Top UK Stocks to Watch: Optimism grows at Vivo as recovery continues
Joshua Warner February 12, 2021 4:17 AM
Vivo Energy says demand for fuel is continuing to recover, Huawei takes HSBC to court, Apax Global Alpha deploys funds into Herjavec Group, and Scottish American Investment delivers its 41st year of consecutive dividend growth.
Top News: Vivo Energy to beat expectations during tough 2020
Vivo Energy said it expects to beat earnings expectations when it releases its 2020 results after margins were better than expected during the final three months of the year.
The company distributes Shell and Engen-branded lubricants and fuels in Africa, operating over 2,000 service stations across 23 countries. Vivo said the retail segment had continued to recover since being hit by limited travel thanks to coronavirus and that full year volumes were down 7% at 9.6 billion litres.
It said the boost it saw in margins in the third quarter had persisted into the fourth and that it now expects to deliver adjusted earnings before interest, tax, depreciation and amortisation above the top end of the $331 million to $354 million range forecast by markets. For perspective, earnings will still be markedly lower than the $431 million of adjusted Ebitda reported in 2019.
Still, despite the tough year, Vivo said it was keeping its dividend for 2020 flat at 3.8 cents, underpinned by its optimistic outlook.
‘The COVID-19 pandemic had a significant adverse impact on our business in the first half of 2020. Since then the group has recovered strongly, with the second half in line with the comparable period in 2019, and this positive performance has continued into 2021,’ said chief executive Christian Chammas.
‘As a result, we are cautiously optimistic, and believe that we are well positioned for the future due to our leading positions in structural growth markets, together with our diversified and resilient business model. This is reflected in our commitment to shareholder returns through our progressive dividend policy. We look forward to providing a further update with our full year results on March 3,’ he added.
Where next for Vivo Energy shares?
Despite an almost 5% jump higher in early trade, the downtrend in Vivo Energy shares on the daily chart remains intact for now. Although the price has moved over the 20 sma and the RSI has moved into bullish territory suggesting more upside could be on the cards.
The share price is currently testing its 50 sma at 82, should the bulls push break through this level and 83 the descending trend line support, the current down trend will be negated. The bulls could then look to target horizontal resistance at 87 ahead of round number 90.
On the flip side, failure to break above 82/3 could see the price rebound lower to test strong support at 75.5 before targeting 70.
FTSE 100 news
Below is a guide to the top news from the FTSE 100 today.
Huawei takes HSBC to court over CFO extradition
News broke overnight that Chinese telecoms giant Huawei is taking HSBC to court in the UK in an attempt to stop the extradition of its chief financial officer from Canada to the US.
Huawei’s CFO Meng Wanzhou was arrested in Canada at the request of the US. The US claims she misled HSBC in meeting back in 2013 and also wants to question her over allegations of fraud and breaking sanctions imposed on Iran. Huawei is hoping to gain access to HSBC’s documents that could help bolster its defence. The meeting with HSBC is thought to be central to the case.
The BBC reports that Huawei will file for an application of disclosure of HSBC’s documents during a court hearing today. HSBC told the BBC that the application is ‘without merit’.
HSBC shares were down 0.3% at 395.7 in early trade.
FTSE 250 news
Below is a guide to the top news from the FTSE 250 today.
Victrex sees improvement in demand but remains cautious
Victrex said revenue ticked up 1% in the first quarter of its financial year as a result of incremental improvement in its end markets, but said it remains cautious going forward.
The company, which makes polymers, said it had a ‘positive start’ to the new financial year and that it performed better than expected as revenue in the last three months of 2020 inched up to £68.7 million from £67.7 million the year before, in-line with the 1% rise in volumes to 883 tonnes from 877 tonnes. It said Asia was its best performing market in the period, with a ‘mixed performance’ in Europe and the US.
Demand for polymers used in electronics was notably strong as more people buy devices as they stay at home, while demand for polymers used in the automotive, medical and value-added sectors had remained stable. Demand from the energy sector saw a ‘limited improvement’ while the aerospace sector ‘remains challenging on a short-term basis’.
‘This is a positive start to FY 2021 and we continue to see incremental improvement across several of our end markets,’ said chief executive Jakob Sigursson. ‘Nevertheless, the incremental improvement trend may remain variable and our assumptions are that we will still see a weaker first half overall, compared to H1 2020 which ended strongly. Consequently, at this early stage, our full year expectations are unchanged.’
It ended 2020 with net cash of £84.4 million, excluding cash ringfenced for its facility in China, and said capital expenditure will be high this financial year at up to £50 million.
Victrex shares were down 1% in early trade at 2250.0.
Funds advised by Apax Global invest in Herjavec Group
Apax Global Alpha, which provides a way of gaining exposure to private equity investments, said one of the funds it advises has agreed to buy a majority stake in cyber security company Herjavec Group.
