Top UK Stocks to Watch Next shares jump after raising guidance

Josh Warner
By :  ,  Former Market Analyst

Top UK Stocks and Shares | Next Share Price | Royal Mail Share Price | Wickes Share Price | Computacenter Share Price | Antofagasta Share Price

Top News: Next raises guidance after smashing sales targets

Next said it expects to deliver twice the rate of growth in full-price sales over the full-year after delivering a better-than-expected performance during the initial weeks of the financial year.

Next shares were trading 9.3% higher in early trade this morning at 8089.0p.

Next said full price sales jumped 18.6% in the 11 weeks to July 17 – a blowout performance considering its central forecast was for just 3% growth. Investors will also welcome the news that sales were 18.6% higher than pre-pandemic levels.

The company said the stellar growth in sales was driven by people refreshing their wardrobes as lockdown eases, warmer-than-expected weather at the end of May and in June, higher domestic consumer spending amid fewer trips overseas, and because consumers are flush with cash after saving during lockdown.

As a result of the strong outperformance, Next said it is now expecting to deliver full price sales growth of 6% this year rather than its original goal of 3%. It also said it now expects pretax profit to be around £750 million this year, up from its previous target of £720 million. That would represent a recovery from the £342 million profit delivered last year when it was hard-hit by the pandemic and mark the return to pre-pandemic levels of growth from the £729 million profit delivered in the year to the end of January 2020.

Shareholders were also told that Next hopes to end the financial year with around £240 million in surplus cash which it intends to return to shareholders, with the first payout to be made this September.  Next will make a special dividend payment of 110p on September 3, worth around £140 million in total.

Royal Mail parcel volumes drop but remain well above pre-pandemic levels

Royal Mail said it delivered fewer parcels during the first quarter of its financial year compared to the year before as it starts to come up against tough comparatives, but said volumes are re-basing at significantly higher levels than before the pandemic.

The company said Royal Mail revenue rose 12.5% in the three months to the end of June and remained over 20% higher than pre-pandemic levels. Revenue from letters increased almost 26% while parcel revenue inched-up 3.4%.

Letter volumes jumped 22% year-on-year, but parcel volumes declined over 13%.

The decline in parcels was caused by tough comparatives from the year before, when volumes exploded as the pandemic erupted, lockdown was imposed, retailers closed and people started shopping more online. However, Royal Mail said parcel volumes were still over 19% higher than pre-pandemic levels.

Royal Mail shares were down 2.7% in early trade this morning at 514.0p.

‘For Royal Mail, as expected, parcel volumes decreased and letter volumes increased compared to the exceptional period last year encompassing the UK's first lockdown, when non-essential retailers closed for the first time. We are starting to see evidence that the domestic parcel market is re-basing to a higher level than pre-pandemic, as consumers continue to shop online,’ said chairman Keith Williams.

At GLS, its international arm, revenue in the first quarter was up 12.4% and over 36% higher than pre-pandemic levels. The company is aiming for GLS to deliver low single digit percentage growth in revenue over the full-year and an operating margin of 8%.

‘For GLS, as expected, parcel volume growth continued albeit at a slower rate, due to the exceptionally strong comparators from the same period in 2020-21,’ Williams added.

‘As pandemic restrictions continue to ease there is still uncertainty about levels of COVID transmission, the impact on consumer behaviour and economic factors such as GDP growth and inflation, all of which will impact on future performance. We continue to expect fluctuations in volumes as we emerge from COVID restrictions, which we will need to manage accordingly. Nonetheless we are encouraged by the revenue performance across Royal Mail and GLS in the first quarter, and notwithstanding the current uncertainty, remain confident about the full year,’ Williams said.

Wickes eyes profit jump as sales growth accelerates

Wickes said profits will jump in the first half after delivering strong sales growth, driven by an acceleration in demand for DIY and a recovery in its Do-It-For-Me division.

Wickes, which was spun-off from Travis Perkins earlier this year, said it delivered 33.1% like-for-like growth in sales in the six months to June 26. That was the result of like-for-like growth accelerating from 19.7% in the first quarter to 47.6% in the second.

Notably, while growth will have been partly flattered by the comparatives from the year before when business was disrupted by the eruption of the coronavirus, growth remains well above pre-pandemic levels. Like-for-likes in the first half were some 22.4% above the same period in 2019.

