Top UK Stocks to Watch: Taylor Wimpey restarts dividends
Joshua Warner March 2, 2021 9:12 AM
Taylor Wimpey confident it can bounce back after a tough year, Renishaw shares pop to an all-time high as it puts itself up for sale, Travis Perkins enters the red, and Flutter Entertainment’s revenues more than double.
Top News: Taylor Wimpey hit by lockdown but expects to bounce back in 2021
Taylor Wimpey said revenue and profits plunged in 2020 as it built fewer houses because of the pandemic, but said it was resuming dividends and confident about its prospects due to its record order book.
The housebuilder said it only managed to construct 9,799 homes during 2020 compared to 16,042 homes in 2019. This was primarily due to a shutdown in activity in the second quarter of the year when the pandemic erupted, with construction levels returning to ‘near normal levels’ in the second half.
Notably, Taylor Wimpey said it still expects output in 2021 to be equal to about 85% to 90% of the number completed before the pandemic in 2019.
Revenue dropped by more than one-third to £2.79 billion from £4.34 billion. That, twinned with a much tighter operating margin of just 10.8% versus 19.6% the year before, saw operating profit plunge by 65% to £300.3 million from £850.5 million. Pretax profit was down 68% to £264.4 million from £835.9 million.
Taylor Wimpey is hoping its operating margin will improve to 18.5% to 19% this year and it is still targeting 21% to 22% over the medium-term.
Taylor Wimpey said it had a record forward order book that stood at 10,685 homes at the end of the year, up from 9,725 at the end of 2019. Taylor Wimpey is 50% sold for 2021.
The housebuilder said it was restarting dividends with a final payout of 4.14 pence per share. That is underpinned by a strong balance sheet with net cash having climbed to £719.4 million from £545.7 million during the year, bolstered by over £500 million raised in equity in June 2020.
‘The 2021 selling season has started well, following on from the stronger than expected recovery of the housing market in the second half of 2020 and reflecting the underlying strength of demand, underpinned by low interest rates and stable mortgage lending,’ Taylor Wimpey said.
Where next for the Taylor Wimpey share price?
Taylor Wimpey shares are trading over 3% higher in early trade as the stock attempts to move out of the holding channel within which it has traded since early December.
Taylor Wimpey has pushed above its 50 sma sand trades above its 100 sma, whilst the RSI is supportive of further upside.
A meaningful break through the upper band of the channel at 172 could see TW head towards 180p and level last seen in early March.
However, 172p has capped several attempts to move higher over the past three months. Should the resistance hold, a move lower to test the 50 sma support at 161p could be on the cards. A break below this level could see the 100 sma at 150p tested, although this looks unlikely near term.
FTSE 100 news
Below is a guide to the top news from the FTSE 100 today.
Flutter Entertainment sees revenue more than double in 2020
Flutter Entertainment said revenue and adjusted earnings more than doubled in 2020 thanks to its transformational merger with The Stars Group.
Flutter Entertainment said revenue rose to £4.39 billion in 2020 from just £2.14 billion the year before, with adjusted Earnings before interest, tax, depreciation and amortisation jumping to £889 million from £425 million. That was predominantly thanks to the acquisitions of The Stars Group.
However, the acquisition costs weighed on its bottom-line, with pretax profit plunging to just £1 million from £136 million in 2019. No dividend was declared for the year.
The company said it had managed to maintain its leadership online, with 96% of its revenue coming from digital products. It said it has maintained it leadership in the US with 40% of the online sports betting market and 20% of the online gaming market.
‘We delivered a very strong financial performance in 2020, benefiting from our scale and diversification. We continue to grow our recreational player base across all key regions, in Q4 alone the group had over 7.6 million monthly online players. Nowhere has our growth been more evident than in the US where we have consolidated our #1 position in this crucial market, with customer economics that continue to exceed our expectations, finishing the year as the first US online operator to reach over $1.1 billion in gross gaming revenue,’ said chief executive Peter Jackson.
Flutter Entertainment said it had seen momentum build in 2021, with revenue up 36% in the seven-weeks to February 21. Still, lockdown in the UK and Ireland means its physical stores are still closed and costing around £9 million in earnings per month.
Flutter Entertainment shares were up 0.4% in early trade at 14428.0.
