Stocks Going Ex-Dividend Today – Compass Group (CPG) and United Utilities Group (UU)

Stocks Going Ex-Dividend Today – Compass Group (CPG) and United Utilities Group (UU)

The date from when a company’s stock starts trading with the value of its latest announced dividend factored in is called the ex-dividend date and any buyer of the stock from that date onwards is not entitled to the declared dividend. Generally, the market drives down the stock price on its ex-dividend date by the amount of the dividend, but the price of the stock might increase as well since the market is guided by many other forces and optimism about the company might result in a rise in its price.

Compass Group

Compass Group PLC (CPG) is a British multinational company headquartered in Chertsey, United Kingdom. The company is engaged in providing food and support services in more than 50 countries, with clientele ranging from armed forces to schoolchildren, and is the largest contract foodservice company in the world. The company’s operations are differentiated in five segments: Healthcare & Seniors, Sports & Leisure, Business & Industry, Defence, Offshore & Remote, and Education. Operations are distributed in three geographical segments as well: North America, Europe and Rest of the World.

Recent Development

On 11 June 2019, the company announced that it had signed an agreement to acquire Fazer Food Services for an enterprise value of approximately 475 million euro from Fazer Group, an international family owned FMCG and direct to the consumer group. Fazer Food Services is a renowned food catering business across several sectors including Business & Industry, Education, Healthcare, Seniors and Defence, in the Nordic region with operations in Finland, Sweden, Norway and Denmark, which will enable Compass Group to further enhance its customer proposition in the Nordic market.

Financial Highlights (H1 FY 2019, in £m)

 (Source: Company Filings)

Due to the positive impact of foreign exchange during the period, growth of revenue, operating profit and earnings per share on an underlying basis was lower than statutory. Driven by organic growth and foreign currency translation, on a statutory basis, revenue grew by 8.8% to £12,326 million, while on an organic basis, revenue increased by 6.6%, due to a strong performance in Europe and excellent growth in North America. As a result of investment and focus in service and quality, the retention rate was 94.8% and like for like revenue growth was 3.2%. Statutory operating profit was £913 million, an increase of 6.9% over the prior period and underlying profit from operations rose by 8.6% to £951 million, while on a constant currency basis, it increased by £52 million, or 5.8%. The company continues to reinvest in the business to support the exciting global growth opportunities and cost efficiencies combined with price increases have enabled it to offset cost pressures, helping it to maintain the underlying operating profit margin at 7.5%. As a result of higher profits and the positive impact of foreign exchange, statutory basic earnings per share rose by 7.4% to 40.7 pence, while on a constant currency basis, the underlying basic earnings per share increased by 6.5% to 42.9 pence.

Dividend

The company declared an interim dividend of 13.1 pence per share (2018: 12.3 pence), up by 6.5% on the prior year, in line with constant currency earnings per share and reflecting continued strong earnings growth and cash flow generation. To shareholders on the register on 21 June 2019, the dividend will be paid on 29 July 2019, resulting in the company going ex-dividend on 20 June 2019.

Share Price Commentary

Daily Chart as at June-20-19, before the market closed (Source: Thomson Reuters)

On 20 June 2019, at the time of writing (before the market closed, at 11:35 am GMT), CPG shares were trading at GBX 1,871.3, down by 1.3 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 1,930.00/GBX 1,467.50. Stock’s average traded volume for 5 days was 2,867,402.40; 30 days – 3,106,222.90 and 90 days – 2,613,746.39. On the valuation front, the stock was trading at a trailing twelve months PE multiple of 23.2x, compared to the industry’s median of 12.8x. The company’s stock beta was 0.84, reflecting less volatility as compared to the benchmark index. The outstanding market capitalisation was around £30.11 billion, with a dividend yield of 2.03 per cent.

United Utilities Group

United Utilities Group PLC (UU) is a Warrington, United Kingdom-headquartered holding company primarily engaged in the provision of wastewater and water services through its subsidiaries. The company gathers water from lakes, reservoirs, boreholes and streams; and collects, treats and deposits wastewater into sea and river. It also collects water from houses, and transports it for treats sewage sludge, treatment works and generates renewable energy. It provides infrastructure management services as well. United Utilities owns licenses for providing wastewater services and water to businesses and people across the North West of England.  The company’s operations are differentiated in three core operating segments: Wholesale water charges, Wholesale wastewater charges and the Residential retail charges.

Financial Highlights (FY 2019, in £m)

(Source: Company Filings)

Largely reflecting our allowed regulatory revenue changes, the company’s reported revenue stood at £1,818.5 million against £1,735.8 million in FY2018, reflecting an increase of 4.76%. The underlying operating profit for FY2019 was £684.8 million versus £645.1 million in FY2018. The reported operating profit declined by 0.23% from £636.4 million in FY2018 to £634.9 million in FY2019, representing an increase in the operating expense for the current financial year. The profit before tax for FY2019 stood at £436.2 million against £432.1 million in FY2018. The underlying after-tax profit was up by £73.8 million from £304.9 million to £378.7 million in FY2019. The underlying earnings per share stood at 55.5 pence in FY2019 versus 44.7 pence in FY2018, while basic earnings per share increased from 52.0 pence to 53.3 pence. The dividend per share for FY2019 was 41.28 pence against 39.73 pence in FY2018. RCV (Regulatory capital value) gearing remained flat at 61% for FY2019. The net debt for the period stood at £7,067.3 million versus £6,867.8 million in FY2018.

Dividend

 The company announced total dividend for the year of 41.28 pence, representing an increase of 3.9%, and was in line with its policy of targeting a growth rate of at least RPI inflation each year through to 2020. The company paid an interim dividend of 13.76 pence per ordinary share in February and announced a final dividend of 27.52 pence per ordinary share. The ex-dividend date is 20 June 2019, to shareholders on the register at the close of business on 21 June 2019, the final dividend is expected to be paid on 1 August 2019.

Share Price Commentary

Daily Chart as at June-20-19, before the market closed (Source: Thomson Reuters)

On 20 June 2019, at the time of writing (before the market closed, at 11:40 am GMT), UU shares were trading at GBX 791.4, down by 3.5 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 879.60/GBX 674.30. Stock’s average traded volume for 5 days was 2,300,992.20; 30 days – 2,439,328.90 and 90 days – 2,164,858.20. On the valuation front, the stock was trading at a trailing twelve months PE multiple of 14.7x, compared to the industry’s median of 14.6x. The company’s stock beta was 0.83, reflecting less volatility as compared to the benchmark index. The outstanding market capitalisation was around £5.59 billion, with a dividend yield of 5.03 per cent.