Importantly, the ‘Do It For Me’ division, which sees Wickes design and install major projects like new kitchens or bathrooms for its customers, was hit hard by the pandemic but returned to growth in the first half with like-for-likes up 20.5% - although sales remain some 28% below pre-pandemic levels.

‘Whilst DIFM sales in the first half were impacted by the enforced closure of our in-store kitchen and bathroom showrooms through to the 12th April, our virtual sales journey continued to resonate well with customers. Since reopening, ordered sales have grown by over 30% on a two year basis, which will support positive delivered sales growth in the second half of the year,’ Wickes said.

Wickes said it still expects to deliver first-half adjusted pretax profit of around £45 million. That will be significantly better than the year before considering Wickes delivered adjusted profit of £49.5 million in the whole of 2020. Interim results will be released on September 16.

Wickes shares were trading 2% higher in early trade this morning at 251.0p.

‘This performance once more reflects the strength of our business model and the tremendous support from our colleagues who have worked with tireless dedication to help the nation feel house proud. We are managing to navigate inflationary pressure and industry wide raw material constraints by working closely with our suppliers, and we remain on track to continue to grow in a responsible and sustainable way, providing our customers with the products they need at the best possible value,’ said chief executive David Wood.

Computacenter interim profits to jump 50%

IT firm Computacenter said first-half pretax profits will be some 50% higher than the year before, giving it confidence it can deliver its 17th consecutive year of earnings growth in 2021.

Computacenter shares were trading 2.9% higher in early trade this morning at 2531.0p

The company said trading had been ‘robust’ across all geographies in the first six months of the year, flagging ‘particular strength at the end of the second quarter’ – which should position it well as it enters the second half.

‘This means that the group will deliver an adjusted profit before tax for the first half of 2021 circa 50% ahead of the same period last year. We have seen strong organic Technology Sourcing and Services Growth in the UK, Germany and the US,’ the company said.

Having delivered £74.6 million in adjusted pretax profit in the first half of 2020, that implies interim profit should be around £111.9 million this year. Computacenter said profits would have been higher if it wasn’t held back by supply shortages of some key components and foreign exchange headwinds.

‘As we enter the second half of the year our Services backlog and more particularly our Product backlog, across all geographies, are at a record high which gives us a high degree of comfort. We do however remain concerned about product shortages within the industry and obviously further strengthening of the pound would create a stronger FX translation headwind, but we are not predicting either of these headwinds to get any worse,’ Computacenter said.

Computacenter delivered record results in 2020 despite the challenges posed by the pandemic and believes it can build on this to deliver its 17th consecutive year of earnings per share growth.

‘Given the performance in the first half, the current backlogs and the forecast to the end of the year, while nothing in life is ever certain and we face a stronger comparative in the second half, it is highly likely that 2021 will be another year of substantial progress for the group,’ the company said.

Computacenter will release interim results on Wednesday September 9.

Antofagasta copper output dips but remains on track for full year

Chilean copper miner Antofagasta said copper production fell in the first half of 2021 as expected but remains on track to hit its full-year targets.

The company said it produced 178,400 tonnes of copper in the second quarter, down 2.5% from the first due to lower recovery rates at Centinela Cathodes and lower-than-expected grades at the Zaldivar mine.

That meant output for the first half came in at 361,500 tonnes, down 2.8% from the year before as anticipated. Net cash costs averaged $1.14 per pound in the first half.

Antofagasta reiterated its full-year guidance to produce between 730,000 to 760,000 tonnes of copper at a net cash cost of $1.25 per pound. However, it warned this could be impacted by the ongoing drought at Los Pelambres, which is forcing Antofagasta to work with strict water management protocols in place. On the upside, Antofagasta should benefit from the loosening of restrictions this year in Chile that has so far forced it to reduce the size of its workforce on site.

Meanwhile, gold production rose 8.5% in the first half to 120,500 ounces and molybdenum output increased 5.5% to 5,800 tonnes.  

‘The copper, gold and molybdenum markets have been strong throughout the first half of the year, with copper trading two-thirds higher than last year at well over $4.00/lb. As vaccination levels increase around the world, the global economy is expected to continue to recover strongly from the pandemic providing further support for the copper market,’ Antofagasta said.

Antofagasta shares were up 0.5% in early trade this morning at 1374.8p.

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