19th Jun 2024. 8.59am
Regency View:
Update
Regency View:
Update
Centrica drift lower after an underwhelming AGM statement
Centrica’s (CNA) share price drifted lower last week following the release of its AGM statement. Investors reacted negatively, finding the company’s update underwhelming despite its generally stable outlook.
The company reported that its performance this year has been in line with expectations. However, this meeting of expectations did not deliver any significant positive surprises or exceptional performance metrics that could have excited investors.
Centrica announced that all its Retail Supply and Optimisation businesses are expected to reach their medium-term sustainable adjusted operating profit ranges by 2024, two years ahead of schedule. Yet, this early achievement did not provide the anticipated boost, suggesting the market had already factored this progress into its expectations or hoped for even more ambitious outcomes.
British Gas Services & Solutions is anticipated to deliver improved financial results, driven by strong operational performance. However, this improvement was seen more as a continuation of recovery rather than a major breakthrough, with investors perhaps looking for stronger growth signals or more aggressive performance improvements.
The company’s hedging policy is set to ensure a stable first half for its Infrastructure businesses. However, the expectation of lower commodity prices and reduced seasonal gas price spreads and volatility in the second half indicated potential headwinds, causing concern about future earnings stability.
Additionally, the guidance that full-year group adjusted earnings per share are expected to align with consensus analyst expectations did not provide an optimistic outlook. Mentioning typical uncertainties such as weather, commodity prices, and regulation added a layer of caution to the forecast.
CNA Daily Candle Chart
Halma hits over two-year high on strong annual results
Halma (HLMA) the health and safety device maker, surged higher last week, rising more than 8% to reach its highest level since April 2022.
The company reported robust financial results, with a notable 9.8% growth in revenue, totalling £2.03 billion ($2.60 billion). This achievement marks a milestone for Halma, surpassing £2 billion in annual revenue for the first time. Furthermore, Halma’s annual profit saw a solid increase of 10%, reaching £396.4 million.
In a positive development for shareholders, Halma announced an increase in its annual dividend to 13.2 pence per share.
CEO Marc Ronchetti expressed optimism about the company’s performance, stating, “We have made a positive start to the new financial year. Our order intake in the year to date is ahead of both revenue and the comparable period last year.”
Ronchetti’s statement underscores Halma’s strong momentum and optimistic outlook, reflecting its ability to exceed expectations and maintain growth in a competitive market landscape.
HLMA Daily Candle Chart
Rentokil shares leap on report of activist stake-building
Pest control firm Rentokil (RTO) surged after reports surfaced that activist investor Nelson Peltz is targeting the company.
Following the news, Rentokil shares jumped as much as 10% to 482 pence and the shares are up more than 13% from the May lows. This significant increase came despite the company’s recent difficulties, including disappointing first-quarter results and the underperformance of its 2022 acquisition of Terminix.
Nelson Peltz’s firm, Trian Investors, has reportedly amassed a significant stake in Rentokil and has initiated discussions on improving shareholder value. Although the exact size of the stake hasn’t been disclosed, Trian Investors claims to be a top 10 shareholder.
RTO Daily Candle Chart
Tesco rally on market share gains and confident outlook
Tesco’s (TSCO) share price rallied last week following a strong first-quarter trading update. The UK’s largest grocery chain reiterated its full-year targets and reported positive sales growth, which pleased investors.
During the 13 weeks ending May 25, Tesco’s UK and Ireland sales increased by 3.6% on a like-for-like basis, reaching £14.33 billion. This growth was primarily driven by a 4.6% rise in core UK like-for-like revenue to £11.37 billion, supported by market share gains at the fastest pace in two years. Food sales rose by 5% due to strong volume growth, particularly in fresh produce, driven by Tesco’s Aldi Price Match and Clubcard offers, while inflation declined.
The upmarket Finest range saw a 12.5% increase in sales, benefiting from switching gains from Marks & Spencer and Waitrose. However, Booker wholesale operation posted a 1.3% drop in turnover, with revenue dipping to £2.23 billion due to a reduction in tobacco distribution and exiting less profitable contracts.
Tesco’s CEO, Ken Murphy said he was “very happy with the progress we’ve made” and claimed Tesco was “the most competitive we’ve ever been, with our value, product quality and service driving better brand perception and customer satisfaction” as shown by the level of switching from rival retailers.
TSCO Daily Candle Chart
Whitbread make UK gains and growth in Germany
Whitbread (WTB) reported a 1% growth in total sales to £739 million for Q1 FY25 compared to the same period in FY24, driven by improved UK trading and continued progress in Germany.
In the UK, Premier Inn’s trading performance strengthened, with Q1 accommodation sales in line with last year and up 55% versus FY20. Total revenue per available room (RevPAR) was 2% behind last year but 38% ahead of FY20. Total accommodation sales growth was 0.6 percentage points ahead of the midscale and economy sector. However, food and beverage (F&B) sales were 1% behind, with strong breakfast sales driven by high occupancy offset by softer performance in branded restaurants.
In Germany, Premier Inn saw total accommodation sales increase by 15%, led by the growing maturity of its estate and room growth. The total estate RevPAR increased to €57, with more established hotels achieving a RevPAR of €61, outperforming the market.
The company’s Accelerating Growth Plan, which includes optimising F&B at various sites and adding 3,500 rooms to the UK pipeline, is on track. This plan is expected to drive long-term profitable growth, leveraging significant potential in both the UK and Germany.
Overall, Whitbread’s Q1 results were well received by the market and the shares jumped more than 2% in Tuesday’s trading.
WTB 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.