Croda International ups dividend after mixed performance
Croda International said it delivered a record performance from its Life Sciences division during 2020, partly driven by its involvement in the distribution of vaccines and other pandemic equipment, and that it is restructuring other parts of the business that found it more challenging.
Croda International said revenue rose 0.9% to £1.39 billion from £1.37 billion the year before, with core sales rising 2.2%.
Adjusted operating profit declined 5.9% to £319.6 million and fell 9.3% on a reported basis to £290 million. Adjusted pretax profit was down 6.7% to £300.6 million and dropped 10.9% on a reported basis to £269.5 million.
Still, Croda said it had lifted its dividend for the year by 1.1% to 91.0 pence from 90.0p in 2019.
Croda said its Life Sciences division had a record year as revenue jumped 14.6% and adjusted operating profit leapt 20.8%. That has been boosted by the acquisitions of Avanti and Iberchem during the year, and a major contract to help with the Pfizer-BioNTech vaccine.
It said it was now combining its Personal Care, Home Care and Fragrances divisions to create one ‘market-leading Consumer Care platform’ after sales suffered during lockdown as people stayed at home and purchased fewer beauty and ‘going-out’ products.
Its smaller Performance Technologies division reported a 3.2% drop in sales and a fall in adjusted operating profit of 22.2%.
‘While continued COVID-19 restrictions make the near-term outlook for elements of our Consumer Care and Performance Technologies sectors difficult to predict, 2020 sales exit rates were encouraging with consumer and industrial end markets showing signs of recovery. Life Sciences is expected to remain strong. The benefits of recovery, together with the full year impact of Avanti, Iberchem and our Pfizer-BioNTech COVID-19 vaccine contract, are expected to support profitable growth across the business,’ said Croda.
Separately, Croda said it has bought Alban Muller for EUR25 million. The French company creates and supplies natural and botanical ingredients for the global beauty industry and generated EUR18 million revenue during the year to the end of June.
‘The acquisition expands Croda's portfolio of sustainable active ingredients for customers in personal care markets, complementing our industry-leading positions with Sederma and Crodarom,’ said the company.
Croda International shares were up 0.4% in early trade at 6320.0.
Fresnillo benefits from higher prices and lower costs
Fresnillo said production dipped in 2020 but that revenue and earnings both improved significantly thanks to higher prices and lower costs, as it hopes to bring on new output capacity this year.
The gold and silver miner said silver production was down 2.9% in 2020 to 53.0 million ounces while gold output suffered a larger fall of over 12% to 769,618 ounces.
Still, revenue benefited from higher prices and rose almost 15% to $2.43 billion from $2.11 billion the year before. Gross profit soared over 90% higher to $879.4 million from just $461.7 million.
Earnings before interest, tax, depreciation and amortisation increased 73% to $1.16 billion from $674 million. Pretax profit leapt to $551.3 million from just $178.8 million in 2019.
The company said it will pay a final dividend of 23.5 cents for a total dividend of 25.8 cents, which is up from 14.5 cents in 2019.
Fresnillo said production declined partly because of measures introduced to improve safety during the pandemic, which has also delayed some of its new projects. The miner said it the commissioning of the Juanicipio plant has been pushed back to the fourth quarter of 2021 and that it expects it to be running at 40% to 50% by the end of this year. Fresnillo said ‘Juanicipio will be a major factor in the group's future silver production’.
Production will also be boosted this year by the new Pyrites Plant at the Fresnillo mine that was brought online in the final quarter of the year, although final inspections have been delayed because of the virus. The new floatation plant at the mine designed to take lead and zinc has also been completed and should benefit output this year.
‘Looking ahead, silver volumes will rise by steadily increasing production at Juanicipio, and the multiple ongoing operational improvement programmes to increase production at Fresnillo. Lower ore grade at Ciénega, together with a reduced activity at Noche Buena following a change to the mining sequence and the fewer available areas as the mine approaches its planned closure, as well as slightly lower volumes at Herradura, are likely to lead to reduced gold production. However, the longer-term prospects for gold are good, supported by the potential new mines at Rodeo and Orisyvo,’ said Fresnillo.
Fresnillo shares were down 0.8% I nearly trade at 898.7.
