Maitland/AMO Morning Monitor – Friday 30 July 2021

30th July 2021

In the news

  • Natural gas prices in Europe and the UK have rallied to some of the highest levels on record, threatening to raise costs for households and businesses as global supplies of the critical fossil fuel remain tight.
  • Robinhood shares have stumbled after its trading debut. The popular app opened at $38 apiece, the bottom of a target range marketed to buyers in its IPO.
  • Amazon's second quarter saw its sales increase, however, this number fell below analysts' expectations. The tech giant also reported a 50% increase in overall profit compared to the same period last year.
  • UK government officials have become more optimistic about the prospects of a strong economic recovery in the second half of the year.
  • China tech stocks listed in the US have suffered their worst month since the global financial crisis, following a regulatory clampdown by Beijing.

Politics today

  • Labour leader, Keir Starmer, has increased pressure on Boris Johnson to ease the “pingdemic” and bring forward the date that fully vaccinated people in England will no longer have to isolate if they’ve been in contact with a COVID case.
  • Parliament is in recess until September 6th.

Stock market moves

  • In the US, the S&P 500 index rose 0.4% while Nasdaq 100 futures fell 1.4%.
  • In Asia, Japan’s Topix index fell 1.4% while Hong Kong’s Hang Seng index tumbled 2.1% and China’s Shanghai Composite index lost 0.7%.
  • In Europe, the FTSE 100 is down 0.8% while the STOXX 600 is also down 0.7% in early hours of trading.
  • Bitcoin continued to trade around $40,000, maintaining its recent rebound.

