Maitland/AMO Morning Monitor – Thursday 14 October 2021
In the news
- The EU has offered to scrap most Northern Ireland checks to resolve Brexit standoff.
- JPMorgan rides high on M&A boom but flags rising expenses.
- Top trade groups led by the CBI have called on Chancellor Rishi Sunak to cut business rates.
- Goods worth £1.5bn, destined for retailers for the Christmas trading season, could be delayed if congestion at Felixstowe continues into December.
- Hut Group crisis deepens as analysts berate the company’s ‘’unproven’’ investment case.
- The House of Commons is in recess until next week.
- The House of Lords sits from 11 a.m. with the introduction of new Scotland Office Minister Malcolm Offord, who will sit as Lord Offord of Garvel. This will be followed by questions on visas for Iraqi interpreters, orders for battleships and preventing the culling of pigs. The main debates will be on social care, gambling-related harms, inequalities in the U.K. and the trade deal between Iceland, Liechtenstein, Norway and the U.K.
Stock market moves
- In the US, the S&P 500 is down 0.06% and the Nasdaq 100 is up 0.77%.
- In Asia, Japan’s TOPIX closed lower at -0.45% and China’s Shanghai Composite is flat at 0.08%. Hong Kong’s Hang Seng shed 1.43%.
- In Europe, the FTSE100 has opened op 0.6%.
- West Texas Intermediate crude was at $81.13 a barrel, up 0.51%.
Corporate announcements* Maitland Client
Rank Group PLC Trading Statement
- The Group is trading in line with expectations.
- Like-for-like net gaming revenue (‘NGR’) up 69% for Q1.
- The Group ended the quarter with cash and available facilities in line with expectations.
- John O’Reilly, CEO, said: “Whilst forecasting remains difficult as we emerge from the pandemic in an environment of volatile costs and numerous supply chain challenges, we are confident that trading will continue to improve across each of our businesses during the remainder of the year.”
- Sequential improvement in performance continued in Q3 with revenue up to 83% on the same period in 2019 on a constant currency basis (vs. 76% in Q2).
- Mitigating rising input costs: payroll and fuel account for 70% of cost base; fuel is fully hedged through 2022 and into 2023; and wage settlements have been agreed across the business.
- Anticipate underlying profit before tax for 2021 to be in line with expectations.
- Retained significant liquidity and strong free cash flow; expect to close 2021 with around £0.8 billion in cash and undrawn committed facilities.
- Ignacio Garat, Group Chief Executive, said: “Due to the tremendous efforts of our colleagues across the Group coupled with the support and cooperation of our customers across all of our markets, the trend of improving performance has continued through the third quarter. I am particularly grateful for the efforts of our colleagues in mitigating the industry-wide challenges of driver availability. This is particularly the case in our North American School Bus business and our team there has worked tirelessly to deliver results in line with our expectations despite this.”
- Total sales of £388.8m in FY22, up 8.3% YoY.
- Digital percentage of total sales was 33% in FY22, up 3% YoY.
- Net cash of £209m on 25 September 2021.
- Nick Wilkinson, CEO, said: “We continue to invest in enhancing our market leading proposition to win more customers who shop more frequently across Dunelm’s expanding range. For example, we have now developed a ‘my favourites’ functionality online, which is another step in getting closer to our customers and making their homewares shopping as easy as possible.
- Occupancy recovery has progressed and is now at 94%, 95% occupancy expected imminently.
- Acquisition of Merrick Place secured for £141m.
- Raised £206m of new equity to bring forward growth plans.
- Helen Gordon, CEO, said: “The sector’s continued attractiveness as an asset class has led us to bring forward our growth plans and in early September we successfully raised £209m of gross proceeds with strong support from our shareholders in a heavily over-subscribed placing. In addition to the acquisition of the stabilised asset, The Forge (£57m), and the forward funding scheme Becketwell, Derby (£38m), we have made good progress on deploying the remainder of the proceeds from the equity placing with the recent acquisition of Merrick Place in West London for £141m.”
- System sales of £375.8m, up 9.9%.
- Total orders grew by 9.5% in the period, driven by collection orders rising 40.3%, now at 82% of 2019 levels.
- Completed initial £45m share buyback programme.
