• New business underwriting is in focus for The Phoenix Group.
• BHP is expected to report record-breaking profits.
• Balfour Beatty’s growth could be accelerated by attractive investment opportunities.
• We would like to see if Persimmon can maintain its impressive dividend.
The Phoenix Group, Half Year Results, Monday 15 August
Steve Clayton, Fund Manager at HL Select
“Phoenix Group, the life assurance owner of brands such as Standard Life, Phoenix and Pearl reports interims on 15 August. Just last week the group announced another deal, this time adding Sun Life to its stable of brands, acquiring the group at a 17% discount to its asset value.
The results will give an update on the group’s new business run rate and whether it is continuing to write sufficient new business to offset the inevitable running-off of business in the closed books of heritage life policies that it administers. The pace of acquisition of higher-yielding alternative assets is also important, for this determines the amount of pension risk-transfer business that Phoenix can write.”
BHP, Full Year Results, Tuesday 16 August
Charlie Williams, Equity Research Assistant
“BHP recently announced its full–year operational review where it experienced a 9% rise in copper prices and 13% fall in iron ore, with the two making up roughly 80% of revenue. Coupled with a sharp rise in the price of coal, analysts are expecting operating profit to rise over $4bn to $35bn year on year. Although promising, it will be intriguing to see how management expects the new year to pan out, given the recent price volatility and early signs of a global recession.
BHP is also investing heavily into potash, a less cyclical commodity by nature as farmers continue to grow their crops regardless of the economic cycle. Their Canadian potash mine, Jansen, will be in focus for investors as it enters the construction phase, and it’ll be interesting to see if the costs and production timeframe remain on track.
Investors will be watching for how well dividends have fared. With peers like Rio Tinto announcing impressive, but not record-breaking dividends this year, eyes will be focused on how much profit BHP will return to shareholders.”
Balfour Beatty, Half Year Results, Wednesday 17 August
Charlie Williams, Equity Research Assistant
“The recent update from Balfour Beatty shone some positive light on what to expect next week. The company confirmed it remained on track to meet expected operating margins for Construction and Support services, while having “confidence” it will grow profits in 2022. That said, operating margins are thin, and it would be good to see how management expects the economic downturn to affect this.
A focus of attention towards infrastructure investment, particularly in countries like the UK where 90% of the domestic order book comes from the public sector, puts Balfour Beatty in an attractive position. As such, Balfour Beatty has confirmed there are “several attractive asset investment opportunities in the pipeline” and investors will be keeping an eye on any further update on these next week.
Balfour Beatty has maintained its full-year share buyback programme of £150m and confirmed in the May update that £19m of shares had been purchased so far. As inflation persists, investors would like to see whether management can comfortably maintain dividends in the short term.”
Persimmon, Half Year Results, Wednesday 17 August
Charlie Williams, Equity Research Assistant
“News has already been received from Persimmon that revenues are slightly down from last year as the group struggled to meet home delivery expectations in the first half of 2022. That said, a 4% rise in the group’s average selling price has more than offset cost inflation. Close attention will be paid to the impact it’s had on profits and if management expects this trend to continue.
Persimmon, much like its peers, faces a multitude of issues around labour shortages and supply chain constraints, adding pressure to margins. The in-house materials business may alleviate some of this pain, but investors should be focused on what affect this has had, if any, and if management expect headwinds to continue.
Dividends will also be at the forefront of investors’ minds. With an impressive prospective dividend yield of 12.3%, Markets clearly aren’t convinced the current pay-out levels can be maintained, so cash generation will be watched closely.”
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