Maitland/AMO Morning Monitor – Thursday 17 October 2019
The FTSE and CAC are both expected to open down this morning, while the DAX is expected to open up.
Asian stocks were mixed today following disappointing US economic data.
In the news
- DUP rejects Boris Johnson's latest Brexit plan
- Nestlé unveils plans for a new share buyback worth 20bn Swiss francs
- Ex-Credit Suisse banker says he hid $45m worth of bribes
The political day
- Boris Johnson to attend the two-day European Council summit which begins in Brussels
- EU chief Brexit negotiator Michel Barnier is expected to further brief ambassadors on the state of talks with the UK
- Queen's Speech debate continues in the House of Commons
Top Financial Announcements* Maitland Client
Unilever PLC 3rd Quarter Trading Statement
- Underlying sales growth 2.9% with volume 1.4% and price 1.5%.
- Emerging markets underlying sales growth 5.1% with volume 2.2% and price 2.8%.
- Turnover increased 5.8% which included a positive impact of 2.3% from currency and 0.8% from acquisitions.
- Alan Jope, CEO, said: “We have maintained momentum in the quarter, with a good balance between volume and price. Emerging markets and Home Care have been the key growth drivers. We will step-up competitive top line performance through innovation and portfolio evolution to serve the faster growing geographies and channels. We are committed to delivering superior long-term financial performance and balanced, compound growth of the top and bottom line through our sustainable business model. We are taking action to remain relevant to the consumer of the future, such as setting stretching goals on plastic use which we recently announced. For the full year, we continue to expect underlying sales growth to be in the lower half of our multi-year 3-5% range, an improvement in underlying operating margin that keeps us on track for the 2020 target and another year of strong free cash flow.”
- Ongoing Revenue increased by 9.8% in Q3, of which 5.5% was Organic (H1 2019: 4.2%, Q3 2018: 4.1%) and 4.3% was from acquisitions.
- Ongoing revenue in Pest Control grew by 12.3% (5.9% Organic), with good performances delivered across both Growth and Emerging markets, which grew by 12.2% and 12.7% respectively.
- North American, UK & Rest of World and Latin American operations delivered particularly good growth in the period.
- Andy Ransom, CEO, said: “I am pleased with our Q3 results and our Group Organic Growth of 5.5% is our highest level of quarterly Organic Growth in over a decade. Pest Control has performed well, growing organically by 5.9%, and Hygiene has demonstrated further momentum, growing organically by 4.8%. Our performance in Q3, combined with further progress in our value-creating M&A programme, means we remain on track to meet expectations for the full year. I am also delighted to see the excellent results of our colleague survey. We continue to deliver world-class standards of colleague engagement and enablement, and we see this in turn resulting in outstanding service for our customers and higher levels of retention. I’d like to thank all of our colleagues for their ongoing commitment and determination to be the best at what we do.”
- Group copper equivalent production decreased by 3% in the September 2019 quarter largely due to planned maintenance across a number of operations and natural field decline in Petroleum. Volumes for the 2020 financial year are expected to be slightly higher than last year.
- All production and unit cost guidance remains unchanged for the 2020 financial year.
- All major projects under development are tracking to plan, with the Ruby oil and gas development in Trinidad and Tobago approved during the September 2019 quarter.
- Andrew Mackenzie, CEO, said: “We delivered a solid start to the 2020 financial year through ongoing strong operational performance across our portfolio. While Group production for the quarter decreased slightly due to the expected impacts of planned maintenance and natural field decline in Petroleum, guidance remains unchanged and we are on track to deliver slightly higher volumes than last financial year. The South Flank iron ore project is 50 per cent complete, with all our major projects on schedule and budget. We achieved further encouraging exploration results in Petroleum and at the Oak Dam copper prospect.”
- Insurance grew in a subdued premium environment despite some volatility in the group’s natural search rankings.
- Energy switching remained strong due to the great provider offers and large customer savings.
- The Board remains confident of meeting current market expectations for the full year.
- Mark Lewis, CEO, said: “The group continued to grow in the quarter, with strong trading in energy showing that there are still big savings to be made by customers even though the price cap is lower. Even better, our Reinvent strategy continues to do more for our customers – the new MoneySuperMarket Energy Monitor service means our customers need never overpay for energy ever again.”
- A good summer’s trading, with all divisions growing revenue and profit. Our Spanish and Moroccan division, ALSA, performed particularly well. This drove strong Group performance.
- Group revenue was up 14.5% in reported terms (11.8% in constant currency).
- Group Operating Profit grew 14.3% in reported terms (15.0% in constant currency).
- Group Operating Margin was also up in the period.
- Dean Finch, CEO, said: “We had another good trading performance in our key summer period. ALSA performed particularly well and our UK coach business grew despite lapping a very strong comparative period last year. North America posted strong growth, boosted by both our WeDriveU acquisition and a good back-to-school performance including improved wage control.”
