Top UK Stocks: CRH shares rise as growth fuels higher dividend

CRH shares near all-time highs as earnings jump, Polymetal bumps up its dividend but blows its capex budget, Hays restarts payouts as recruitment starts to bounce back, AstraZeneca’s Forxiga drug is approved in Japan, and Hunting cuts profits expectations.

UK

Top News: CRH ups dividend after delivering strong growth

CRH said it has raised its dividend after delivering strong growth during the first half of 2021, driven by improved demand for building materials in North America and Europe.

The company said revenue was up 15% in the first half to $14.0 billion and that, twinned with better margins across all divisions, led to a 25% rise in Ebitda to $2.0 billion. Pretax profit at the bottom-line jumped to $1.04 billion from just $518 million the year before.

CRH said market conditions improved in both North America and Europe. Its Americas business reported a 3% increase in sales thanks to better prices across the board and growth in demand for the likes of aggregates, cements and concrete. Europe saw strong volume improvement after being hit hard last year by the pandemic and like-for-like sales were up 17%. Meanwhile, its Building Products division reported 8% like-for-like growth thanks to strong demand and better prices for repair, maintenance and improvement work in North America.

‘For the second half of the year, our Americas Materials Division is expected to continue to benefit from an improving economic backdrop and good underlying demand. We are further encouraged by the progress being made in relation to infrastructure funding negotiations in the US. In Europe Materials, we expect solid construction demand in our key markets against a backdrop of a strong prior year comparative,’ CRH said.

‘Our Building Products Division is expected to continue to benefit from positive residential demand, with early signs of recovery in non-residential activity. Assuming normal weather patterns for the remainder of the construction season and against a backdrop of input cost inflation, we expect second-half Group EBITDA to be ahead of a record prior year comparative,’ CRH added.

Operating cashflow improved by 55% to hit a new record of $1.6 billion, helping support CRH’s decision to bump up its interim dividend by 4.5% to 23.0 cents. That is on top of the £300 million share buyback launched in June that will be completed by the start of October, having already returned a further £300 million through repurchases earlier this year.

Where next for the CRH share price?

CRH share price has been trending higher since its mid-March low. It trades within an ascending channel from late October and trades above its 50 & 200 sma in a bullish trend.  

The RSI is supportive of further upside whilst it remains out of overbought territory. 

The price currently trades around the midpoint of the ascending channel and just shy of its all time high of 3864. A break above this level opens the door to fresh record highs with 4065 the upper band of the ascending channel a potential target.  

On the flip side, the 50 sma at 3656 could offer some support ahead of 3547 the lower band of the channel. It would take a move below 3450 the July low and 3400 200 sma for sellers to gain traction. 

Polymetal raises its dividend and blows its capex budget

Polymetal said it raised its dividend after an improvement in prices led to better revenue and earnings in the first half, but warned that it will spend significantly more than originally budgeted in capital expenditure this year.

Polymetal shares were down 1.5% in early trade this morning at 1500.5p.

Revenue increased 12% in the first half of 2021 to $1.27 billion. That was the result of higher gold and silver prices offsetting a mild 1% decline in production and an 8% decline in sales due to a lag between producing silver concentrate and selling it, which should push some income into the second half.

Polymetal said it remains on course to produce 1.5 million ounces of gold equivalent over the full year, having produced 714,000 ounces in the first half.

All-in production costs rose 16% to $1,019 per gold equivalent ounce, having upped investment in the likes of mining fleets and accelerating stripping operations. That is expected to decline to $925 to $975 per ounce in the second half.

The rise in costs resulted in a tighter margin for the period, but adjusted Ebitda was still up over 8% year-on-year to $660 million. Net earnings rose to $419 million from $376 million.

Polymetal said it is paying an interim dividend of $0.45 per share, up from $0.40 last year, marking half of the company’s underlying earnings.

Operating cashflow was up 22% year-on-year to $358 million but that did not stop net debt rising to $1.82 billion from $1.35 billion at the end of December. Polymetal also warned that it has bumped up its capital expenditure budget for 2021 to $675 million to $725 million from its original budget of $560 million. It said the rise was down to rising wage and material costs, the feasibility study for its POX-3 plant, and because it has decided to accelerate work on the Veduga and Prognoz projects.

Polymetal released a separate statement this morning confirming it is accelerating development at the open-pit mine at Prognoz and on the ore processing operations at the Nezhda concentrator, stating it hopes to deliver its first production in the third quarter of 2023 – some three years earlier than originally planned. This is to allow Polymetal to reap the benefits of the ‘favourable silver market’.