- Dominic Paul, CEO, said: “Our supply chain continues to deliver outstanding results, despite the well-publicised inflationary pressures and challenging labour market, which is testament to the skill and dedication of our teams. While we see these pressures continuing into 2022, our success in managing them to date provides us with confidence that our growth momentum will be sustained. We’re proud to be creating new jobs to support that growth and today are announcing that we are recruiting 8,000 new colleagues across the UK and Ireland. Trading remains in-line with our expectations, we are well placed as we gear up for our peak trading period and believe our strategy is working to create sustainable value for all our stakeholders.”
- Total funds under management and administration increased 11.3% to £60.9bn during the first nine months of the year (31 December 2020: £54.7bn).
- The Investment Management business recorded gross inflows of £1.1bn in Q3, nearly doubling the £639m recorded in Q3 2020. Rathbone Funds recorded £1.1bn gross inflows in the period (Q3 2020: £867 million).
- Total net operating income of £106.4m in Q3 2021, up 22.3% YoY (£87m in Q3 2020).
- Paul Stockton, CEO, said: “Following a strong third quarter of growth, our total funds under management and administration reached £60.9 billion at 30 September 2021. Positive net organic inflows in Investment Management and record net inflows into Rathbone Funds reflect our continuing momentum and delivery against the strategic priorities we have set out for growth. We continue to transform our digital capability and client experience and welcome the addition of Saunderson House’s capability in the fourth quarter. With a clear direction and strong balance sheet, we are confident that our current plans place us in a strong position to take advantage of future growth opportunities across the Rathbones Group.”
- Assets under management declined by $3.1bn over the period.
- Net outflows of $1.0bn and negative investment performance of $2.1bn.
- Total assets under management of $94.4bn.
- Mark Coombs, CEO, said: “Investors have focused increasingly on the global growth outlook, including the impact of higher commodity prices, supply chain challenges and China’s ongoing reforms. Meanwhile, vaccination rates are increasing and restrictions are easing across a wide range of Emerging Markets, delivering a pickup in leading indicators and a broadening of economic growth. Further, central banks in emerging countries are raising interest rates, reinforcing the attractive yields available. This positive fundamental backdrop is not reflected in current valuations, presenting an opportunity for Ashmore’s active investment processes to exploit and enabling investors to benefit from increasing their allocations to Emerging Markets.”
Hays PLC First Quarter Trading Update
- Fees up 41% with sequential growth in all regions, particularly in Perm, up 65%. Group net fee exit rate of 40%, in line with the growth rate in the quarter, despite tougher growth comparatives.
- Group consultant headcount increased by 8% in the quarter and by 19% YoY.
- Net cash position of c.£360m, in line with expectations (30 June 2021: £410.6m; 30 September 2020: c.£350m).
- Commenting on the Group’s performance, Alistair Cox, Chief Executive, said: “Consultant productivity remains at record levels, despite our significant headcount investment. Our Strategic Growth Initiatives are performing well as we accelerate the pursuit of the many structural growth opportunities we see. Client and candidate confidence is high and there are clear signs of skill shortages and wage inflation, particularly at higher salary levels. Our strong brand and management teams globally, plus our financial strength, give me confidence that we will take further market share as the economic recovery continues.”
- Group sales for the period were 23% ahead of last year at CER2. This represents organic growth of 15% over last year and 8% compared with two years ago.
- Orders remained ahead of sales in the period, with organic growth of 64% and 34% respectively, against last year and two years ago.
- Growth was similar in both divisions and resulted in a record order book at the end of the period, being 71% higher organically than last year and 53% higher organically than two years ago.
- The Group has acquired five businesses over the last 12 months for a total up front consideration of £109m.
- Underlying operating performance at Group level with order intake at £700m, 25% higher than the first half of FY21.
- Net cash at 30 September 2021 of approximately £140m.
- Achieved order intake in the US at $184m compared to $83m in the H2 of FY21.
- Steve Wadey, Group Chief Executive Officer said: “Overall the Group has delivered strong operational performance in the first half of the year. We continue to deliver for our customers around the world, with EMEA Services delivering very strong performance to offset short-term weaker US performance in Global Products, due to the changing customer mission and COVID. We remain focused on delivering our strategy to build an integrated global defence and security company, through both organic growth and acquisitions. I am pleased with our continued strategic momentum, demonstrated by excellent order intake including a range of significant contract wins.”
- Net asset value total return was 20.9% after deducting borrowings at fair value.
- In this period share price total return was 25.7%.
- The Board is recommending a dividend of 6.00p per share, an increase of 33.3% on last year’s 4.50p.
- At 31 August 2021, the Company had total assets of £1,097.6m before deduction of bank loans of £142.2m.