Companies roundup: Finsbury Group, Boohoo, Deliveroo and Melrose

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19th January 2023

The latest companies news from Boohoo, Dr Martens, Harbour Energy and more

elrose Industries (MRO) said that its soon-to-be demerged automotive business arm grew sales by around 6 per cent last year to £5.2bn, while operating profit increased by 21 per cent to around £320mn-£330mn. The business benefited from improved operations following recent restructuring efforts, the company said.

The demerger of automotive, powder metallurgy and hydrogen units into a separate, listed entity is expected to complete shortly after shareholder approval is gained, which it will seek in March. Melrose Industries will retain the existing aerospace-focused arm.

Boohoo sales fall as consumers return to the high street

It was a difficult close to the year for online retailer Boohoo (BOO), which saw revenue fall 11 per cent year-on-year in the four months to the end of December. Though significant, the decrease was in line with the company’s prior guidance. It’s now aiming to recover lost ground via careful management of its inventory. In its trading update, the company reported that inventory stockpiles were already down 27 per cent year-on-year. Markets reacted negatively to the update, with shares falling more than 7.5 per cent by mid-morning.

Home Reit hires external property manager

Homeless accommodation landlord Home Reit (HOME) has hired a property manager Simpact Group to conduct “a detailed review” of its portfolio following months of criticism about the ethics and financial stability of its business model. Simpact has also been tasked with “rent collection and the recovery of rent arrears” following news earlier this month that two of Home Reit’s largest tenants by rent roll are disputing and withholding rent payments.

The company also said that an audit into the allegations made against it by short sellers would not be completed by 31 January. At the start of this year, Home Reit suspended trading due to a failure to file its annual results on time which it blamed on the need to perform an audit into the allegations.

Premier Foods posts strong grocery sales

Higher prices at Premier Foods (PFD) helped sales rise by 12 per cent against the prior year in the food manufacturer’s key Christmas quarter. There was a particularly strong performance by the company’s grocery division in the 13 weeks to 31 December, with a 17 per cent sales uplift driven by seasonal home cooking. But sweet treat sales were down by 1 per cent, and Premier also announced the closure of a “marginally unprofitable” manufacturing site which will lead to 300 job losses. The shares were flat in early trading.

Kodal Minerals funds mine by handing 51 per cent to Chinese company
Another UK-listed miner has welcomed Chinese capital as companies turn abroad for cash hunting for raw materials to fuel the electric vehicle industry. Kodal Minerals (KOD) will give Chinese firm Hainan Group a 51 per cent of its Bougouni mine in Mali in exchange for $100mn (£81mn). The company will also take a 15 per cent stake in Kodal, through a 100 per cent premium share subscription worth almost $18mn. The miner’s shares were up 36 per cent on the news.

Dr Martens shares trampled by profit warning

Shares in Dr Martens (DOCS) fell by 22 per cent this morning, after the boot maker revealed that full-year profits would be £30mn lower than expected. The group is experiencing “significant operational issues” at its new distribution centre in LA, which have led to an inventory bottleneck. Lost revenue and incurred costs related to this are expected to reduce full-year Ebitda by £16-25mn. Management also noted slower than expected sales growth in America.

Frontier Developments disappoints again

Frontier Developments (FDEV) has lowered its full-year profit and revenue expectations after a poor trading period over Christmas. The games developer had pinned a lot of hope on its new F1 Management game, however sales performance “fell materially below original expectations”.

Finsbury Food looks to price recovery

Speciality bakery manufacturer Finsbury Food (FIF) said in a first-half update that it is on track to hit market expectations despite worse “food sector headwinds” in its current financial year than in 2022. Sales for the 6 months to 31 December were up by 15 per cent to £191mn as higher prices offset flat volumes, with the company’s overseas division enjoying the highest growth rate.

Panmure Gordon analyst Alex Chatterton said that the company “continues to look attractive from a valuation perspective, particularly compared to its pre-Covid P/E multiple average and to UK [small and mid cap] food manufacturing peers”.

Harbour Energy plans job cuts, announces tripled free cash flow

In a record year for oil and gas profits, Harbour Energy (HBR) has found plenty to be unhappy about. The top independent North Sea producer said in a trading update covering 2022 its forecast free cash flow for the year would be $2.1bn (£1.7bn), up from $700mn in 2021, while net debt has plummeted from $2.3bn a year to $800mn.

But the company said it was cutting back UK operations, including jobs, because of the Energy Profits Levy (EPL), a 35 per cent tax windfall tax on energy companies. “While oil and gas prices have reverted to more normal levels we still face a [total] tax rate of 75 per cent in the UK due to the recent tax changes, making investment in the country less competitive,” said Harbour chief executive Linda Cook. “As a result, the EPL necessitated a review of our future activity levels in the UK and reinforced our ambition to grow and diversify internationally.”

Deliveroo delivers better profits outlook

Food delivery app Deliveroo (ROO) said in a fourth-quarter update that annual profitability would be better than its previous forecast due to “gross profit margin expansion and cost control”. Adjusted cash profits in the second half of the year were around breakeven, with a 7 per cent rise in full-year gross transaction value within guidance. But order numbers fell by 2 per cent in the fourth quarter, and average monthly active consumers were down by 1 per cent.

Edison Group director of consumer Russell Pointon said that “if Deliveroo can keep the balance between offsetting costs and retaining its market share, results may well turn out to be slightly better than expected”.

Original article here: https://www.investorschronicle.co.uk/news/2023/01/19/companies-roundup-boohoo-deliveroo-and-melrose/

Author: Investor’s Chronicle

Alex Chatterton

Vice President, Research Analyst, Consumer & Leisure

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