31st Jan 2024. 8.58am
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Primark powers ahead: ABF reports strong Q1 growth despite challenges
Associated British Foods (ABF) recently delivered a positive first-quarter update, fuelled by a robust 7.3% growth in Primark revenues, reaching an impressive £3.38 billion. This surge in Primark’s performance has significantly contributed to ABF’s overall optimistic outlook for the remainder of the year.
Despite encountering challenges such as unseasonably warm weather affecting retail trading, Primark managed to secure a record market share and successfully launched eight new stores. This expansion reflects the brand’s resilience and adaptability in the face of external factors.
The sugar division also emerged as a strong performer for ABF, experiencing a 3.8% increase in revenue, bringing it to £825 million. This diversification of revenue streams contributes to the overall health of ABF’s portfolio.
With a positive trajectory, ABF anticipates an enhanced gross margin, instilling confidence in achieving a full-year adjusted operating margin of more than 10% at Primark.
While the grocery sector exhibited a respectable 1.8% revenue growth, driven by advancements in edible oils and tea products, the smaller divisions faced challenges. The agriculture division witnessed a 12.1% decline in revenue, primarily due to weakened demand for animal feeds. However, there are hopeful signs of recovery in the compound feed markets.
ABD Daily Candle Chart
Computacenter reports record profits
Computacenter (CCC) has delivered a strong performance in 2023, defying market challenges, as indicated in last week’s trading statement.
The tech reseller reported record adjusted pre-tax profits and exceeded expectations in cash generation for the year ending 31st Dec. Total revenue, on a Gross Invoiced Income basis, saw a 12% increase, with robust performances in both Technology Sourcing and Services businesses. The positive results were achieved amid uncertain macroeconomic conditions, reflecting the strength of the integrated Technology Sourcing and Services model and geographic diversity.
Computacenter highlighted significant contributions from its North America and German operations, emphasising the success of its investment strategy in the US. The company benefited from the normalisation of component shortages that had previously affected the industry. Despite the challenges, Computacenter managed inventory levels well and finished the year with a strong cash position.
The trading statement hinted at the possibility of using the surplus cash for M&A activity, stating that the firm was evaluating its options. However, Computacenter also has a track record of returning surplus capital to shareholders in the absence of suitable acquisitions.
CCC Daily Candle Chart
easyJet’s trading sparks key breakout
easyJet (EZJ) reported an improved financial performance in Q1, with a headline loss before tax of £126 million (compared to £133 million loss in Q1’23). Passenger growth was at +14% year-on-year, and Revenue per Seat (RPS) increased by 3%. The load factor decreased by 1 percentage point to 86%. Noteworthy achievements include easyJet Holidays delivering a profit of £30 million (a 131% increase year-on-year) and passenger numbers increasing to 19.8 million.
Despite a £40 million direct impact from the Middle East conflict, easyJet expects H1 losses to reduce year-on-year. The company is on track to deliver disciplined capacity growth of around 9% in FY24, with H1’24 featuring approximately 42 million seats, an 11% YoY increase. Positive momentum is seen for summer 2024, with strong turn-of-the-year bookings and expectations for H2 RPS to remain well ahead YoY.
CEO Johan Lundgren highlighted the demand for easyJet’s brand and network, emphasising the positive booking momentum for summer 2024. The airline remains focused on delivering for customers and expects continuing performance gains.
During Q1, easyJet operated 23.0 million seats, a YoY increase from 20.2 million. The load factor was 86%, and passenger numbers in the quarter increased to 19.8 million. The airline’s fleet strategy includes the purchase of 157 Airbus A320neo family aircraft, scheduled for delivery between FY29 and FY34.
Despite short-term impacts from the Middle East conflict, easyJet’s revenue continued to benefit from strong demand, and its increased productivity led to a 3% YoY reduction in non-fuel unit costs. The airline repaid a €500 million Eurobond in Q1’24.
Overall, easyJet maintains a positive outlook for the future, supported by a strong performance, disciplined capacity growth, and encouraging booking trends for the upcoming quarters.
The update was well received by the market and the shares have broken above a key level of resistance created by the cluster of highs which formed in the first part of last year. The stage is set of for a powerful uptrend to emerge and we are more than ahhpy to hold the stock in our FTSE Investor portfolio.
EZJ Daily Candle Chart
Keller exceeds expectations, anticipates record 2023 profits
Keller (KLR), the world’s largest geotechnical specialist contractor, has issued a post-close trading update for the year ending 31st Dec. The company anticipates reporting an underlying operating profit significantly surpassing market expectations, with the underlying operating profit margin expected to be higher than in recent years.
