BUSINESS LIVE: BAE raises earnings forecast

Man Group’s new boss is off to a rocky start, after earnings collapsed in the first half of this year following a string of bad bets in the market.

Robyn Grew, the hedge fund manager’s president, will become the first-ever female CEO when she takes over from Luke Ellis in early September.

But she faces a baptism of fire after the FTSE 250 group reported a pre-tax profit of £107m for the six months to the end of June, a 65% year-on-year decline as the fees it collected from fund performance fell by 92% up to £25 million.

Oli Creasey, equity research analyst at Quilter Cheviot:

‘Taylor Wimpey’s half-year results show a resilience that is likely to positively surprise the market this morning.

“The company has surpassed its own weekly sales guidance… Management has increased its FY completion guidance and capped it at between 10,000 and 10,500 homes in the full year.

“The median sales price of a home in Taylor Wimpey increased +7% year-over-year and +2% over the past six months, partly driven by a change in the type of homes sold, but it is also a demonstration of pricing discipline by the company, especially with volumes as strong as they were.

Operating margin fell -6% to 14.4%, but we would argue that this is better than expected given the operating environment, particularly cost pressures, which are now easing to around 6% annualized cost inflation.

Remarkably, the company remains broadly stable: the net cash position remains largely unchanged, as does the size of the land bank, despite the operational pressures being felt.

The company has announced a +4% increase in its November dividend, in line with its existing policy of paying out 7.5% of net assets each year, representing an annual dividend yield of more than 8%.

The UK housing market remains under pressure. But Taylor Wimpey shows that it can still function well under that pressure.’

Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown:

“A strong set of results over the first half year has shown BAE’s key position in the defense market.

And with some of its biggest buyers, the UK, US and Europe, expected to continue to increase defense budgets for years to come, the sky is really the limit for this jetmaker.

With orders nearly doubling the group’s turnover in the first half, the group’s order book now stands at an incredible £66.2bn. Given increased defense spending, that figure is expected to continue to rise.

Free cash flow has also increased by around £1bn over the past year, meaning there’s plenty of room to return cash to shareholders via increased dividends and a fresh new buyback programme.

“All of this has led BAE to raise its full-year forecast for all key metrics, seriously underscoring the expectation that the tremendous progress will continue.”

A senior Bank of England insider has been appointed as the new deputy governor.

Sarah Breeden led the Bank’s response to the Northern Rock crisis in 2007 and will take over from Sir Jon Cunliffe, who has held this role since 2013.

She will serve on the course-setting committee on monetary policy and the committee on financial policy.

Haleon has forecast annual organic sales growth, with the healthcare company confident that demand for its oral and respiratory health products will continue despite cost-of-living pressures.

Haleon, the world’s largest standalone consumer healthcare company, told investors that full-year organic sales growth is now expected to be 7 to 8 percent, compared to a previous forecast of the top end of a range of 4 to 6 percent. .

Analysts expect an average growth of 6.2 percent.

Taylor Wimpey has signaled affordability concerns due to high mortgage rates, but the homebuilder has still forecast annual UK homebuilding targets, excluding joint ventures, at the high end of its earlier estimate.

The company, Britain’s third-largest housebuilder by market value, posted pre-tax profits of £237.7m for the six months to July 2, down about 29 per cent from a year earlier.

Jennie Daly, CEO, said:

‘The first half of the year was characterized by changing market conditions, including sharply higher mortgage interest rates. While this inevitably affected our results, I’m pleased that we delivered a resilient performance with first half completions slightly above our expectations. This achievement is testament to the hard work of our teams in the field and our strong focus on operational excellence and tight cost management.

“As we enter the second half of the year, our focus remains on optimizing all aspects of our business as we continue to support our customers during this uncertain period. With a healthy order book and strong underlying interest in our well-located, high-quality homes, we expect full-year UK completions, excluding joint ventures, to be in the range of 10,000 to 10,500, the upper limit of our previous forecast.

‘Taylor Wimpey is a strong, sustainable and agile company, supported by a robust balance sheet and an excellent land bank. We remain well positioned to lead the business through near term challenges while maximizing value over the medium to long term.”

Europe’s manufacturing sector continued to slide, with the continent recording its fastest contraction since Covid-19.

Data showed activity in the sector fell to its lowest level since May 2020 last month.

The purchasing managers index (PMI) recorded a reading of 42.7 for July, compared to 43.4 the previous month. A reading below 50 indicates a contraction.

BAE Systems has significantly raised earnings growth expectations for the year as Britain’s largest defense company continues to benefit from increased spending on military equipment by governments around the world in response to a fragile geopolitical environment.

New forecasts of earnings per share growth of 10 to 12 percent compared to a 5 to 7 percent increase forecast in February, while BAE also raised its sales expectation from 3 to 5 percent from 5 to 7 percent.

For the first six months of the year, underlying earnings per share rose 17 percent to 29.6 pence

Charles Woodburn, CEO, said:

‘We delivered a strong financial performance in the first half of the year, thanks to the excellent efforts of our employees.

“Our global footprint, deep customer relationships and industry-leading technologies enable us to effectively support the national security requirements and multi-domain ambitions of our government clients in an increasingly uncertain world.

“With a record order book and good operational performance, we are well positioned to deliver continued growth in the coming years, giving us confidence to continue to invest in new technologies, facilities, highly skilled jobs and in our local communities.”