Corporate announcements

* Maitland Client

NatWest Group PLC Interim Results - NatWest Group
  • H1 2021 operating profit before tax of £2,505m compared with an operating loss before tax of £770m in H1 2020. H1 2021 attributable profit of £1,842m.
  • Bank net interest margin of 1.61% decreased by 3 basis points compared with Q1 2021 principally reflecting increased levels of liquidity.
  • NatWest Group now aims to distribute a minimum of £1bn per annum from 2021 to 2023, via a combination of ordinary and special dividends, and intends to commence an ordinary share buy-back programme of up to £750m in the second half of the year.
  • Alison Rose, CEO, said: “As a result of our strong and resilient performance, coupled with our capital strength and cautiously optimistic outlook, we are announcing an interim dividend of 3p per share and share buy-back of up to £750m. We are also increasing our minimum annual distribution to shareholders to £1.0bn for the next three years. Taken together, this means our total distributions for 2021 will be a minimum of £2.9bn.”
Pearson PLC Half-year Report
  • Adjusted operating profit of £127m, following loss of £(23)m in H1 2020.
  • Strong balance sheet and cash flow with H1 net debt of £646m (H1 2020: £982m).
  • The Group continue to expect adjusted operating profit for FY21 to be in line with market expectations.
  • Andy Bird, CEO, said: “Pearson has made good strategic, operational and financial progress in the first half of 2021 leading to healthy revenue and profit growth in the period. This reflects a strong rebound from 2020 with encouraging momentum in the underlying business. We are pleased to declare an interim dividend of 6.3p for our shareholders.”
Glencore PLC Half-Year Production Report 2021
  • Own sourced copper and cobalt production of 598,000 tonnes and 14,800 tonnes, respectively, was modestly higher than H1 2020.
  • Own sourced gold and silver production were, respectively, 3% and 13% ahead of H1 2020.
  • Entitlement interest oil production of 2.6m barrels of oil equivalent was broadly in line with H1 2020, reflecting the offsetting effects of the Chad oil fields placed on care and maintenance in April 2020 and the gas phase of the Equatorial Guinea project commencing in February 2021.
  • Gary Nagle, CEO, said: “Our Marketing business has again performed well, with constructive market conditions allowing us to raise our full year 2021 EBIT expectations to the top end of our $2.2-$3.2bn p.a. guidance range… our operational teams remain focussed on operating safely and responsibly to create sustainable long-term value for all stakeholders.”
Intertek Group PLC Half-year Report
  • Revenue of £1,317.6m: +4.8% at constant rates; -1.0% at actual rates.
  • Adjusted operating profit of £201.7m with operating margin increasing 260bps at constant rates to 15.3%.
  • Strong Cash conversion of 135%, robust balance sheet with net debt of £435m.
  • André Lacroix, CEO, said: “The Group is on track to deliver a strong 2021 with robust like-for-like revenue growth, year on year margin progression and a strong free cashflow performance, notwithstanding the lockdown restrictions in several of our markets impacting the supply chains of our clients and mobility. We expect our Products division to deliver robust like-for-like revenue growth and both Trade and Resources to deliver good like-for-like revenue growth.”
AVEVA Group PLC Q1 Trading Update
  • AVEVA has achieved approximately 11% revenue growth in the first three months of the financial year on a pro forma organic constant currency basis.
  • All of the Group’s revenue lines grew, with Subscription growing in line with overall Group revenue and Perpetual licences increasing significantly.
  • AVEVA will report half-year results for the financial period from 1 April 2021 to 30 September 2021 on 9 November 2021.
Rightmove PLC Half-year Report
  • Revenue up 58% on 2020, reflecting the growth in customer spending and ARPA over the first six months of 2021. 
  • Operating profit of £114.9m, up 86% on 2020 (2020: £61.7m) and 6% on 2019 (£108.2m).
  • Interim dividend for 2021 of 3.0p (2020: nil; 2019: 2.8p) per ordinary share.
  • Peter Brooks-Johnson, CEO, said: “The innovation we have delivered to help home-hunters find their happy, despite the restrictions, have been well used – with 200,000 video viewings and 160,000 rental viewing appointments made on the platform.”
International Cons Airlines Group Interim Management Report to Jun 30 2021
  • Passenger capacity in quarter 2 was 21.9% of 2019 and continues to be adversely affected by the COVID-19 pandemic together with government restrictions and quarantine requirements.
  • Current passenger capacity plans for quarter 3 are for around 45% of 2019 capacity, but remain uncertain and subject to ongoing review.
  • Strong liquidity of €10.2bn at the end of quarter 2, driven by successful conclusion of financing initiatives since the start of the year, together with cost actions and UK pension contribution deferral.
  • Luis Gallego, CEO, said: “Longer term we’re preparing our business so that we can emerge stronger and more competitive in a structurally changed industry. For example, we’re accelerating the digitalisation of our business and our agreements with unions are enabling us to improve productivity and reduce our cost base while increasing the proportion of variable costs.”
Babcock International Group PLC Full year results for the year ended 31 March 2021
  • Revenue down 3% excluding foreign exchange and disposals, with business growth offset by the impact of COVID-19 on trading and the de-recognition of pass-through revenue from the Phoenix contract in Land.
  • Underlying operating profit excl. one-off CPBS adjustments was £222.4m. 
  • The impact of COVID-19 on the Group’s performance in FY22 is uncertain. While its activity levels have broadly recovered, the additional costs from operating in a COVID-secure way remain.
  • David Lockwood, CEO, said: “Looking forward, Babcock will be a simplified and more focussed group with a renewed emphasis on the exceptional engineering skills of its people. We will be well placed to take advantage of the many opportunities we see in both UK and international markets, leading to improved cash generation and profitability in the medium term.”
