A Glance At 4 Trending Stocks – RBS, BARC, HFD and UN01

UK Banks Face Threat of Legal Action

On 30 July 2019, Barclays and Royal Bank of Scotland, along with JP Morgan, Citigroup and UBS, were sued over allegations of foreign-exchange rigging, in a class-action lawsuit under the Consumer Rights Act 2015, which is likely to cost the banks billions. As per the lawsuit, because of foreign exchange market manipulation between 2007 and 2013, corporations, hedge funds, asset managers and pension funds lost out on their profits and should be compensated for it.

Royal Bank of Scotland

Royal Bank of Scotland (RBS) is an Edinburgh, Scotland-headquartered UK-centred bank which provides a wide range of products and services to personal, large corporate and commercial and institutional customers across markets in Europe, Asia and the US. The operations are differentiated in four core operating segments: Personal & Ulster, Commercial & Private, RBS International, and NatWest Markets. Personal & Ulster is further divided into UK Personal Banking and Ulster Bank RoI, while Commercial & Private is divided into Commercial Banking and Private Banking.

Financial Highlights (H1 FY 2019, in GBP m)

 (Source: Company Filings)

Despite lower central treasury income, total income increased by GBP 415 million, or 6.2% to GBP 7,117m H1 FY 2019. Net interest income declined by 7% as net interest margin was 2.04%, which was 9 basis points lower than H1 2018. As other expenses reduced by GBP 173 million in H1 FY 2019 compared with H1 2018, operating expenses decreased by GBP 635 million, or 13.4%, to GBP 4,100m. The company reported an operating profit of GBP 2,694 million in H1 FY 2019, representing an increase of 48% over the year as the operating expenses declined. An attributable profit of GBP 2,038 million was reported, corresponding to basic earnings per share of 16.9p. Return on tangible equity was 12.1% for H1 2019, and CET1 ratio was 16.0%, with cost/income ratio of 57.2%.

Share Price Commentary

Daily Chart as at 02-August-19, before the market closed (Source: Thomson Reuters)

 

On 2nd August 2019, at the time of writing (before the market closed, GMT 4:20 pm), RBS shares were trading at GBX 203.3, down by 6.3 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 266.44/GBX 194.44. The company’s stock beta was 0.77, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around GBP 26.31 billion, and a dividend yield of 2.53%.

 

Barclays PLC

Barclays PLC (BARC) is a multinational financial services company which caters to individuals, SMEs, corporates, and high-net-worth clients by offering private and investment banking solutions, wholesale and commercial banking, and personal and business banking. Investment solutions, loans, cards, and deposits and accounts are also offered by the group. It also offers services such as online banking, international banking, premier banking, mobile banking, transactional lending and foreign exchange. The group is differentiated into two core operating segments: Barclays UK and Barclays International.

Financial Highlights (H1 FY 2019, in £m)

(Source: Company Filings)

As Barclays International income was down by 1% and Barclays UK income decreased by 2%, total income decreased 1% to GBP 10,790m in H1 FY 2019. Due to the non-recurrence of favourable macroeconomic forecast update in the US, credit impairment charges rose to GBP 928m (H1 2018: GBP 571m), which resulted in a 5% decline in net operating income to GBP 9,862m. Reflecting continued investment in the business, operating expenses increased 1% to GBP 6,758m, and profit before tax was excluding litigation and conduct was GBP 3.1bn in H1 FY19 (H1 FY18: GBP 3.7bn) and reported profit before tax was GBP 3.0bn (H1 FY18: GBP 1.7bn). Attributable profit excluding litigation and conduct was GBP 2,158m (H1 FY18: GBP 2,550m), while reported attributable profit was GBP 2,072m in H1 FY19 (H1 FY18: GBP 561m). This resulted in basic earnings per share of 12.1p and generated a RoTE of 9.4% (H1 FY18: 11.6%), excluding litigation and conduct. The CET1 ratio increased to 13.4%, and average UK leverage ratio increased to 4.7%.

Share Price Commentary

Daily Chart as at 02-August-19, before the market closed (Source: Thomson Reuters)

 

On 2nd August 2019, at the time of writing (before the market closed, GMT 4:25 pm), BARC shares were trading at GBX 152.8, down by 2.2 per cent against the previous day closing price. Stock’s 52 weeks High and Low is GBX 193.60/GBX 144.99. The company’s stock beta was 0.70, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around GBP 26.94 billion, and a dividend yield of 4.49%.

