Recent Updates On Two Stocks: SThree PLC And Anglo American PLC

Recent Updates On Two Stocks: SThree PLC And Anglo American PLC

SThree PLC

SThree PLC (STHR) is a London, the United Kingdom-based international staffing company. The company offers expert recruitment services in the STEM (science, technology, engineering and mathematics) industries. The group provides contract and permanent staff to diversified sectors, including banking and finance, energy, life sciences, engineering, and ICT (information and communication technology). The company’s staffing business is differentiated in four segments: Continental Europe, Asia Pacific & Middle East (APAC & ME), the United Kingdom & Ireland (UK&I), and the USA. The group also offers resources to support its products with contractor services.

Industry Awards and Recognition

(Source: Company Website)

Key Brands: Computer Futures, Progressive Recruitment, Huxley, Real, Orgtel, JP Gray, Newington International, Madison Black, Global Enterprise Partners, and Hyden.

Financial Results (H1 FY19, £ million)

(Source: Interim Results, Company Website)

In H1 FY2019, the reported revenue of the company surged by 12 per cent to £653.3 million as compared to £585.9 million in H1 FY18, while on a constant currency basis, revenue surged by 10 per cent. On a constant currency basis, net fees surged by 9 per cent, and on a reported basis by 10 per cent to £163 million as compared with the corresponding period of the last year, due to an increase in contract net fees and a slight surge in permanent net fees.

Adjusted operating profit rose by 21 per cent to £24.6 million in H1 FY19 against the £20.4 million in H1 FY18, while reported operating profit stood at £23.3 million. On a constant currency basis, operating profit surged by 18 per cent. The reported profit before tax stood at £22.7 million, an increase of 27 per cent as compared with the corresponding period of the last year. The adjusted profit before tax stood at £24.0 million, an increase of 18 per cent against the £20.3 million in H1 FY18.  On an adjusted basis, operating profit (OP) conversion ratio surged by 1.4 percentage points to 15.1 per cent as compared to the previous year same period data, while on a reported basis, OP conversion ratio increased by 2.2 per cent to 14.3 per cent in H1 FY2019.

On an adjusted basis, basic earnings per share increased by 1.9 pence to 13.5 pence against the 11.6 pence in H1 FY18, driven by a surge in the adjusted profit before tax. On a reported basis, basic earnings per share increased by 2.6 pence to 12.7 pence against the 10.1 pence in H1 FY18, due to improved trading performance and decrease in restructuring costs, EPS also increased by 14 per cent at a constant currency basis. While reported diluted earnings per share stood at 12.2 pence, an increase of 2.6 pence as compared to the previous year same period data.

The company’s board proposed to pay an interim dividend per share at 5.1 pence, an increase of 0.4 pence against the 4.7 pence in H1 FY18, amounting to around £6.7 million in total. On 6th December 2019, Dividend will be paid to shareholders at a record date of 1st November 2019. As priorly stated, the board is targeting a dividend cover in the range of 2.0x-2.5x, based on underlying earnings per share. In H1 FY19, net debt was £8 million, an increase from the previous year same period data.

Outlook

The company has delivered decent growth in the H1 FY19 period. In the regional and sectoral classification, the key performance indicators performed significantly well. The group had also reported decent growth in the net fees across all the three geographical segments except the UK&I and have plans in place to drive growth over all of them.

The scale of the STEM prospect is both growing across the key regions and sectors. The company continue to invest in high performing teams to drive growth. The company has decent performance in all the key areas and industries in their diversified portfolio. The company has a good start of the financial year 2019 and prospect for the full year remains well in line.

The company will be capitalising on strong growth, backed by execution over detailed operational plans, in the coming time. There has been no change in the Board’s prospects for the full year 2019 and of macro-economic backdrop of certain regions remains the same.

Share Price Performance

Daily Chart as at July-22-19, after the market close (Source: Thomson Reuters)

On July 22, 2019, SThree PLC shares closed at GBX 278, up by 2.58 per cent against its previous day closing price. Stock’s 52 weeks High and Low is GBX 393.50/GBX 245. At the time of writing, the share was 29.35 per cent lower than the 52w High level and 13.47 per cent higher than the 52w low level. Stock’s average traded volume for 5 days was 209,267.00; 30 days – 105,848.53 and 90 days – 105,506.36. The average traded volume for 5 days was up by 97.70 per cent as compared to 30 days average traded volume. The company’s stock beta was 0.56, reflecting lower volatility as compared to the benchmark index. The outstanding market capitalisation was around £364.84 million, with a dividend yield of 5.36 per cent.