Hays grows increasingly confident as recruitment recovers

Hays said profits will surpass pre-pandemic levels faster than previously expected following the strong recovery seen in the second half of its financial year, giving it the confidence to resume dividends and make a special payout.

The recruitment specialist reported an 8% decline in net fees to £918.1 million as the pandemic weighed on the industry during the 12 months to the end of June. Hays said trading steadily improved throughout the year. Net fees fell 24% in the first half but came in 13% higher in the second, with the fourth quarter seeing a 39% jump in net fees.

Notably, demand for temporary workers help up better during the year than permanent job placings, although this also rebounded in the second half.

Adjusted operating profit was down 30% to £95.1 million, as lower profits in the first offset the growth booked in the second. Pretax profit at the bottom-line inched up 2% to £88.1 million.

‘Despite all the challenges presented by the pandemic we remained focused on our purpose, helped 280,000 talented people find their next job and provided expertise, guidance and training to millions of others. As business and candidate confidence increased globally, our management actions drove record consultant productivity, leading to a strong recovery in fees and profits,’ said chief executive Alistair Cox.

‘We start our new financial year with good momentum, driven by the hard work and dedication of our colleagues worldwide and our investments. While retaining operational rigour, we are adding consultant capacity to both capitalise on the cyclical recovery and to accelerate our development in highly attractive structural growth markets. Overall, the strength of the recovery has been dramatic. We now see a clear route back to, and then exceeding, pre-pandemic levels of profit, faster than we envisaged even six months ago,’ he added.

Operating cashflow almost halved to £130.8 million from £247.4 million the year before, but its net cash position still improved to £410.6 million at the end of June. The improving picture gave Hays the confidence to restart dividend payments with a 1.22p payout for the year, complimented by a one-off special dividend worth 8.93p per share.

Hays shares were trading broadly flat this morning at 156.4p, having risen by over 1% in earlier trade.

AstraZeneca: Forxiga approved in Japan, Wilson disease drug proves effective

AstraZeneca said its Forxiga drug has been approved to treat patients with chronic kidney disease in Japan as it revealed positive results from the latest trial evaluating the effectiveness of its drug targeting Wilson disease.

Forxiga has been given the green light in Japan and opens up new possibilities for the 13 million people thought to be suffering from chronic kidney disease in the country. Forxiga is the first-ever drug to be approved in Japan to treat the disease, which has historically seen extremely low diagnosis rates.

The drug has already received approval in the US and the European Union.

Meanwhile, AstraZeneca released positive results from another trial that is hoping to deliver the first innovation in the treatment of Wilson disease in more than three decades. The disease is a progressive genetic condition that compromises the body’s ability to remove excess copper, causing toxic copper to build-up in organs and leading to the likes of liver disease or neurological disorders.

AstraZeneca said its drug candidate ALXN1840, a once-daily oral medicine, met its primary endpoint in the latest trials by showing a statistically significant improvement in daily mean copper mobilisation from tissues and demonstrating superiority over current treatments. The trial involves 214 patients, some of which have never been treated and others that have received other treatments for as long as ten years.

AstraZeneca shares were trading up 0.9% this morning at 8629.5p.

Hunting cuts profit expectations as oil and gas industry recovers

Hunting continued to struggle in the first half of 2021 as the oil and gas industry slowly bounces back from the pandemic, stating it is feeling increasingly confident about its prospects in 2022 but warning that earnings will be lower than expected this year.

Revenue in the first half came in at $244.3 million, down from $377.7 million the year before and broadly in-line with what was delivered in the second half of 2020.

Hunting booked an Ebitda loss of $3.6 million, swinging from a $28.4 million profit the year before. The underlying operating loss of $23.0 million turned from a $5.7 million profit, while the reported loss of $26.5 million narrowed from a $183.6 million loss.

‘The group's results reported today reflect a similar performance when compared to H2 2020 as the global oil and gas industry slowly emerges from the impact of the COVID-19 pandemic. The market recovery in the US, while slower than anticipated, shows clear signs of growth, which is projected to accelerate as more global economies reopen and travel increases,’ said chief executive Jim Johnson.

‘The recovery within international markets, while still projected to grow in H2 2021 and into 2022, continues to be hampered by spiking COVID-19 infection rates, leading to ongoing caution within our client base,’ he added.

Hunting said it is confident that activity in the oil and gas industry will continue to pick up and that it is feeling confident about 2022 as clients plan to buy new products and launch new projects. However, it warned Ebitda in 2021 will be around $10 million lower than in 2020 due to the slower-than-expected recovery seen this year.

Although times remain tough, the improving picture gave Hunting the confidence to raise its interim dividend to 4.0 cents from 2.0 cents last year.

Hunting shares were down 4.5% this morning at 199.8p.

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