Top UK Stocks: Balfour Beatty bumps up dividend after returning to profit

Balfour Beatty makes progress as it restructures the business, Persimmon sells more houses at higher prices, Hochschild benefits from higher output and prices, Network International says activity starts returning to pre-pandemic levels, and Rotork launches a new share buyback.

UK

Top News: Balfour Beatty confident profits can return to pre-pandemic levels this year

Balfour Beatty said profits should return to pre-pandemic levels this year as it continues to restructure the business as it hiked its dividend and bumped-up expectations for 2022.

Revenue in the first half came in at £4.15 billion, broadly level with the £4.18 billion booked the year before. The company said its support services division performed well and benefited from exiting the water and gas sector, but said its construction services unit was hit by challenges in London.

The company turned to an underlying operating profit of £60 million from a £14 million loss the year before. The reported pretax profit of £35 million turned from a £26 million loss.

Moving forward, its order book at the end of June was valued at £16.1 billion, down slightly from £16.4 billion the year before. It said most of the work is related to key infrastructure and that 80% of orders are from the public sector or regulated industries.

‘We continue to reshape Balfour Beatty to play to its strengths. These include leading capability in markets where governments are committed to long-term infrastructure programmes.  It means choosing to exclude regions and sectors which cannot provide profitable, low risk growth, in favour of those that can.  Our priority is on executing our already strong order book which will drive attractive cash generation and returns,’ said chief executive Leo Quinn.

Balfour Beatty kicked-off a £1.1 billion asset disposal programme in June as it looks to offload its asset-heavy infrastructure investments business, leaving it focused on asset-light activities around construction and support services.

Balfour Beatty said it is paying an interim dividend worth 3.0 pence per share, which is some 43% higher than what it was paying before the pandemic erupted. It also purchased £99 million worth of shares through its buyback programme that was accelerated during the first half, leaving it with around £51 million to distribute under the current plan.

Balfour Beatty reiterated that operating profits should return to pre-pandemic levels this year. It also bumped up expectations for its support services division, which is now targeting a margin of 6% to 8% in 2022 rather than the previous goal of 3% to 5%.

Balfour Beatty shares were trading 3.6% lower in early trade this morning at 307.1p, but still trade over 13% higher than the start of 2021.

Persimmon bumps up dividend as it sells more houses at higher prices

Persimmon said revenue and profits both grew in the first half as activity bounced back after being hit by the pandemic last year, allowing it to step-up dividends and putting it on course to deliver a 10% jump in completions in 2021.

Revenue rose to £1.84 billion in the first half of 2021 from £1.19 billion the year before. That was the result of building 7,406 homes at an average selling price of £236,199 compared to just 4,900 homes at £225,066 the year before, when construction was disrupted by the eruption of the pandemic. Persimmon said construction has now remained above pre-pandemic levels for 12 consecutive months.

‘We anticipate successfully delivering 10% growth in sales completions this year. The group has a great platform and good momentum to deliver further disciplined growth into the medium term, creating value for all,’ said chief executive Dean Finch.

That, combined with better margins of 27.6% versus 26.6% last year, allowed pretax profit to jump to £480.1 million from £292.4 million.

Persimmon said it has a forward sales position of £2.23 billion at the end of June, down from £2.48 billion a year earlier. It said cumulative average private weekly sales over the last 33 weeks has been over 20% above the same period in 2019.

Persimmon brought forward its interim dividend of 125p back in March, which compared to a 40p interim payout in 2020. Persimmon said it will pay a second dividend worth 110p this month, which compares to the 40p payout made last December.

Persimmon shares were trading 0.6% lower in early trade this morning at 2850.5p.

Hochschild Mining delays dividend decision amid improved performance

Hochschild Mining said revenue soared and it escaped the red during the first half of 2021 after benefiting from a significant uptick in production of gold and silver and higher prices, but said shareholders will have to wait to hear about dividends.

Revenue rose 70% year-on-year to $394.8 million from just $232.0 million last year. That was after output surged to 175,119 gold equivalent ounces from just 126,835 ounces the year before. Although the cost of production nudged higher, this was more than offset by higher commodity prices. Gold sold for an average of $1,772 an ounce and silver at $26.3 per ounce in the period compared to $1,701 and $16.2 the year before.

That resulted in adjusted Ebitda jumping to $198.5 million from $80.6 million last year. Underlying profit of $38.1 million swung from a $4.3 million loss and the reported profit at the bottom-line, which includes one-off charges, turned to $28.6 million from a $9.0 million loss.