Anglo American PLC

Anglo American PLC (AAL) headquartered in London, was founded in 1917. Its principal operations include mining, exploring and processing of metal and minerals globally. The group mainly explores metals such as copper, platinum, diamonds, iron, nickel, manganese and thermal coal. The company divided its operations into six reportable segments being De Beers, Platinum Group Metals, Copper, Coal, Nickel and Manganese, Iron Ore and Copper. The main products offering of the company includes Diamonds, Copper, Palladium, Rhodium, Thermal coal, Manganese ore and alloys and iron ore. The company is having mining operations in geographic regions of Southern Africa, North America, South America and Australia. Anglo American Platinum Ltd., one of the Anglo American PLC, group entity is the leading global producer of platinum group metals. Anglo American Platinum Limited company is listed on the JSE (Johannesburg Securities Exchange).

On 25th July 2019, the Anglo American PLC will be releasing its Half Year Results for the financial year 2019.

Anglo American Platinum Financial Highlights (H1 FY2019, R billion)

(Source: Interim Report, Company Website)

On 22nd July 2019, Anglo American Platinum interim results for H12019 were announced on the Johannesburg Stock Exchange.

In H1 FY2019, the company delivered another solid financial performance with surge in earnings, returns and operating cash flows, benefitting from robust market fundamentals which saw the US Dollar, platinum basket price, rising by 16 per cent to 2,685 against the previous year same period data, and coupled with a weakening rand, led to the ZAR platinum basket price surging by 33 per cent as compared with the corresponding period of the last year. Reported revenue surged by 28 per cent to R42.9 billion as compared to R33.5 billion in H1 FY18.

EBITDA increased by 82 per cent to R12.4 billion against the R6.8 billion in H1 FY18, due to an increase in higher US dollar metal prices and the weaker rand/US dollar exchange rate contributing R3.6 billion and R3.3 billion respectively, while EBITDA margin stood at 32 per cent, an increase of 11 percentage points from the previous year same period data.

Headline earnings climbed by 120 per cent to R7.4 billion in H1 FY19 as compared with the corresponding period of the last year, due to an increase in rand basket price, and a stock count adjustment gain. Headline earnings per share surged by 120 per cent to R28.15 as compared to R12.82 per share in H1 FY18.

Basic earnings were R7.3 billion, an increase of 236 per cent against the previous year same period data, while basic earnings per share stood at R27.88. Free cash flow from operations rose by 126 per cent to R4.3 billion as compared with the corresponding period of the last year (H1 FY18: R1.9 billion). The group had a robust balance sheet with net cash at R6 billion as compared to the net cash position of R2.9 billion at 31st December 2018. This imitates an improvement of R3.1 billion after paying a final dividend for 2018 in March 2019 of R2 billion. Dividend per share increased by 194 per cent to R11 as compared to R3.74 per share in H1 FY18. ROCE (return on capital employed) was 45 per cent, an increase of 23pp from the previous year same period data, driven by the strong earnings.

In H1 FY 2019, capital expenditure, excluding capitalised waste stripping and capitalised interest, surged by 17 per cent to R2.1 billion as compared to R1.8 billion in H1 FY18. In February 2019, the board improved the dividend pay-out ratio policy to 40 per cent from 30 per cent.

Outlook for Anglo American Platinum

In 2019, platinum is likely to be in balance or even in a slight deficit. In 2020, the market may return to a tad surplus if investment demand returns to more normal levels. Palladium will remain in deficit, due to the strong demand in the automotive sector, until or unless substitution by platinum occurs in a substantial proportion of gasoline catalytic converters.

In H1 FY19, the company achieved a steady operational performance, due to the various headwinds. PGM production has been guided to be in the range of 4.2–4.5 million PGM ounces. Platinum production will be in the range of 2-2.1 million ounces, and palladium production will be between 1.3 million ounces and 1.4 million ounces. PGM sales volumes will be in line with refined production, and as per guidance in the range of 4.6-4.9 million ounces.

With previous market guidance, unit costs are expected to be in the line of R21,000-R22,000 per platinum ounce produced. Capital discipline will continue, with capital expenditure guidance unchanged, and it will be in the range of R5.7 billion to R6.3 billion.

The company has a decent growth prospect as there is a positive economic forecast for the global diamond jewellery business. There is Healthy demand for polished diamonds from the US and Chinese retailers. The company’s operations had been affected by US-China trade tensions, slower economic growth and stock market volatility. In India, the significant depreciation of the rupee reduced local demand in US dollar terms, which had put an impact on the earnings of the company.

Share Price Performance

Daily Chart as at July-22-19, after the market close (Source: Thomson Reuters)

On July 22, 2019, Anglo American Plc shares closed at GBX 2,240, increased by 0.27 per cent against its previous day closing price. Stock’s 52 weeks High and Low is GBX 2,294/GBX 1,433.64. At the time of writing, the share was 2.35 per cent lower than the 52w High level and 56.25 per cent higher than the 52w low level. Stock’s average traded volume for 5 days was 2,510,300.00; 30 days – 3,165,429.23 and 90 days – 3,368,914.30. The average traded volume for 5 days was down by 20.70 per cent as compared to 30 days average traded volume. The company’s stock beta was 1.57, reflecting more volatility as compared to the benchmark index. The outstanding market capitalisation was around £31.54 billion, with a dividend yield of 3.43 per cent.

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