4th Oct 2023. 8.56am

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Regency View:


Babcock’s strong start continues

Babcock International (BAB) has provided a positive trading update for the first five months of the financial year ahead of its Annual General Meeting.

The defence engineer has experienced strong performance with organic revenue growth, improved operational efficiency, and higher cash flow compared to the same period last year. This growth has been driven by contract phasing in the Marine sector and growth in Nuclear infrastructure programs.

Babcock’s underlying operating profit has increased year-on-year due to revenue growth and operational improvement, with additional benefits from license fees related to the Polish MIECZNIK frigate program.

The company expects to continue this positive trend with new program wins, contract renewals, and a strong opportunity pipeline, supporting expectations for another year of organic revenue growth, improved margins, increased free cash flow, and progress toward its medium-term goals.

On the price chart the shares have gapped higher following the AGM statement and this signals that Babcock has plenty of bullish momentum.

BAB Daily Candle Chart

BAB Daily Candle Chart

Bytes delivers double-digit growth amidst challenging conditions

Bytes Technology (BYIT) has reported a strong performance in its half-year trading update for the financial year ending on August 31, 2023.

The company, known for its expertise in software, security, and cloud services achieved notable year-on-year growth in Gross Invoiced Income. This growth was accompanied by increases in Gross Profit and Adjusted Operating Profit, both comfortably in double digits, indicating BTG’s continued market share gains in both corporate and public sectors.

Despite paying £30 million in final and special dividends during the period, BTG maintained a net cash position of £51.3 million by the end of H1 FY24. The company anticipates strong cash conversion for the full year, with its half-year results for FY24 set to be released on October 25, 2023.

Neil Murphy, the CEO of BTG, emphasised the company’s resilience and growth, stating:

“We continue to demonstrate the strength of our business model by again delivering double-digit growth amid challenging macroeconomic conditions. The positive start to our financial year, coupled with ongoing investment in our operations, positions us well for the rest of the year.”

BYIT Daily Candle Chart

BYIT Daily Candle Chart

Halma’s half year numbers fail to impress

Global safety products group, Halma (HLMA) recently released its half-year trading update for the period ending September 30, 2023.

Despite reporting “good” organic constant currency revenue growth, the company faced challenges amid varied market conditions. The return on sales is expected to be at the lower end of the target range of 18-22%.

Stronger revenue growth in the Safety and Environmental & Analysis sectors offset weaker performance in the Healthcare sector, which experienced customer destocking. Geographically, the United States and Europe showed strong revenue growth, while Asia Pacific declined due to challenges in the Chinese market.

Halma’s guidance for the full year remains unchanged, aiming for “good” organic revenue growth and a 20% return on sales. Despite strong cash performance, the company has been conservative in its mergers and acquisitions (M&A) spending this year.

The markets response to the numbers has been lukewarm and Halma’s share price has started to trend lower. Prices are set to retest a key level of support at 1,854p (see chart below) and we will be looking for this structural level to hold.

HLMA Daily Candle Chart

HLMA Daily Candle Chart

JD Sports profit on track in 2023

JD Sports (JD.) released a robust set of interim results last month in which it said its poised for increased annual profits due to strong demand for branded footwear and apparel.

Despite the financial pressures faced by consumers due to rising expenses, JD’s younger clientele has continued to spend, particularly on the retailer’s exclusive sportswear fashion offerings.

Organic sales jumped 12% with the growth is driven by the premium Sports Fashion business. Geographically, European led the way with an impressive 27% growth, North America (+15%) and UK (+8%) markets also delivered growth.  

JD Sports said it plans to invest up to £3 billion in opening 1,750 stores over the next five years, aiming to become a global leader in athletic leisurewear.

For the 12 months ending in January, JD expects to achieve an annual pretax profit of £1.04 billion, representing a 5% increase from the previous year.

Commenting on the results, CEO Régis Schultz said:

“Our core consumers remain resilient in the face of the ongoing global macro-economic challenges. The JD brand continues to strengthen its global presence, supported by our strategic partnerships with much-loved brands and our strong balance sheet.”

JD. Daily Candle Chart

JD. Daily Candle Chart

Ten Entertainment strikes success with record sales and expansion plans

Ten Pin bowling operator, Ten Entertainment (TEG) has reported a positive half-year trading update for the period ending on July 2, 2023.

Continued sales growth marked the highlight of their performance, with a +1.6% like-for-like sales growth compared to the same period in 2022. Total sales growth increased by +3.2%. Impressively, sales have continued to rise, now standing at +57% compared to pre-Covid levels, demonstrating the enduring appeal of bowling. The Group also achieved a record-breaking Easter performance, making it the biggest sales week in the Group’s history.

TEG’s expansion efforts are noteworthy, with plans for at least four new openings in 2023. They have successfully opened a new site in Crewe in February, with Milton Keynes set to open by the end of July and Dundee nearing completion, expected to open in August. Additionally, construction has commenced on an innovative entertainment centre in Sheffield.

In terms of profitability, TEG anticipates that its Profit Before Tax (PBT) for H1 2023 will slightly surpass the previous year’s results. The company’s full-year profit growth remains on track to meet market expectations. Energy costs are stable and significantly below forecast, with a fixed rate until September 2026, offering cost stability. Despite significant strategic investments, the company maintains a healthy net cash balance.

Strategically, TEG’s refurbishment program has transformed seven centres in the first half of 2023, resulting in strong sales growth. The company has also maintained competitive pricing to provide customers with the best value leisure experience.

Looking ahead, the company expects low single-digit sales growth for the rest of 2023. They have plans to open new centres and introduce innovative activities, including the Sheffield location which is expected to open by Christmas. TEG plans to announce its half-year results on September 20, 2023.

TEG Daily Candle Chart

TEG Daily Candle Chart


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