National Grid tweaks dividend policy as investment to rise
National Grid said annual dividend increases will be linked to CPI rather than RPI from the 2022 financial year as it warned it will have to invest larger sums over the coming years.
The grid operator’s dividend grows annually in line with the Retail Price Index (RPI) and this will remain the case in the current financial year due to end in 2021. However, from the 2022 financial year, the payout increase will be linked to the Consumer Prices Index including occupiers’ housing costs (CPIH).
National Grid said the decision had been made following the most recent review conducted by regulator Ofgem, which proposes rules on how much market players can charge and outlines how much they must spend and invest each year.
‘We expect to invest around £10 billion of capex through the course of the 5 year price control, across our electricity and gas transmission networks. At nearly £2 billion per annum on average, investment will be substantially higher than the RIIO-T1 price control,’ said National Grid.
However, National Grid said it would be appealing against Ofgem’s methodology used to calculate the cost of equity, and said this will kickstart a six-month process if it is accepted by the regulator.
‘We believe that the methodology Ofgem used to set the cost of equity ignores evidence for higher total market return and risk-free rate levels. We also maintain the view that the outperformance wedge, a downward adjustment to allowed returns in expectation of future outperformance, is conceptually and practically flawed. We were disappointed it remained in the Final Determination,’ said National Grid.
‘If the CMA accepts to hear our appeal, the six-month process will begin from April. Based on timelines for similar processes, provisional findings would be expected around July with Final Determinations in early October,’ it added.
National Grid shares were up 0.9% in early trade at 831.0.
FTSE 250 news
Below is a guide to the top news from the FTSE 250 today.
Renishaw puts up for sale sign as founders seek to cash-out
Renishaw said its two founders want to sell their controlling stake in the business, prompting the company to put itself up for sale.
Executive chairman David McMurtry and non-executive deputy chairman John Deer ideally want to sell their entire 53% stake and Renishaw has now launched a formal sales process as a result.
‘The board intends to seek a buyer who will respect the unique heritage and culture of the business, its commitment to the local communities in which its operations are based, and who will enable the company to continue to prosper in the long-term,’ said Renishaw.
Renishaw shares were trading 14% higher in early trade at a new all-time high of 6605.0.
Travis Perkins swings to loss as it restarts plans to spin-off Wickes
Travis Perkins sank into the red during 2020 as volumes were hit during the initial lockdown but said that it has now returned to growth and intends to restart dividends in 2021.
The building material supplier said revenue fell 11.5% to £6.15 billion in 2020, with like-for-like sales down 7.1%. The company suffered from lower volumes when the pandemic erupted but said this recovered in the second half by returning to growth of 1.4%.
Adjusted operating profit fell 48.6% to £227 million while reported operating profit plunged to £77 million from £232 million. It swung to a post-tax loss of £22 million from a £123 million profit in 2019.
The company said cashflow had remained strong and allowed net debt to be reduced to just £40 million compared to over £340 million at the start of 2020. It is not paying a dividend for the year but said it intends to restart payouts in 2021 ‘assuming there is no further deterioration in the external environment.’
‘Whilst uncertainty remains, we have seen a good recovery through the second half which gives us confidence that the fundamental drivers in our markets are robust. The continuing progress against our strategic plans leaves the Group well placed to outperform in those markets,’ said chief executive Nick Roberts.
Travis Perkins said it has restarted plans to demerge Wickes from the rest of the business, stating the company’s ‘digitally-led model has proved highly effective during the pandemic and the business is in great shape to embark on its journey as a standalone entity.’ Wickes continues to take market share in the core DIY segment and reported annual like-for-like sales growth of 19.3% in 2020.
Travis Perkins shares were down 1.6% in early trade at 1450.3.
Wizz Air operates at 17% capacity in February
Wizz Air said it operated at just 17% of its capacity during February as the pandemic continues to limit people’s ability to travel.
The airline carried just 382,928 passengers during February 2021 compared to over 3 million in the same month the year before. Capacity was down to 548,569 seats during the month from over 3.2 million a year earlier, whilst its load factor declined to 69.8% from 93.8%.
Wizz Air said it established its 41st base in Sarajevo in Bosnia and Herzegovina and a new seasonal base in Bourgas, Bulgaria.
Wizz Air shares were up 1% in early trade at 5438.0.
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