14th Feb 2024. 8.59am

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Regency View:


Airtel’s strong Q3 sparks $100m share buyback despite currency challenges

Airtel Africa (AAF) reported a robust performance in Q3, with a 21% increase in constant currency revenues compared to the previous year. However, reported revenues saw an 8.3% decline, primarily due to the devaluation of the Nigerian naira.

Total customer numbers experienced a 9.1% growth, reaching 151.2 million. This increase was driven by the continued adoption of mobile data and mobile money services. Notably, data customers rose by 22.4% to 62.7 million, while mobile money customers increased by 19.5% to 37.5 million.

Earnings per share before exceptional items declined by 34.6% to 7.1 cents, impacted by a $140 million derivative and FX loss attributable to the weakened naira. Additionally, capital expenditure grew by 8.2% to $494 million.

Despite the currency challenges, Airtel Africa plans to initiate a share buyback worth up to $100 million in early March. The company attributes this decision to its progress in reducing leverage and strong operating cash generation. The board believes that repurchasing its own shares is an attractive use of capital, considering the group’s robust long-term growth outlook.

AAF Daily Candle Chart

AAF Daily Candle Chart

AstraZeneca’s new drug push impacts profits

AstraZeneca (AZN) reported earnings below expectations for 2023 due to the impact of new drug launches on profits.

The pharma giant’s adjusted earnings (EBITDA) reached $13.5 billion, falling short of consensus estimates of $14.5 billion. This was attributed to costs associated with the launch of drugs like asthma medicine Airsupra.

However, AstraZeneca exceeded expectations in sales, recording revenue of $45.8 billion, a 15% increase at constant exchange rates. The result was slightly ahead of analysts’ forecasts and was primarily driven by oncology drugs, which accounted for over a third of sales.

The company aims to launch 15 new drugs by 2030, with its CEO forecasting revenue growth in the low double-digits to low teens for 2024. Despite a 7% decrease in shares since the beginning of the year, AstraZeneca’s robust pipeline, particularly in oncology, remains a key strength.

Oncology sales grew by 20% at constant exchange rates, helping offset tumbling revenue from the company’s COVID-19 medicines. AstraZeneca’s COVID-19 jab developed with Oxford University was widely used globally, but sales fell more than 99% to just $12 million in 2023.

The market’s reaction has been bearish and the shares have continued their recent downtrend with prices now pulling back 25% from trend highs reached in April. A source of comfort should be AstraZeneca’s long-term (multi-year) uptrend and the company’s impressive product pipeline and bullish outlook.

AZN Daily Candle Chart

AZN Daily Candle Chart

Babcock anticipates growth amid global threat environment

Defence company Babcock (BAB) affirmed its expectations for another year of growth, signalling continued momentum towards achieving its medium-term guidance.

Talking at Babcock’s Capital Market’s Day, CEO David Lockwood said the company is on track to meet forecasts for organic revenue growth, underlying operating margin expansion, and positive cash flow in the current year.

Lockwood expressed confidence in Babcock meeting its guidance for underlying operating margins, aiming for at least 8% over the next three to five years. The company’s strategic plans align with its commitment to sustained growth and financial performance.

Lockwood’s turnaround plan for Babcock coincides with the ongoing Ukraine war, driving increased demand for the company’s military equipment, including naval ships and weapons handling systems. This surge in demand has contributed to the company’s positive outlook.

For the 12 months ending in March, analysts anticipate Babcock to post a robust operating profit of £290 million ($365.98 million). The stock remains in a strong uptrend and we are more than happy to hold the stock within our FTSE Investor portfolio.

BAB Daily Candle Chart

BAB Daily Candle Chart

Smith & Nephew unveils AI-driven robotic surgical solutions

Smith & Nephew (SN.) is set to showcase cutting-edge AI-driven robotic-assisted solutions for personalised orthopaedic surgery at the AAOS 2024 Annual Meeting.

The medical technology company will unveil a forthcoming new feature for its CORI Surgical System, an image-agnostic robotic platform designed to enhance surgery personalisation, improve efficiency, and optimise performance across its orthopaedic reconstruction portfolio.

The CORI Surgical System, a next-gen handheld robotic platform, supports knee arthroplasty and total hip arthroplasty (THA). Key features include the CORI Digital Tensioner, offering objective gap data and quantifying joint laxity in total knee arthroplasty for more consistent joint balancing.

Smith & Nephew’s RI.KNEE ROBOTICS v2.0, powered by AI, provides personalised planning with simulation and AI-powered reference values. Surgeons can set preferences for initial implant positions customised to patient deformity, enhancing precision and satisfaction. This approach aligns with the company’s commitment to ‘Precision in Motion’ and elevates the standard of care provided by surgeons.

Whilst this news hasn’t moved the market, it highlights that Smith & Nephew are at the cutting edge of healthcare technology and the shares have continued to trend higher following November’s strong trading update.

SN. Daily Candle Chart

SN. Daily Candle Chart

Barclays to acquire most of Tesco’s banking operations

Barclays (BARC) is set to purchase the majority of Tesco’s (TSCO) banking operations for approximately £600 million ($757 million).

This move follows Sainsbury’s decision to wind down its banking business last month. The acquisition includes Tesco’s existing credit cards, loans, and savings operations, encompassing £8.3 billion of unsecured loans and around £6.7 billion of deposits. Tesco will retain its other banking activities, such as insurance, ATMs, travel money, and gift cards.

As part of the deal, about 2,800 Tesco employees will transfer to Barclays. The two companies have also formed a strategic partnership for ten years, allowing Barclays to offer Tesco-branded banking products and services using Tesco’s Clubcard loyalty scheme. Tesco will receive annual fees of £50 million. The acquisition and partnership are subject to regulatory approval, expected to be completed in the second half of 2024.

Tesco intends to return the majority of the proceeds and a special dividend of £250 million paid by Tesco Bank in August 2023 to shareholders through an additional share buyback. The deal is expected to enhance Tesco’s balance sheet by shedding capital-intensive assets while retaining capital-light ones.

Tesco anticipates annual adjusted operating profit from the partnership and retained activities in the range of £80 million to £100 million, contributing significantly to the current year’s expected profits from Tesco Bank.

TSCO Daily Candle Chart

TSCO Daily Candle Chart


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