Recent Business Performance Updates Of Two Stocks: SIG PLC & Berkeley Group PLC

About SIG PLC

SIG PLC (SHI) is a Sheffield, UK based supplier of building products. The group is involved in the supply of construction and related market products which are specialist in nature. The company’s business is differentiated into two segments: UK & Ireland and Mainland Europe.

SHI-Half Year Trading Updates

The company’s like-for-like (LFL) sales for H1 2019 decreased by 3.8 per cent over the period. The company’s revenues from continuing operations were 5.7 per cent lower in the period, with an adverse currency movement of 1.3 per cent and an impact from fewer working days of 0.6 per cent. The LFL sales decreased in the UK & Ireland segment, due to the falling level of construction activity as the Q2 progressed. The company’s businesses in Mainland Europe reported a positive performance in the H1 FY19, with LFL revenues, increasing by 3.3 per cent. The company released its interim results for the financial year 2019 on 6th September 2019.

SHI-Financial highlights for H1 FY19 period ended 30th June 2019

The company’s H1 FY19 LFL (like-for-like) revenue plunged by 3.8 per cent. This can be attributed to unfavourable currency movements and lesser work done due to fewer working days. The company’s revenue (underlying) dipped by 5.1 per cent to £1,260.1 million in H1 FY19 as against £1,327.5 million in H1 FY18. These underlying results do not capture the inflows from the business divestitures made, as this will provide a better picture of the company’s performance. The business divestitures bought in sales of £12.5 million in H1 FY19 as against £54.2 million in H1 FY18. The company’s revenue plunged by 7.9 per cent to £1,272.6 million in H1 FY19 on a statutory basis as against £1,381.7 million in H1 FY18.

The company’s gross profit margin (underlying) surged by 70 bps to 27.1 per cent in H1 FY19 as against 26.4 per cent in H1 FY18. The company’s gross profit margin surged by 50 bps to 27 per cent in H1 FY19 as against 26.5 per cent in H1 FY18 on a statutory basis. The company’s gross profit (underlying) plunged by £9.5 million to £341.3 million in H1 FY19 as against £350.8 million in H1 FY18 due to lesser turnover. The company’s gross profit (statutory) plunged to £343.9 million from £366.6 million in H1 FY19 due to divestiture from businesses.

The company brought significant changes to bring cost efficiencies in the financial year 2018. As a result, the operating costs (adjusted) plunged to £304.1 million in second half of 2018 as against £317.8 million in the first half of 2018. These benefits have been carried forward in 2019, the operating costs (adjusted) stood at £304.8 million in H1 FY19 (on pre-IFRS 16 basis). The company’s operating profit (adjusted) surged by 10.6 per cent to £36.5 million in H1 FY19 as against £33.0 million in H1 FY18. The company’s operating margin (adjusted) surged by 40 bps to 2.9 per cent in H1 FY19 as against 2.5 per cent in H1 FY18. The company’s operating profit (reported) plunged by £10.1 million to £17.8 million in H1 FY19 as against £27.9 million in H1 FY18. The company’s PBT (underlying) surged by 19.5 per cent to £30.0 million in H1 FY19 as against £25.1 million in H1 FY18. The company’s basic earnings per share (underlying) surged by 23.3 per cent to 3.7 pence per share in H1 FY19 as against 3 pence per share in H1 FY18. The company’s basic earnings per share (reported) stood at 0.2 pence per share in H1 FY19 as against 2.5 pence per share in H1 FY18. The company declared an interim dividend of 1.25 pence per share in H1 FY19 same as in H1 FY18 which will be paid to investors on 8th November 2019. The company’s net debt reduced from £176.1 million in H1 FY18 to £158.2 million in H1 FY19, excluding impact of IFRS 16.

SHI-Share price performance

Daily Chart as at 06-September-19, before the market close (Source: Thomson Reuters)

On 06th September 2019, at the time of writing (before the market close, at 12:17 PM GMT), SHI shares were trading at GBX 122.2, down by 5.34 per cent against the previous day’s closing price. Stock’s 52 weeks High and Low are GBX 154.00/GBX 101.30. The group’s stock is reflecting higher volatility as against the benchmark index based on the company’s beta of 1.19.

