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BMW’s Q3 showcased strong execution despite a very challenging operating environment brought about by the semiconductor shortage. While its resilient quarterly results echo those of its premium rival, BMW managed to post record revenue and earnings for a Q3 while facing significant production bottlenecks. While supply pressures will endure through next year, 2022 is looking like another good year for BMW.
Companies: Bayerische Motoren Werke AG
BMW’s H1 results were very solid, with sales volumes reaching a record level for a first half and revenues and EBIT beating expectations. Automotive margins and cash generation were exceptionally strong as the company proved capable of handling the current industry headwinds. In spite of this, management is concerned by the risks from the semiconductor crisis and rising raw material costs as they extend into H2, opting to stick to its conservative automotive EBIT FY targets.
Closing the Q1 earnings German trio, BMW also reported upbeat results coming above market expectations. The same drivers were at play here, including strong pricing, a favourable product mix and buoyant Chinese volumes. BMW also stood out as the European OEM that best managed the semiconductor shortage so far. However, Q2 is proving that it is not immune to the industry-wide lack of chips, likely leading the company to maintain its initial FY guidance.
BMW’s full-year release saw the group beating market expectations on the back of a very strong H2. Having pre-released most of the FY20 figures though, the key takeaway is a more upbeat guidance for the current year compared to the very cautious outlook sustained through 2020. The margin objectives will quickly position BMW back on the path to attain its 2025 targets, while stepping up its electrification strategy to answer the industry’s mounting EV push.
BMW was able to pare back its losses following a solid sales performance in Q4, with volumes rising by 3.2% yoy to 686k vehicles. The full-year deliveries amounted to 2.32m units, an 8.4% decline in a global market that contracted by c.15% in 2020, and came in slightly above our estimates of 2.28m units. We expect China to continue being the driving force behind the still shaky recovery in 2021.
As seen across all European OEMs that had already released their Q3 results, the third quarter also proved quite positive for BMW. Despite already high expectations, the group managed to surprise on a solid automotive EBIT margin and a strong net result boosted by the remarkable performance in China. However, the uncertainty brought by a second wave of the pandemic is expected to weigh on the Q4 results, leading BMW to stick to its original FY scenario.
BMW’s revenues were, as expected, hit hard by the difficult market conditions during Q2. What was less expected though, was the dive on the automotive division’s operating profitability (-10.4% margin). Fortunately for BMW, the swell performance of the JV with Brilliance Automotive helped the group narrow its losses in Q2. Now that the worst is over, the focus is on how BMW will manage the recovery to attain its positive EBIT and FCF targets for FY20.
BMW was the last of the European automakers to release its Q1 figures. And unlike all of them, it saw its top-line actually increase by 3.5%, buoyed by the Financial Services segment. Below the surface, though, BMW more closely resembles its German peers, as the automotive division was knocked by the COVID-19 pandemic. The cut to the 2020 guidance and the expectation of an even tougher Q2 will put pressure on the group’s otherwise strong balance sheet.
The Q1 figures give us a first glimpse of the effect of the Coronavirus outbreak on BMW’s volumes, with China posting the most significant decreases. As the gradual recovery of the Chinese market takes place, the concern in Q2 will be centred on Europe and the US. Lockdown measures and production halts are bound to stifle volumes even further.
BMW had released clear indications for 2019 on 12 March (see our Chat comment on that day). With today’s release of its annual report, it has given, unlike VW yesterday, a very cautious guidance for the current year.
We had expected a full-year number of almost 2.54m units, whereas the final number was 2.52m. The December number fell by 3.6% to 224k which explains this marginal difference. Based on our previous projection, we see the number increasing by 1% in 2020 to 2.56m which translates into an increase of 1.6% based on last year’s final number. This is clearly too optimistic.
BMW has been producing the full-electric i3 since 2013. Meanwhile, it also sells full-electric and plug-in hybrids of other models. All combined, it has now sold 0.5m electric vehicles which represent about 3.7% of all vehicles delivered from 2013 to 2019 (13.6m).
Up to now, China has been about the only market where BMW has achieved positive delivery growth, whereas Europe and about all other markets were weak. It achieved some positive growth in the USA, but the delivery fall has accelerated in Europe in November.
China has been the prime driving force behind BMW’s delivery growth in 2019 and the USA has contributed a small share as well. On the other hand, Europe as well as RoW held the growth rate back, i.e. delivery numbers to clients in these regions fell.
BMW had a dismal H1 19 when car deliveries and revenue were hardly up and when earnings collapsed. All these numbers were back in positive territory in Q3 and they all exceeded our projections. While net earnings of €1.55bn were only slightly higher than our expected €1.53bn, EBIT of €2.29bn was considerably higher than our €2.07bn.
