Top UK Stocks to Watch: Vodafone service revenue returns to growth

Vodafone surprises the market as services revenue returns to growth, GSK signs a coronavirus vaccine partnership with CureVac, Unite Group extends its rental discounts to students, and Wizz Air’s passenger numbers slump in January thanks to the pandemic.

UK

Top News: Vodafone stays on track as service revenue returns to growth

Vodafone said service revenue returned to growth in the third quarter of its financial year, putting it on course to hit its full year targets.

The telecoms giant said organic service revenue, which accounts for the bulk of its total topline income, grew 0.4% in the last three months of 2020, as a 1.1% decline in central Europe was offset by stronger performances elsewhere and from Vodacom. Its largest individual market in Germany performed well, with revenue growing 1% on both a reported and organic basis.

The 0.4% growth was considerably better than the 0.1% drop forecast by analysts, according to Reuters.

Reported revenue, however, fell 3.9% to EUR9.35 billion from EUR9.73 billion the year before. Combined with a fall in other revenue to EUR1.84 billion from EUR2.01 billion, total revenue for the quarter dropped 4.7% to EUR11.20 billion from EUR11.75 billion. For perspective, revenue fell 2.3% in the first half of the financial year.

‘I am pleased the group returned to service revenue growth in Q3 as a result of the continued commercial momentum across our business, including our largest market Germany. Our good trading performance underscores our confidence in the outlook for the full year,’ said chief executive Nick Read.

Vodafone said the performance has kept it on track to deliver its full year guidance of adjusted earnings before interest, tax, depreciation and amortisation of between EUR14.4 billion to EUR14.6 billion and free cashflow of at least EUR5 billion excluding spectrum and restructuring costs.

That would compare to adjusted Ebitda of UR14.88 billion in the last financial year and free cashflow of EUR5.7 billion.

Vodafone said it has also continued to progress its plans to spin-off Vantage Towers in ‘early 2021’.


Vodafone share price: technical analysis

Vodafone shares had been in consolidation mode since mid-December. 

Today’s jump higher has seen the share price break out of the symmetrical triangle pattern to the upside, briefly piercing horizontal resistance at 132.5 high 27th Jan before easing back. The breakout suggests there could be more upside to come.

Immediate resistance can be seen at 133.70 today’s high ahead of 136.40 December’s high.

On the flip side, the descending trend line of the symmetrical triangle at 128. 25 offers support an important level for the bears.



FTSE 100 news

Below is a guide to the top news from the FTSE 100 today.


GlaxoSmithKline and CureVac to develop variant-targeting coronavirus vaccines

GlaxoSmithKline has agreed to help CureVac ramp-up production of its coronavirus vaccine as the pair agreed to develop new vaccines to target the emerging variants of the virus.

The agreement will see the launch of a new EUR150 million collaboration between the two firms that will see GSK help manufacture up to 100 million doses of CureVac’s vaccine in 2021 using its manufacturing plants in Belgium. The pair will then also look to develop a new vaccine to target new variants of the virus.

‘Through this new exclusive co-development agreement, GSK and CureVac will contribute resources and expertise to research, develop, and manufacture a number of novel mRNA vaccine candidates, including multi-valent and monovalent approaches. The aim of this work is to offer broader protection against a variety of different SARS-CoV2 variants, and to enable a quick response to new variants potentially emerging in the future,’ said GSK.

The development of the new vaccines will start immediately with the hopes of introducing the first one in 2022.

‘The increase in emerging variants with the potential to reduce the efficacy of first generation COVID-19 vaccines requires acceleration of efforts to develop vaccines against new variants to keep one step ahead of the pandemic. These next generation COVID-19 vaccines may either be used to protect people who have not been vaccinated before, or to serve as boosters in the event that COVID-19 immunity gained from an initial vaccination reduces over time,’ GSK added.

GSK is paying EUR75 million upfront to hold the rights to sell CureVac’s vaccine everywhere apart from Germany, Austria and Switzerland, and could pay a further EUR75 million in the future through milestone payments.

GSK shares were up 0.9% in early trade at 1378.7.


Anglo American diamond sales boosted by holidays

Anglo American said its De Beers diamond unit sold $650 million worth of rough diamonds during the first sales cycle of 2021. That is up from $551 million in the first sales cycle of 2020 and from the $452 million of sales secured during the final sales round of 2020.