Essentra PLC Results for the Half Year Ended 30 June 2021
  • Revenue increase of 7.5% vs H1 2020 on a like-for-like basis, with continued positive momentum resulting in a return to quarterly growth.
  • Adjusted operating profit up 34.0% vs H1 2020 to £35.7m.
  • Interim dividend of 2.0p per share declared, in line with our progressive policy.
  • Paul Forman, CEO, said: “Whilst there is more for us still to do, our H1 2021 results demonstrate our ability to deliver financial progress despite a challenging market backdrop. We are well positioned for the remainder of 2021 and are on track to deliver full year adjusted operating profit in-line with the Board’s expectations.”
Fortress Investment Group (UK) Ltd Update on CMA Condition
  • The Board of Morrisons and Bidco announced that they had reached agreement on the terms of a recommended all cash offer by Bidco for the entire issued, and to be issued, share capital of Morrisons.
  • Capitalised terms used and not defined in this announcement have the meanings given to them in the scheme document in relation to the Fortress Offer published and sent to Morrisons Shareholders on 22 July 2021.
  • Bidco announces that the CMA has responded to the briefing paper submitted by Bidco in respect of the Fortress Offer to confirm that it has no further questions in relation to the Fortress Offer.
  • Accordingly, Bidco is not aware of any fact or circumstance, as at the date of this announcement, that would result in any delay in the satisfaction of the CMA Condition.
Cineworld Group PLC Further Liquidity and Covenant Flexibility Secured
  • The Group announces it secured $200m of incremental loans maturing in May 2024 from a group of its existing lenders.
  • The Group has also agreed covenant amendments on certain of its existing debt facilities, including reducing the minimum liquidity requirement and relaxing limitations on the use of cash, among other modifications.
  • Cineworld believes that this further liquidity, in addition to the US CARES Act refund of $203m, will provide the Group with financial and operational flexibility.
  • Mooky Greidinger, CEO, said: “We are monitoring the evolution of the virus and its potential impact on our business…We remain confident in the prospects for our business and continue to look forward to welcoming our customers back to the best place to watch a movie.”
ConvaTec Group PLC Interim Results
  • Revenue growth ahead of Group’s expectations:  +7.4% organic growth, +7.0% on a constant currency and +11.0% on a reported basis.
  • Reported operating profit of $136m, 19.9% higher year on year, with adjusted EBIT of $204m.
  • 2021 full-year outlook is updated:  organic revenue growth of between 3.5-5% (previously: 3-4.5%) and a constant currency adjusted EBIT margin of 18-19% (previously: 18-19.5%).
  • Karim Bitar, CEO, said: “I am pleased with our continued strategic progress, on delivering another semester of good growth and on the underlying performance of the Group, notwithstanding that the financial performance was helped by the COVID impacted Q2 comparative. Our ongoing strategic transformation remains on track, and we have made progress during the period.”
Jupiter Fund Management PLC Interim Report and Accounts 2021
  • Consistent strong investment performance with 69% of AUM above median over three years.
  • AUM ended the period at a record high of £60.3bn.
  • Underlying profit before tax increased 38% to £78.2m (2020 H1: £56.6m). Statutory profits rose 40% to £57.0m (2020 H1: £40.8m).
  • Andrew Formica, CEO, said: “We have reported record gross inflows for the period, with a number of strategically important products performing very well, which highlights our positive momentum going into the second half of the year.”
Paragon Banking Group PLC Trading Update
  • Year to date new business volumes exceeded their equivalent levels in 2020, supported by a strong quarter’s trading that generated new advances of £485.4m in the Mortgages division.
  • The Group reports £310.6m in Commercial Lending, representing its busiest new advances quarter for over a decade.
  • The Group’s net loan book increased to £13.1bn at the quarter end, up 3.9% from June last year and by 2.2% during the quarter.
  • Nigel Terrington, CEO, said: “The high level of new originations in the current operating environment is testament to the resilience, capabilities and efficiency of our business model and people. We are excited about the prospects for the Group which build from the specialist understanding of our markets and customers and our strong capital foundations.”
Law Debenture Corp PLC Half-year Report
  • 2021 dividend to be increased from 2020 level of 27.5 pence per share.
  • Dividend yield of 3.7% as quarterly dividend increased by 5.8%.
  • NAV total return for the six months grew 16.7% compared to 11.1% for the benchmark, FTSE Actuaries All-Share Total Return Index.
  • Denis Jackson, CEO, said: “We are pleased to report another period of strong financial performance – further outperformance by our Investment Portfolio while our IPS business has performed strongly, with revenue up 18.2% and profit before tax up 6.1%…We look forward to capturing the opportunities ahead.”
Scottish American Investment Co (SAINTS) PLC Half-year Report
  • The Group reports strong net asset value total return over the first six months of 2021, returning 11.3%.
  • SAINTS’ revenues per share over the period were 6.74p compared to 6.09p for the equivalent period last year.
  • Its property portfolio delivered a 12.9% return, with a significant contribution from the sale of its largest holding, a data centre in Milton Keynes, at a large premium to its book value.
  • The Board and the Managers are optimistic about SAINTS’ long term prospects for resilient income growth.
IMI PLC Interim Results
  • The Group reports 8% organic sales growth, 24% organic adjusted operating profit growth.
  • Adjusted operating margin improved by 170bps in first half.
  • FY 2021 guidance increased to adjusted EPS of 85p to 90p, including buyback impact.
  • Roy Twite, CEO, said: “We continue to make excellent progress with our strategy to increase customer intimacy, drive market-led innovation and reduce complexity… We remain on track to deliver our long-term ambition of sustainable profitable growth and Group margins of 18% to 20%.”