Apax Global said Apax X Fund, a limited partner that it advises, is making the investment and that it is investing EUR5.4 million on a look through basis.
Herjavec Group was founded in 2003 and is recognised as ‘one of the world's most innovative cybersecurity companies’, according to Apax Global Alpha.
‘Having followed the company's progress to date, Apax X saw the opportunity to back a well-regarded player in the cybersecurity services space with solid potential for both organic and inorganic growth. The Apax Funds, in partnership with Herjavec Group's management team, will look to build on the company's impressive growth rate by accelerating international expansion efforts, augmenting HG's talent bench with additional threat & identity resources, and further advancing the HG Identity and HG SOAR proprietary platforms,’ said Apax Global Alpha.
Apax Global Alpha shares were up 0.2% in early trade at 203.8.
Greencoat UK Wind to raise up to £198 million in equity
Greencoat UK Wind said it is looking to raise up to £198 million by selling new shares in the business in order to pay down debt and fund its acquisition pipeline. The renewable energy infrastructure fund said it is selling up to 150.8 million new shares at 131 pence each to institutional investors.
‘Proceeds from the placing will be used to repay or reduce borrowings under the company's revolving credit facility to allow the company to fund its strong pipeline of acquisition opportunities, including an acquisition in the near term and £162 million of previously announced committed acquisitions over the next 12 months,’ said Greencoat UK Wind.
The company said, after taking out the acquisition cost and assuming it raises the full amount under the placing, that it will have outstanding gearing of 28% of gross asset value, of which £700 million is fixed rate term debt.
The new shares are equal to 8.3% of the company’s issued share capital.
Greencoat UK Wind shares were down 1% in early trade at 132.7.
Renewables Infrastructure Group buys Gronhult wind farm in Sweden
The Renewables Infrastructure Group has bought the Gronhult onshore wind farm in Sweden from the country’s leading utility firm Vattenfall.
The wind farm is yet to be constructed and is made up of a ‘ready-to-build’ wind farm in the southwest of the country. The project will consist of 12 Vestas 5.6 megawatt turbines with construction starting in the second quarter of 2021. The project will have a capacity of 67.2 megawatts in total.
The project is expected to be operational before the end of 2022.
The company said the wind farm will represent around 3% of its total portfolio once it is constructed and that Sweden as a whole will home around 10% of its portfolio.
‘Gronhult will receive market based revenues once operational and the investment manager will consider a range of power price hedging strategies. The project is expected to benefit from increasing electricity demand through greater electrification of transport and the expansion of other energy intensive industries such as data centres in and around Stockholm and Gothenburg,’ said the company.
The Renewables Infrastructure Group shares were down 0.8% in early trade at 127.5.
Ascential sells DeHavilland for £15 million
Data and analytics outfit Ascential said it has sold DeHavilland to asset manager Bridgepoint for £15 million in cash.
DeHavilland had sat within Ascential’s Built, Environmental and Policy unit that has now been completely sold-off following this latest deal. It recently sold off the other two parts of the unit, Glenigan and Groundsure. In total, the three businesses were sold for £257.9 million.
‘As previously noted, this capital will be allocated to core areas of focus for Ascential and, in particular, the fast-growing digital commerce segment, including organic investments and potential M&A opportunities,’ Ascential said.
The Built, Environmental and Policy unit generated revenue of £35.9 million in 2019 and adjusted earnings before interest, tax, depreciation and amortisation of £17.0 million.
‘We are delighted that Groundsure, Glenigan and now DeHavilland have found new owners who will continue to support their development as strong, independent businesses. For Ascential, this transaction marks the achievement of a strategic priority to bring clearer focus to our core customer proposition: enabling our customers to design and create the right products, maximise their marketing impact and optimise their digital commerce performance,’ said chief executive Duncan Painter.
Ascential shares were down 0.3% in early trade at 366.2.
Scottish American Investment outperforms market and grows dividend
Scottish American Investment raised its dividend for 2020 after outperforming the market, maintaining its position as one of the leading funds amongst its peers.
The fund said it is paying a final dividend for 2020 of 3.0p, taking the full year payout to 12.0p, up 1.1% from 2019. Scottish American Investment has now raised its dividend for 41 consecutive years and the most recent increase is notably above the UK CPI inflation rate during the year of 0.6%.
Net asset value total return in the year was 14.5%, ahead of the total return from global equities of 13.0%. The share price total return was 12.0%. Scottish American Investment said it ‘remains the best performing fund in its Global Equity Income peer group, in terms of NAV total return, over the past five years.’
‘The board remain of the view that a long-term approach based on investing globally for sustainable growth is the best route to achieving SAINTS' aim of growing the dividend ahead of inflation over time. It has great confidence in SAINTS' managers, and this confidence has been strengthened by the experiences of the past year,’ said the fund.
Scottish American Investment shares were down 0.2% in early trade at 471.0.
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