning revenues by 18% in Q1, with growth in Pearson Test of English volumes weighted to Q1.

Higher Education revenues fell 5% due to predicted declines in US higher education, indicating a continuous decline in enrolments and courses per enrolment for the academic year 2021/22.

Pearson’s GED Testing Service was chosen as an education partner for Amazon’s Career Choice initiative, indicating that the company has made significant strategic development.

Sales of Workforce Skills increased by 9% excluding acquisitions, owing to continued growth in BTEC, GED, and TalentLens for Pearson, and as projected, sales in enterprises undergoing strategic review dropped 11%.

The group also reported a share buyback programme to return £350m to shareholders and stated that the first tranche commenced in April, of which over £75m had already been completed.

Pearson reaffirmed its guidance for adjusted operating profit in 2022.

Pearson acquires Mondly

Pearson announced the acquisition of Mondly, which was a strategic purchase for the English Language Learning division, today.

The acquisition is another step forward in the digital strategy, providing the group with access to the rapidly expanding direct to consumer English language learning sector.

Institutional, Pearson Test of English, and Workforce Skills are all strategic growth areas for Pearson, with synergies and cross-selling opportunities.

Pearson expects mid-teens margins for the division by 2025.

Andy Bird, Chief Executive Officer, Pearson said, “Pearson has continued to make strong strategic, operational and financial progress through the first quarter. Underlying sales grew by 7%, and we remain on track to deliver on our 2022 financial expectations and medium-term guidance.” 

“Our acquisition of Mondly, one of the world’s leading online language learning platforms, is another exciting strategic development. It strengthens Pearson’s direct to consumer strategy and supports our ambition to become the global leader in English language learning for committed learners.” 

“We remain sharply focused on the successful execution of our strategy and we are encouraged by the momentum we are seeing across the business.”

Pearson shares gained 2.6% to 791p on Friday after the group reported its Q1 trading update.