‘With the midstream starting the year with low levels of rough and polished inventories, and following strong sales of diamond jewellery over the key holiday season in the US, we saw good demand for rough diamonds at the first cycle of the year as midstream customers sought to restock and to fill orders from retail businesses,’ said chief executive Bruce Cleaver.

‘Sales of rough diamonds are also being supported by expected demand ahead of Chinese New Year and Valentine's Day. While risks to recovery as a result of ongoing restrictions on the movement of both people and goods persist, we have been encouraged by demand conditions,’ he added.

Anglo American shares were down 0.6% in early trade at 2409.3.


Glencore reaffirms production guidance

Glencore said it produced less commodities in 2020 than the year before as production was disrupted by the pandemic and other issues.

The miner said copper production fell 8% in the year to 1.25 million tonnes from 1.37 million tonnes in 2019 as Mutanda was placed on care and maintenance. Glencore expects to produce around 1.22 million tonnes in 2021.

Cobalt production fell 41%, again because of Mutanda, to 27,400 tonnes but that should rise to around 35,000 tonnes this year.

‘Excluding Mutanda (currently on care and maintenance), 2020 copper production was in line with 2019, while cobalt production was 6,200 tonnes higher, reflecting Katanga's continued successful ramp-up to design capacity levels,’ said chief executive Ivan Glasberg.

‘Required Covid-19 related mandatory suspensions and international mobility restrictions significantly impacted 2020 production of ferrochrome in South Africa, oil in Chad and nickel at Koniambo. Furthermore, various proactive market-related supply reductions were initiated in H2 2020, primarily with respect to coal production from Australia,’ he added.

Zinc production was up 9% in the year to 1.17 million tonnes and should rise further to around 1.25 million tonnes this year. Nickel output slumped 9% to 110,200 tonnes in 2020 and should increase to 117,000 tonnes in 2021.

Glencore shares were down 1% in early trade at 243.7.


Ferguson to dual-list in the US in March

Ferguson said it expects to dual-list on the New York Stock Exchange in ‘early March’.

The plumbing and heating specialist makes the bulk of its revenue in the US and secured approval from shareholders to list there in July 2020. Ferguson intends to retain its premium listing on the London Stock Exchange and will remain part of the FTSE 100.

Ferguson shares were up 0.8% in early trade at 8804.0.


FTSE 250 news

Below is a guide to the top news from the FTSE 250 today.


Unite Group extends discount to hard-hit students

Unite Group said it has decided to extend the 50% rent discount offered to students for a further three weeks, costing the company a additional £6 million.

The student accommodation provider introduced a 50% discount on January 11 and said the new extension was made to reflect the government’s decision to keep the country in national lockdown until at least March 8.

All students that applied for the original four-week discount will now automatically get the same discount for another three weeks. It will also allow students to stay for an extra month after the academic year ends if they wish.

The discount and tenancy extension are open to all students that are not living in their accommodation between January 18 and March 7. It said around half of its tenants are now living in their accommodation.  

The three-week extension will cost £6 million in income, equal to 1.5 pence of earnings per share. The total cost of the seven-week discount and the new tenancy extension is up to £15 million, or 4p of EPS.

Unite Group said it has continued to collect most of the rent due from students despite the difficult conditions, with 91% of rent collected for the 2020/21 academic year. Notably, students have to keep up with payments in order to be eligible for the discount or the extension.

Unite Group shares were down 2.7% in early trade at 953.8.


Wizz Air operates at just 27% of capacity in January

Wizz Air said it operated at just 27% of its capacity during January as it reported a steep fall in passenger numbers because of the coronavirus pandemic.

The airline said it cut capacity by 73% to just 940,410 seats from over 3.5 million in January 2020. Passenger numbers slumped almost 82% to 573,692 from 3.2 million the year before. Load factor declined to 61% from 90.2%.

That means capacity has fallen by 54% in the rolling 12-month period to the end of January to 19.7 million seats from 43.1 million the year before, with passenger numbers down 65% to 14.0 million from 40.3 million. Load factor was down to 71.4% from 93.7%.

Wizz Air shares were up 3.4% in early trade at 4750.0.

 

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