- Group system sales up 3.4% to £313.5m (2018: £303.3m).
- Solid UK & ROI performance; system sales growth of 3.9% to £288.2m (2018: £277.3m).
- 12 stores opened in UK & ROI in Q3 (UK: 9; ROI: 3).
- David Wild, CEO, said: “We delivered a solid performance in our core UK and Ireland markets, with system sales up 3.9%, against a market backdrop that remains challenging. Normal working practices continue to be impacted by our franchisee dispute. As we said at our interim results, this situation is complex and we expect a resolution to take time, certainly into 2020. We remain committed to working with our franchisees to agree sustainable win-win solutions. We are investing in people and processes to enable us to better support our franchisees. A key hire for our business is Emily Somers, who joined us as Chief Marketing Officer in August, and I am delighted to have her as part of the team. Although the financial results have stabilised, the performance of our international business remains disappointing. Over the past six weeks we have completed a review with external consultants, assessing each of our four international markets and the future prospects for our businesses. We have concluded that, whilst they represent attractive markets, we are not the best owners of these businesses. The Board has therefore decided to exit the markets in an orderly manner.”
- Group revenue up 11% with Group like-for-like revenue up 1%.
- Travel total revenue up 22% (up 8% excluding InMotion) and up 3% on a like-for-like basis.
- Strong profit growth in Travel with profit up 14% to £117m (2018: £103m).
- Final dividend increased by 8%. Share buyback of £31m completed.
- Stephen Clarke, CEO, said: “The Group has delivered another strong performance. Internationally we have won a record number of units in the year, including significant wins in the Middle East, Australia and Europe and, more recently, our first WH Smith win in a major US airport. We now have 433 units open internationally, across 30 countries and over 100 airports. In our High Street business, we have delivered another good performance. We continue to focus on improving our Stationery offer and this remains our key area of investment. As a result, we delivered a strong ‘Back to School’ period with good growth across many product categories. While there is uncertainty in the broader economic and political environment, we are pleased with the start to the new financial year in both businesses. Looking ahead, the Group will continue to focus on profitable growth, cash generation and delivering value for shareholders.”
- WH Smith PLC today announces a proposed placing of new ordinary shares in the Group to institutional investors to raise gross proceeds of approximately £155m, representing approximately 7% of WH Smith’s existing share capital as at the closing price on 16 October 2019.
- Separately, WH Smith has agreed to acquire Marshall Retail Group, a leading and fast growing US travel retailer, for $400m (approximately £312m) on a cash and debt-free basis.
- The net proceeds of the Placing are intended to be used to part fund the Transaction.
- The group sees the acquisition as a compelling opportunity to accelerate the growth of WH Smith’s International Travel business in the $3.2bn US airport travel retail market.
- Like-for-like Group revenue in continuing operations increased by 0.9% and total revenue by 4.5% for the three months to 30 September 2019.
- Following an encouraging start, trading towards the end of the quarter and more recently has been impacted by a softening in activity.
- Group revenue from continuing operations for the nine months to 30 September increased by 3.6% to £2.03bn (nine months to 30 September 2018: £1.96bn).
- Against the backdrop of softer third quarter trends which have continued into October, the Group currently expects to report full year operating profit for continuing operations in the range of 4-8% lower than current consensus.
- Gavin Slark, CEO, said: “Recent trading conditions are more reflective of market sentiment than business fundamentals. Grafton remains well placed to continue to benefit from our strong market positions in Ireland and the Netherlands and from a recovery in the UK merchanting market. The Group continues to focus on optimising trading opportunities in its markets, on cost control and cash generation and has a strong balance sheet to support value enhancing acquisition opportunities.”
- Total funds under management and administration increased 4.4% to £49.4bn at 30 September 2019 (2018: £47.3bn).
- £42.4bn in the Investment Management business (2018: £41.3bn), £7.0bn in the Unit Trusts business (2018: £6.0bn).
- Total net inflows were £0.1bn in the third quarter (2018: £7.0bn, largely reflecting the acquisition of Speirs & Jeffrey).
- Paul Stockton, CEO, said: “Our funds under management and administration increased marginally in the quarter to £49.4bn. In difficult markets we continue to focus on providing a quality service to our clients, navigating through ongoing market uncertainty but also selectively investing to pursue organic growth opportunities and develop our business.”
- NewRiver is pleased to announce that its joint venture with BRAVO Strategies III LLC has completed the acquisition of Poole Retail Park in Dorset from LS Poole Retail Limited, for total consideration of £44.7m, reflecting a net initial yield of 8.0%.
- NewRiver will hold a 10% interest in the asset (NRR share: £4.5m) and will benefit from 10% of the net rental income (NRR share: £0.4m per annum).
- The gross asset value subject to the transaction is £44.7m and NewRiver’s share of the transaction will be satisfied from existing resources and available credit facilities.