Conclusion

The company took note of the challenging income environment faced in the first half and said that it would reduce 2019 costs below £13.6 billion if challenging conditions continue beyond the latest period. However, it continues to target 2019 and 2020 RoTE of more than 9% and more than 10% respectively and cost/income ratio of less than 60% over time. The company is focused on delivering sustainable income generation through digital transformation and has consequently invested in digital technology, with just under 8 million customers now digitally active on the Barclays App. Market risks for the portfolio of the company can increase due to political concerns in the US and Europe (including Brexit), slowing global growth, the US-China trade conflict and the uncertain outlook for the direction of monetary policy. The uncertainties have resulted in business borrowing decisions delays, and it might be difficult for the group to achieve a rise in income level in the short-term period.

Halfords Group

Halfords Group PLC (HFD) is a British retailer of motoring, cycling and leisure products and services, which also operates a vehicle, servicing, maintenance and repairs business through Halfords Autocentres. The operations of the company are differentiated in two segments, namely retail and autocentres. While autocentres operate solely in the UK, retail operates in both the UK and Republic of Ireland.

Financial Highlights (FY 2019, in £m)

(Source: Company Filings)

Despite a challenging consumer environment, retail revenue remained flat at GBP 977.2m in FY19, and Autocentres revenue rose to GBP 161.4m, helping the company post marginal increase in total revenue to GBP 1,138.6m in the year, up by 0.3%, with like-for-like sales growth of 1.1%. Due to a continued focus on buying efficiencies, stock loss improvements and a positive foreign exchange tailwind, gross profit improved in the year to GBP 579.0m, up by 1.5%, with a 70 basis points improvement year-on-year in gross margin. As a result of strategic investment, one-off costs and inflationary increases, operating costs increased by 4.3% in the FY19 to GBP 516.8m (FY18: GBP 495.6m). Underlying EBIT declined by 16.6% to GBP 62.2m, and underlying EBITDA decreased 10.3% to GBP 98.2m. Group profit before tax was GBP 51.0m in FY19 (FY18: GBP 67.1m), while underlying profit before tax declined by 17.9% at GBP 58.8m. Profit after tax for the year was GBP 41.9m, down by 23.4% and basic earnings per share were down by 23.7% over the year to 21.2p.

Share Price Commentary

Daily Chart as at 02-August-2019, before the market closed (Source: Thomson Reuters)

 

On 2nd August 2019, at the time of writing (before the market closed, GMT 4:37 pm), HFD shares were trading at GBX 182, down by 1.3% against the previous day closing price. Stock’s 52 week High and Low is GBX 355.20/GBX 175.10. The company’s stock beta was 0.02. Total outstanding market capitalisation was around GBP 368.36 million, and dividend yield was 10.06%.

Conclusion

With a free cash flow of £42.7m in FY19, the company continues to be cash generative, and net debt at £81.8m was £6.0m down year-on-year. While the company has significant headroom to grow further in some areas, it has a leading market shares in some of the motoring and cycling markets, with good long-term growth prospects in both the markets. Extremely mild weather conditions have impacted motoring, and consumer confidence remains fragile. The company expects underlying sales growth to be muted in the next year, and inflation and employment costs would lead to underlying operating cost growth in FY20.

Uniper SE

Uniper SE (UN01) is a Düsseldorf, Germany-based international energy company that generates, trades, and markets energy on a large scale, with operations across Europe, Americas and Asia, The company seeks to deliver flexible and competitively priced energy products and services with the help of technical and commercial expertise coupled with a balanced portfolio of technologically advanced large-scale assets. The company also procures, stores, transports and supplies commodities and energy-related products. The operations of the group are differentiated in three operating segments, namely International Power Generation, Global Commodities and European Generation.

Financial Highlights (Q1 FY 2019, in €m)

(Source: Company Filings)

Sales revenue in the first quarter rose by 3.8% to EUR 21,830m, driven by an 11% increase in Global Commodities segment. Income before financial results and taxes rose to EUR 965m from EUR 125m in the first quarter of FY 2018, while the adjusted EBIT declined to EUR 185m from EUR 350m in the corresponding period last year. Adjusted EBITDA was reported at EUR 356m and net income during the year was EUR 791m, corresponding to earnings per share of EUR 2.10. Adjusted funds from operations were EUR 243m, and cash provided by operating activities was reported at EUR 105m in Q1 FY 2019. Economic net debt rose by EUR 57m to EUR 2,566m.

Conclusion

The company reiterated the annual target for FY 2019, as reported in its annual report and reported that the risk faced by the group had not changed materially. The company operates a diversified portfolio of assets and serves many markets, helping it to cushion any blow from domestic factors. The company is currently trading near its 52-week high, and it would announce its results for the first half of 2019 on 8 August 2019.

Facebook Comments