City round-up; Franchise Brands; BAE Systems; Coral Products; Astra Zeneca; Convatec; McBride
Macclesfield-based multi-brand franchise business, Franchise Brands, said first half progress has continued into Q3 and Q4, in a trading update today, but warned that the anticipated recovery in project work is not expected to happen until next year, due to continued macroeconomic uncertainty and challenging conditions in some markets.
The board said this supports its expectations that group adjusted EBITDA for the year ending December 31, 2024, will be within the range of market expectations, but at the lower end, of between £35.7m to £37m.
Last month the group said it is considering a Main Market listing.
Today’s update said demand for essential reactive service at its Pirtek division has continued to be resilient in most sectors.
Project work and other discretionary spending has remained subdued, particularly in the construction and plant hire sectors.
The early signs of improving macroeconomic sentiment detected over the summer have not yet led to a sustained improvement in demand. This was particularly evident in the UK, which was compounded by uncertainty in relation to the Autumn Budget, and in Germany which continues to be held back by the significant slowdown in the manufacturing sector. However, a growing pipeline of required maintenance work remains available when customers have the confidence to re-start discretionary spending.
In the Water & Waste Services division, demand for essential reactive services has also remained robust. Filta UK continued to successfully transition from a direct labour organisation to a franchise model. Willow Pumps is expanding its customer base to support Filta UK customers and drive efficiency within the core pump service.
Filta North America’s core franchise business – excluding used cooking oil – experienced strong growth in system sales, building on the progress made in the first half.
The B2C Division continues to trade creditably, despite a challenging franchise recruitment environment.
Following recent acquisitions, the group’s strategic focus is on integrating these businesses into the group and repaying the acquisition debt facilities.
Executive Chairman, Stephen Hemsley, Executive Chairman, said: “Demand for our essential reactive services continues to drive a resilient performance, despite softer demand for non-essential work.
“We expect this deferred work will be required, albeit the exact timing is uncertain and so we are cautiously assuming a recovery beyond the current year.
“All our integration and de-gearing initiatives remain on track, which will enhance our operational gearing and EPS growth, respectively, in future years. Our principal franchise brands have significant growth potential as they grow their small shares of large, fragmented markets, expand their range of services and geographical penetration, and cross-sell to our large customer base.
“I, therefore, remain confident that our resilient reactive service business will continue to prosper, and that overall system sales growth will accelerate once the macroeconomic environment improves and support the strategic ambitions set out at the Capital Markets Day held earlier this year.”
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Charles Woodburn
Defence giant, BAE Systems, reiterated its annual targets today after issuing a bullish trading update.
It said its operational and financial performance underpin the group full-year guidance, in line with the upgrade at the half year. It has seen its solid order intake sustained, with around £25bn booked year-to-date and strong visibility in the order backlog and pipeline of incumbent positions which supports the long term growth outlook.
The full year 2024 guidance across all metrics is unchanged from the upgraded guidance provided at the half year results in August, which is sales of +12-14% (2023 £25.284bn), underlying EBITDA +12-14% (2023 £2.682bn), and free cash flow of around £1.5bn.
The group’s balance sheet remains strong. The 2024 interim dividend of 12.4p per share will be paid on December 2, 2024 and BAE is maintaining a good cadence on the up to £1.5bn share buyback programme announced in August 2023, which commenced on July 25, 2024.
Total cash returned to shareholders this year – including the 2023 final dividend – is expected to be c.£1.4bn.
Chief executive, Charles Woodburn, said: “Our operational and financial performance so far in 2024 reaffirms our confidence in achieving the upgraded full year guidance we issued at the half year.
“Focusing on operational excellence, contracting discipline and growing our workforce is enabling us to consistently deliver critical capabilities and technologies for our customers worldwide.
“At the same time, we continue to invest in our business for the long term, which, together with our broad geographic and domain diversity, positions us well for continued growth in the years ahead.”
The group operates factories in Warton and Salmesbury, near Preston, building military aircraft, as well as a submarine building facility in Barrow, and employs around 15,000 staff in the region.
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “The increasingly uncertain geopolitical backdrop remains a strong driver of profit and revenue for BAE Systems and the company is sticking with the upgraded guidance from August’s first-half results.
“That’s underpinned by a strong flow of orders and it maintains the extraordinary trajectory of the business since Russia’s 2022 invasion of Ukraine, since which its share price has more than doubled.
“The company is experiencing some currency headwinds, although the resurgence in the dollar since Donald Trump’s election success is likely to see these ease a touch in the remaining weeks of 2024.”
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Coral Products, Wythenshawe
Swingeing cost-cutting continues at Coral Products as it announced that Phil Allen, Division MD-Rigids, has resigned with immediate effect.
The Wythenshawe-based plastics group is seeking to reduce its cost base after last month announcing it will make a loss this financial year.
Almost three weeks ago Lance Burn, group CEO announced he was standing down, by mutual agreement, to save costs. Coral said at the time: “In the light of the continued challenging trading environment, Coral has entered into a cost rationalisation exercise and reflecting this, by mutual agreement, Lance Burn, Group CEO, has resigned and will leave the group on 31st October 2024.”