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Unilever’s bid for GSK’s Consumer HealthCare division is causing a stir, as it seems totally unreasonable. The group was asked to move on portfolio rotation, but definitely not to be so ambitious at the risk of penalising shareholders.
Companies: Unilever PLC
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Hercules Site Services a technology enabled labour supply company for the UK infrastructure sector, intends to float on AIM. Hercules is seeking to raise approximately £5.5m to rapidly deliver on the significant demand it is experiencing for its diverse range of services across the UK infrastructure sector, including to scale up its operations to supply labour to the northern section of the HS2 rail project
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Companies: Accrol Group Holdings plc
Accrol has released H1 results, which are 7% below last year’s level at the adjusted EBITDA level at £5.0m despite significant supply chain disruption and cost escalation. We made our earnings adjustments in the trading update last week but reduce our net debt forecasts by 13% to £23.9m reflecting lower capital expenditure investment. We believe more can be done to reduce this through working capital efficiencies, but we have left our assumptions on this unchanged for now.
Companies: Science In Sport Plc
Sanderson Design Group (SDG) has announced a trading update for the current financial year ending 31 January 2022 (FY22E). Strong performances, most notably from the group’s manufacturing and licensing activities, have resulted in the Board’s expectation of adjusted profit before tax of at least £12.0m, compared with the £7.1m delivered in FY21. This equates to an increase of at least 70% over FY21. Our upgrade to £12.0m represents a 14% increase on our previous adjusted PBT forecast of £10.6m.
Companies: Sanderson Design Group PLC
The group has released a year-end trading update confirming a performance broadly in line with our forecast. We introduce a forecast for 2022 for the first time, based on the expectation that the UK&I business will move to a breakeven position in the current year, reflecting the benefits of the strategic rebuild implemented over the past three years.
Companies: Eve Sleep PLC
Where next for markets in 2022? In our view, if COVID is not on the way out, we are just going to have to live with it now and it will have less and less impact on economic forecasts going forward. Instead, the bigger issues for investors to deal with in 2022 are cost inflation and staff shortages for business (which are already hitting earnings momentum), energy cost inflation and higher taxes hitting the consumer wallet, and markets that start from very elevated valuation multiples compared wi
Companies: GML HAT IOG LOK MTC QTX SOM SCE SNG TRCS TRMR
FY21A Results were well flagged in November’s trading update. Today’s announcement reveals the Group is now debt free and reiterates its intention to return to the dividend list in the current period. Shoe Zone has a clear and well-defined plan to transform its store portfolio and grow its digital offer through its shoehub platform, which we believe will deliver a well-balanced retail model that can win market share and drive profitable growth.
Companies: Shoe Zone PLC
H1'22 Interim Results: Caution Ahead!
Companies: Frontier Developments Plc
Games Workshop Group’s (GAW’s) H122 results reflect lower year-on-year revenue growth after a very strong FY21, as expected, with positive comments on new launches, specifically the third edition of Age of Sigmar. Ongoing internal investment to support future growth and new external cost pressures led to a reduction in operating profit pre-royalties, which was more than offset by the notable increase in royalty income. As previously flagged, the shape of our FY22 forecasts has changed to reflect
Companies: Games Workshop Group PLC
Residential-for-rent developer and manager Watkin Jones today delivered an 11% rise in PBT to £51.1m for FY2021, beating our estimate of £50.0m by 2.2%. There were similar ‘beats’ in EPS and dividend, at 16.3p and 8.2p, respectively, driven by strong operational delivery and cost control. We have maintained our earnings and dividend estimates for FY2022E, growing at over 6%. We have also introduced forecasts for FY2023E, which assume accelerated earnings growth of 31% as the strong development p
Companies: Watkin Jones Plc
Another strong update from Galliford Try, with trading in line with expectations, order book growth of £100m & average month end cash up £16m since the FY21 results, a strong pipeline confirmed, and good progress made on the integration of the nmcn water business. Management is sticking to its strategy and its focus on safety, and it is paying off, yet the valuation still looks extremely cheap, with cash alone covering >90% of the market cap, and PPAs more than covering the rest - implying a ne
Companies: Galliford Try Holdings PLC
We continue to believe that IMB is not necessarily a short-term strategic investment given the fact that the company is entering the second year of its “strengthening phase” with further investments which should weigh on margins, so no major improvement in the shareholder return.
Companies: Imperial Brands PLC
Surface Transforms has announced a further and large contract award with customer OEM 6. To recap, on Tuesday, the Group issued a warning that sales for 2021e would be “below £3m” vs. our forecast for £4.7m. This was due to short-term furnace processing delays for early orders for OEM 8. Sales are not lost and will carry forward into 2022e. Management also said that more contract award news would be coming imminently.
Companies: Surface Transforms plc