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UK WINNERS & LOSERS SUMMARY: Taylor Wimpey Drags Housebuilders Lower

Wed, 26th Feb 2020 10:47

(Alliance News) - The following stocks are the leading risers and fallers within the main London indices on Wednesday.


J Sainsbury, up 0.8%. Berenberg raised the supermarket chain to Buy from Hold. Berenberg cut rival Wm Morrison Supermarkets to Hold from Buy; the stock was down 1.3%.


London Stock Exchange Group, down 5.2%. The stock exchange operator's USD27 billion acquisition of financial data provider Refinitiv is facing intense scrutiny in Brussels, the Financial Times reported. According to the newspaper, there is heightened risk that regulators will subject the blockbuster deal to a much lengthier probe than the two companies had anticipated. LSEG announced back in August agreement to buy Refinitiv for USD27 billion, including taking on USD13 billion in Refinitiv debt. The deal was overwhelmingly supported by LSEG shareholders in a November vote. However, the companies have yet to notify competition regulators formally of the deal, a step required to start the review of an acquisition, according to the FT.

Taylor Wimpey, down 4.0%. The housebuilder posted a full-year revenue climb with completions rising to a company record. Revenue in 2019 came in 6.4% higher at GBP4.34 billion from GBP4.08 billion, with the firm's pretax profit rising 3.1% to GBP835.9 million from GBP810.7 million. Before exceptional items however, pretax profit dipped 4.1% to GBP821.6 million from GBP856.8 million. In 2019, the company made a GBP14.3 million gain from such one-off items, swinging from a GBP46.1 million loss. Operating profit in 2019 was GBP850.5, down from GBP880.2 million in 2018, with an operating profit margin of 19.6%, down from 21.6% in 2018. Looking ahead, Taylor Wimpey said it expects volumes for 2020 and its operating profit margin in the first half of 2020 will show pressure from 2019 build cost inflation and selling prices as well as long term investment in quality and business improvement. "Build costs are increasing and asking prices are stalling, and this is inevitably having an impact on levels of profitability. Though Taylor Wimpey doesn't appear to be willing to give up 20%-plus margins without a fight," commented AJ Bell's Russ Mould. Peers Barratt Developments, Persimmon and Berkeley Group were down 3.3%, 2.3% and 2.7% respectively in a negative read-across.


Weir Group, up 6.9%. The engineer said it was looking to exit its oil and gas business as it reported a sharp swing to an annual loss due to a non-cash impairment from the Oil & Gas North American assets. For 2019, the Glasgow-based engineering firm posted a reported pretax loss of GBP372 million, compared to a profit of GBP86 million the year before, due to an impairment charge of GBP546 million recognised in the Oil & Gas North American cash generating unit. Weir said challenging market conditions and uncertainty about the timing of market recovery led to estimates of future cash flows featuring lower revenue and margin assumptions, leading to a review of specific assets considered to be at risk. Weir declared a final dividend of 30.45 pence per share, bringing the total payout to 46.95p, up 2% from 46.20p the prior year. Weir said its focus going forward was to become a "pure play" mining technology firm and added it was "looking for opportunities to maximise value from the oil and gas business at the right time".

Serco, up 4.5%. The outsourcer achieved its first revenue growth in over five years, the company said, with the dividend also returning. Serco posted revenue of GBP3.25 billion in 2019, 15% higher than the year before. Organic revenue growth was 8%. Chief Executive Rupert Soames said this was the first revenue growth since 2013. The company's pretax profit increased by 8.9% to GBP80.7 million, with the figure before exceptional items up 5.7% to GBP104.1 million. Serco has decided to pay a 1.0p per share dividend for the year, the first time it has paid a dividend since 2014, an "important milestone" for the company. Looking ahead to 2020, Serco is guiding for revenue of between GBP3.4 billion to GBP3.5 billion, which would mean growth of 6% to 8%. This also assumes organic growth of 4%, Serco added. Underlying trading profit is seen rising by around 20% to GBP145 million.


Restaurant Group, down 6.2%. The Frankie & Benny's, Chiquito and Wagamama dining chains owner suspended payouts to allow a new strategy to be implemented, which will include reducing debt and shutting sites. Restaurant Group paid a dividend of 8.27 pence per share for 2018, but said there will be no final dividend for 2019. At the half-way stage of 2019, it paid a dividend of 2.1p, well below the interim dividend of 6.8p in 2018. The dividend has been halted as London-based Restaurant Group embarks on a plan to grow Wagamama, as well as its Concessions and Pubs businesses. It will also begin closing sites in the Leisure unit, targeting between 260 to 275 sites by the end of 2021, with 350 currently open. Turning to results for the 52 weeks to December 29, like-for-like sales rose 2.7%, with total sales rising 56% to GBP1.07 million due to the addition of Wagamama. Restaurant Group posted a pretax loss of GBP37.3 million, compared to a GBP13.9 million profit the year before. The adjusted pretax profit figure was 40% higher at GBP74.5 million.


Webis Holdings. up 8.0%. The gaming firm reported a narrowed first-half loss with revenue climbing, helped by growth in its horse racing operations segment. In the six months to November 30, revenue was 50% higher at USD8.1 million from USD5.4 million, with its pretax loss slimming to GBP207,000 from GBP591,000. Amounts wagered fell sharply however, down 38% year-on-year to USD37.7 million from USD61.2 million. The Isle of Man-based company lost a contract with a "large syndicate". In Racetrack, the Webis unit which manages and operates horse racing facilities, revenue was 67% higher at USD6.9 million from USD4.1 million. In ADW, or advance wagering deposits, revenue was down 5.8% to USD1.2 million from USD1.3 million the year prior. The unit provides online services allowing customers to wager into betting pools.


Metro Bank, down 8.5%. The high street bank sunk to an annual loss in 2019, as it struggled to cope with a "very challenging" year. In 2019, Metro Bank recorded a pretax loss of GBP130.8 million, compared to a GBP40.6 million profit in 2018. The loss includes GBP68 million of intangible asset write-downs from discontinuing certain "work projects" or removing older IT projects that no longer meet with the bank's new strategy. Net interest income slipped 6.7% year on year to GBP308.1 million from GBP330.1 million. Total income, however, was up 2.8% to GBP415.6 million. Metro's total operating expenses jumped 50% in 2019 to GBP534.7 million from GBP355.5 million. The bank's cost-to-income ratio worsened to 129% in 2019 from 88% in 2018. Looking ahead, Metro said it has "refreshed" its strategy, following a comprehensive review of the bank. The lender will focus on "robust" capital and liquidity, "strong" asset quality and a "simple" balance sheet. It is targeting return on tangible equity above 8.5% by 2024.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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