Hochschild said it is on course to produce 360,000 to 372,000 gold equivalent ounces over the full year, but warned production costs will be higher in the second than in the first.

Despite the improved performance, Hochschild refrained from announcing a dividend for now. It warned that a review has revealed it may not have complied with the Companies Act 2006 in the past because it paid some dividends when it did not have sufficient distributable reserves in place. It warned it will need shareholders to vote on a proposal that will be put forward at a general meeting to ensure investors won’t be obliged to repay the historic dividends in question.

Although there are concerns over previous payouts, Hochschild flagged that its current cash position is strong with net cash of $51.1 million at the end of June, up from $21.6 million at the end of December.

‘The company has identified certain steps that are anticipated will create sufficient distributable reserves in the company and is working with its advisers towards that objective. We will update shareholders on this in due course. Subject to creating sufficient distributable reserves, the directors anticipate announcing an interim dividend by the end of the month,’ said Hochschild.

The miner also warned that there is ‘increased political risk’ in Peru and Chile, where it operates, which ‘could result in increased taxes/royalties, other costs and potential permitting delays that could potentially impact our exploration and operational activities.’

It also said work will step-up in the second-half on exploration and development work as it looks to bolster its resources and reserves.

Hochschild Mining shares were trading 2.6% higher in early trade at 154.9p.

Network International starts to see activity return to pre-pandemic levels

Network International Holdings said activity levels have started to return to pre-pandemic levels as it revealed higher revenue and profits during the first half.

The stock was trading 2.6% higher in early trade this morning at 361.75p.   

The international payments facilitator, which is anchored in the Middle East, said revenue rose 16.5% in the first half to $156.4 million from $134.2 million the year before.

That was the result of payment volumes jumping 18.5% to $18.96 billion and the number of transactions processed surging over 29% to 459.8 million. The total number of cards hosted by the business rose 18% to 16.3 million.

Its Merchant Solutions business reported a 30% jump in revenue while Issuer Solutions reported 9.9% growth. The company said the Issuer business has breezed past pre-pandemic levels this year and said while overall trends have improved for its Merchant business, domestic spending is yet to return to levels seen in 2019.

‘It is encouraging to see the business continuing to take strides. We are seeing a recovery from COVID-19, with the majority of KPIs now ahead of pre-pandemic levels, including the signing of new merchant and bank customers. At the same time, we have yet to see a full recovery in our Merchant Solutions business, which is reflective of our exposure to international spending, more discretionary merchant sectors, as well as competitive dynamics,’ said chief executive Nandan Mer.

Underlying Ebitda rose 17.2% to $60.4 million as its margin held steady. The $15.0 million profit at the bottom-line turned from a $936,000 loss last year.

Operating cashflow was much lower at $24.8 million from $59.9 million the year before as a result of changes in settlement related balances, but overall underlying free cashflow improved to $21.1 million from $18.1 million, which it said was down to lower capital expenditure compared to last year.

Network International Holdings said revenue over the full year will be ‘slightly higher than those recorded in 2019’, but warned underlying costs will also rise as it steps up investment. The focus is on improving the Merchant business. However, it said overall capital expenditure will be lower than first thought this year at around $55 million versus its original $65 million budget.

The company said it is still working on its entry into Saudi Arabia and said it expects to start generating incremental revenue from the operation sometime in 2022.

Rotork announces new £50 million share buyback

Rotork said it has approved a new £50 million share buyback programme as it continues to generate surplus cash.

Rotosk shares edged up 1.5% in early trade this morning at 338.4p.

The company, which makes electric, pneumatic and hydraulic valve actuators, said the £50 million represents the maximum amount it will spend on the buyback, with those shares repurchased set to be cancelled.

‘Rotork remains a highly cash generative business with a strong cash position that provides us with considerable financial flexibility. Consistent with our capital allocation policy, the board has decided to return a prudent level of cash to shareholders while retaining a strong balance sheet,’ the company said.

‘This decision in no way reduces our appetite to pursue strategic investments and we remain active in looking for suitable opportunities,’ Rotork added.

The news comes just weeks after Rotork released interim results covering the first half of 2021, which saw the company return to growth for the first time since the pandemic erupted and reinstate its interim dividend with a 2.35p payout. First-half revenue edged up 1.8% to £288.3 million and pretax profit at the bottom-line increased 8.4% to £54.1 million.

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