In North America, management initiatives in the foundations business and unexpected pricing resilience at Suncoast contributed to a material improvement in operational performance. However, these benefits are considered one-off and not expected to repeat in 2024.
In Europe, economic challenges and competitive pricing affected profitability, with some projects in the Nordic region further impacting margins. As a result, the division’s full-year performance is below original expectations, and corrective actions are being taken for improved performance in 2024.
In Asia-Pacific, Middle East, and Africa (AMEA), Keller Australia is expected to report a record performance due to high demand and improved operational execution. Although NEOM faces uncertainties, the company has secured an $80 million work package for the Trojena winter resort development.
Strong earnings performance and effective working capital management are anticipated to result in improved cash generation, with the year-end net debt/EBITDA leverage ratio expected to be approximately 0.6x, at the lower end of the target range.
CEO Michael Speakman expressed confidence in the company’s progress, citing management actions, commercial agility, and one-off benefits in North America as contributors to a record performance in 2023. The positive outlook and a strong order book provide confidence in further progress in 2024.
KLR Daily Candle Chart
Money Supermarket jump as Amazon shuts UK insurance comparison site
Shares in Money Supermarket (MONY) bounce back this week after Amazon announced the closure of its UK comparison site, Amazon Insurance Store.
Amazon provided no specific reason for discontinuing the service, and the company’s UK press office has not responded to requests for comment.
The decision comes after Amazon launched the insurance comparison site in October 2022, collaborating with insurers Ageas UK (AGES.BR), Co-op, and LV= (a unit of Allianz, ALVG.DE). Despite initial concerns from insurers about tech giants entering the insurance market, industry observers note that insurance is a highly regulated sector, making entry challenging. Many investors now see Amazon as less of a threat due to a perceived lack of traction in the insurance market.
MONY Daily Candle Chart
Unilever struggles to defend market share amid private label surge
Unilever (ULVR), faced challenges in maintaining its market share in grocery stores during the fourth quarter of the year. This struggle was observed across most of its product categories in both Europe and the United States. The data indicates that Unilever lost ground to private label brands and made cuts to its product offerings.
Unilever experienced a peak in underlying price growth at 13.3% during the fourth quarter of 2022. Notably, prices in its home care business rose nearly 17%, while prices in its ice cream business increased by about 14%. However, price hikes have started to ease, and in the third quarter of 2023, Unilever increased prices by only 5.8%, according to Nielsen data.
The rise of private label brands has been a notable trend, with private label food sales increasing by 16% in the two years leading up to March 2022. Retailers with significant private label brands, like Carrefour and Tesco, have capitalized on this trend through innovation and marketing.
Unilever’s CEO, Hein Schumacher, emphasised the company’s priority of making and developing the market rather than just taking market share from competitors. We will learn more when Unilever publish their Full Year 2023 earnings on Thursday 8th February.
ULVR Daily Candle Chart
UK flags UAE stake in Vodafone as national security risk
The UK government has raised concerns over a stake in Vodafone (VOD) held by the United Arab Emirates (UAE) group Emirates Telecommunications (e&), deeming it a national security risk.
The state-controlled e& began building a stake in Vodafone in 2022, increasing it to almost 15% last year. The cabinet office highlighted risks given Vodafone’s significance to the UK’s telecommunications sector and its role as a supplier to government departments.
This announcement comes after the culture secretary, Lucy Frazer, ordered further regulatory scrutiny on public interest grounds of RedBird IMI’s £600mn bid for the Telegraph newspaper group, backed by Abu Dhabi.
The government scrutiny aligns with efforts to expand a “sovereign investment partnership” with the UAE, with the Gulf state exceeding its £10bn investment pledge made in 2021.
E& is Vodafone’s largest single shareholder, holding a strategic partnership with the company, which includes a seat on Vodafone’s board. The cabinet office emphasised that this relationship would enable e& to materially influence Vodafone’s policy. Under the National Security and Investment Act, the government can review and potentially block foreign takeovers of companies with ties to national security.
While stopping short of ordering a divestment, the cabinet office instructed Vodafone and e& to meet certain requirements related to altering or terminating their strategic relationship. The companies are also required to establish a “national security committee” overseeing Vodafone’s work with implications for the UK’s national security.
Vodafone stated that it was pleased to have received clearance for its strategic relationship agreement with e&. The UAE group, e&, has not yet responded to requests for comment.
VOD Daily Candle Chart
Disclaimer:
All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.
Disclaimer:
All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.