Now, the latest departure has been confirmed.
Coral said the position of Division MD-Rigids will not be replaced, and Phil’s duties will be overseen by Ian Hillman, Group COO.
It said it is committed to resetting the cost base of the business to be better positioned to operate in the ongoing challenging economic conditions.
Chairman, Joe Grimmond, said: “On behalf of everyone, I would like to thank Phil for his commitment to the Coral group of businesses and wish him well on his future endeavours.”
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Pascal Soriot
AstraZeneca is to invest $3.5 billion in the United States focused on expanding the Company’s research and manufacturing footprint by the end of 2026. This includes $2 billion of new investment creating more than a thousand new, high-skilled jobs contributing to the growth of the US economy.AstraZeneca’s expanding footprint in the US includes, among others: A state-of-the-art R&D centre in Kendall Square, Cambridge, Massachusetts; a next generation manufacturing facility for biologics in Maryland; cell therapy manufacturing capacity on the West and East Coast; specialty manufacturing in Texas.
This morning the global pharma giant said total revenue for the first nine months of the year was up 19% to $39,182m, driven by a 19% increase in Product Sales and continued growth in Alliance Revenue from partnered medicines.
Pascal Soriot, Chief Executive Officer, AstraZeneca said: “Our multibillion dollar investment reflects the attractiveness of the business environment together with the quality of talent and innovation capabilities here in the United States. By expanding our R&D and manufacturing footprint, we aim to enhance the development of cutting-edge therapies and support the United States leadership in healthcare innovation.”
He also commented on investigations by the Chinese authorities into current and former AstraZeneca employees over allegations of medical insurance fraud, illegal drug importation and personal information breaches. Recently Leon Wang, EVP International and AstraZeneca China President was detained.
Soriot said: “We take the matters in China very seriously. If requested we will fully cooperate with the authorities. We remain committed to delivering innovative life-changing medicines to patients in China.”
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “After a few setbacks with drug trials and the detention of its head of business in China, it was about time AstraZeneca served up some good news.
“While raised earnings guidance, positive trial data on a neurofibromatosis treatment and a multibillion-dollar investment in the US should have given the shares a shot in the arm, investors weren’t won over.
“The China issue revolves around allegations about the importation of its cancer drug Imjudo, which hasn’t been approved for sale in the country, medical insurance fraud and personal data breaches. AstraZeneca said it would fully cooperate with the authorities, if requested. The uncertainty around this issue is likely to hang over the shares until the matter is resolved.”
He added: “It’s an unwelcome situation for the business, but the pharmaceutical juggernaut will keep on trucking. It has a large portfolio of drugs at different stages of their development and the end goal is to find treatments that will help people and generate the earnings of tomorrow. AstraZeneca has a good track record of success in the laboratory or acquiring biotech firms that bring new treatments to its portfolio.
“Spending big bucks in the US should put AstraZeneca in a good light from the perspective of Donald Trump and his policies to create more jobs in the country. We don’t know the precise details of how tariffs would work under his new administration, and which products they would be applied to, but the idea of a British business spending $3.5bn to set up new research and development facilities and additional manufacturing capacity is surely music to the ears of the president-elect who wants more done on US soil.
“It also helps that the US is a prime location for AstraZeneca, accounting for 44% of its total revenue.”
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ConvaTec wound care
Wound care business Convatec is upgrading market guidance on its performance claiming organic sales have grown from 7.25% to 8.0% (previously 6.0%-7.0%) and that operating margins have increased half a percent to 21.5%.
The Deeside-based business said in a statement that it is on-track to deliver double-digit growth in adjusted earnings per share based on a broadening product portfolio, new product launches, ongoing productivity initiatives and focused commercial execution.
Convatec revenues in 2023 were over $2 billion and Karim Bitar, Chief Executive Officer, commented:
“Convatec has delivered faster broad-based sales growth in the second half and operating margin is tracking materially ahead of H1, driven by strong execution of our FISBE strategy and lower inflation. This is further evidence that Convatec has successfully pivoted to a higher level of organic sales growth and profitability, and we are on-track to deliver a mid-20s operating margin in 2026 or 2027. For FY25, we expect to grow sales and operating margin further, and to deliver another year of double-digit growth in adjusted EPS and free cash flow to equity. This growth is driven by our clear strategy, our strongest-ever new product pipeline and the focus on execution excellence by our team of more than 10,000 colleagues around the world.”
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McBride PLC
McBride, the Manchester-based manufacturer and supplier of private label cleaning products has told the stock market that revenues are ahead of the same period last year and in line with internal expectations.
The Group’s FY25 interim results will be announced on 25 February 2025. Market expectations are that the business will make adjusted operating profit £59.7m and maintain net debt of £111.6m.
Input costs for the main raw and packaging materials remain in line with forecasts made at the beginning of the financial year. However, with only four months of the financial year complete, the Group remains cautious about the macro-economic environment and potential increased volatility in commodity markets adversely impacting input costs.
In September’s final results announcement, the Group stated that net debt reduction would continue to be a prime focus. As with profitability, progress in debt levels remains in line with expectations*. Additionally, refinancing is progressing according to plan and is expected to complete in the coming weeks.