The investors have been consistently benefitted from the dividends payed by the company. According to the last seven years of data, the highest dividend yield stood at 3.55 per cent in FY16, and the company’s lowest dividend yield was recorded at 1.68 per cent in FY13.

About Berkeley Group Holdings PLC

Berkeley Group Holdings PLC (BKG) is a company based in the United Kingdom, which deals in creating homes with access to parks and public spaces and amenities. The company has successfully delivered 19,000 plus houses in the last five years. More than 11,000 people work for the company. The company has also ventured into creating schools with 6 already delivered and 8 more in the pipeline. As per the customer service barometer, the company has an excellent NPS (Net Promoter Score) of 70.5. The company is a part of FTSE 100.

BKG-Trading updates

On 6th September 2019, the company released a trading update for three months period ended 31st August 2019. The company expects its sales to be above £1.8 billion. The company is visualising a stable demand for new quality homes which are well located and priced. Appropriate pricing and finance options are key to do well in the market. Overall, the industry is constrained by the geopolitical factors. The company is expecting net cash balances of £975 million by H1 FY20.

On 15th August 2019, the company declared an interim dividend of 20.08 pence per share, which will be paid on 13th September 2019 to the shareholders.

BKG-Financial Highlights for the financial year 2019 period ended 30th April 2019 (£, million)

The company’s revenue surged by 4.1 per cent to £2,957.4 million in FY19 as against £2,840.9 million in FY18. This can be attributed to proceeds from the sale of 3,698 new homes at a mean selling price of £748,000. The gross profit of the company plunged by 5.8 per cent to £926.2 million in FY19. The gross margin of the company plunged to 31.3 per cent in FY19 as against 34.6 per cent in FY18. The company’s operating income plunged by 5.9 per cent to £768.4 million in FY19. The company’s operating margin fell from 28.8 per cent in FY18 to 26 per cent in FY19. The company’s PBT (profit before taxation) plunged by 20.7 per cent to £775.2 million in FY19. The company’s basic EPS (earnings per share) was down by 18.1 per cent to 481.1 pence in FY19 from 587.4 pence in FY18. The company’s net assets surged by 14.4 per cent to £2,963.3 million. The company had net cash balances of £975 million in FY19 as against £687.3 million in FY18.  

As per the latest data revealed by MHCLG (Ministry of Housing, Communities and Local Government), in 2018, homes demand in London was approximately 30% below the 2015 peak and substantially below the London planned target of 66,000 homes per year. Also, the completion of homes slumped substantially by 32% in 2018 against the year-ago period. The operating environment for the industry looks challenging for the coming three years, as the UK’s decision to crash out of the EU bloc has brought a lack of visibility in political outlook. Both demand and supply of homes are at best stagnant at present, and the political uncertainty looks likely to persist for the short-term. During the period, it was reported that gross margins and pre-tax return on equity declined and this trend might prevail at the company for a mid-term time horizon, mainly because of reluctant demand and supply in its operating segments. A reduction in demand due to changes in economic conditions in the UK, Europe and worldwide would hit the group hard as the business is sensitive to wider economic factors.

BKG-Share price performance

Daily Chart as at 06-September-19, before the market close (Source: Thomson Reuters)

On 06th September 2019, at the time of writing (before the market close, at 12:21 PM GMT), BKG shares were trading at GBX 3,958, up by 2.19 per cent against the previous day’s closing price. Stock’s 52 weeks High and Low are GBX 4,012.00/GBX 3,170.00. The group’s stock is reflecting lower volatility as against the benchmark index based on the company’s beta of 0.56.

The investors have been consistently benefitted from the dividends paid by the company. According to the last seven years data, the highest dividend yield stood at 7.85 per cent in FY14, and the company’s lowest dividend yield was recorded at 0.72 per cent in FY19.

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