BUSINESS LIVE: BAE hikes profit forecast

Man Group’s incoming boss is facing a difficult start after profits collapsed in the first half of this year following a series of bad bets on the market.

Robyn Grew, the hedge fund manager’s president, will become its first-ever female chief executive when she takes over from Luke Ellis at the start of September.

But she faces a baptism by fire after the FTSE 250 group reported a pre-tax profit of £107million for the six months to the end of June, down 65 per cent year-on-year, as the fees it raked in from fund performance tumbled by 92 per cent to £25million.

Oli Creasey, equity research analyst at Quilter Cheviot:

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

‘The company has exceeded its own guidance for weekly sales rate…Management have increased and narrowed their FY guidance for completions to between 10,000-10,500 homes in the full year.

‘The average sale price of a Taylor Wimpey home grew +7% year-on-year and +2% in the past six months, based partly on a change in types of houses sold, but is also a demonstration of pricing discipline by the company, particularly with volumes as strong as they were.

‘The operating margin fell -6% to 14.4%, but we would suggest this is better than expected given the operating environment, particularly cost pressures, which are now moderating to around 6% annualised cost inflation.

‘It is notable that the company is remaining in a broadly steady state – the net cash position is largely unchanged, as is the size of the landbank, despite the operational pressure being felt.

‘The company has announced a +4% increase to the November dividend, in line with the existing policy to pay out 7.5% of net assets each year, equating to an annual dividend yield of over 8%.

‘The UK housing market remains under pressure. However, Taylor Wimpey is demonstrating that it can still function effectively under this pressure.’

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘A strong set of first-half results have shown that BAE occupies a key space in the defence market.

‘And with some of its biggest buyers, the UK, US and Europe, all expected to continue raising defence budgets over the coming years, the sky really is the limit for this jet-maker.

‘With orders almost double the group’s sales in the first half, the group’s order book’s now sitting at an incredible £66.2bn. Given the increased defence spending environment, that figure’s expected to continue ballooning.

‘Free cash flow’s also increased by around £1bn in 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 bump up its full-year guidance for all key metrics, putting serious weight behind the expectation that stellar progress will continue.’

A senior insider at the Bank of England has been named as its 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 been in the role since 2013.

She will sit on the rate-setting monetary policy committee and financial policy committee.

Haleon has raised forecasts for annual organic revenue growth, with the healthcare company confident that demand for its oral and respiratory health products will stick despite a cost-of-living squeeze.

Haleon, the world’s largest standalone consumer healthcare firm, told investors that full-year organic revenue growth is now expected to come in at 7 to 8 per cent, compared with an earlier forecast of the top-end of a 4 to 6 per cent range.

Analysts on average expect growth of 6.2 per cent.

Taylor Wimpey has flagged affordability concerns due to elevated mortgage rates, but the housebuilder has still forecast annual UK home-build targets excluding joint ventures at the upper end of its previous estimate.

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

Jennie Daly, chief executive, said:

‘The first half of the year has been characterised by variable market conditions including substantially higher mortgage rates. While this has inevitably impacted our results, I am pleased that we have delivered a resilient performance with first half completions slightly ahead of our expectations. This performance is testament to the hard work of our teams on the ground and our strong focus on operational excellence and tight cost management.

‘As we move into the second half of the year, our focus remains on optimising all areas of our operations as we continue to support our customers during this uncertain period. With a healthy orderbook and strong underlying interest for 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 end of our previous guidance.

‘Taylor Wimpey is a strong, sustainable and agile business underpinned by a robust balance sheet and an excellent landbank. We remain well positioned to manage the business through near term challenges while maximising value in the medium to long term.’

Europe’s manufacturing sector fell deeper into decline with the Continent recording its fastest contraction since Covid-19.

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

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

BAE Systems has significantly boosted profit growth expectations for the year as Britain’s biggest defence company continues to benefit from higher spending on military equipment by governments around the world in response to a fragile geopolitical environment.

Fresh forecasts of earnings per share growth of 10 to 12 per cent compare to a range of 5 to 7 per cent increase predicted in February, while BAE also lifted sales guidance to 5 to 7 per cent growth from 3 to 5 per cent.

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

Charles Woodburn, chief executive, said:

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

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

‘With a record order backlog and good operational performance, we’re well positioned to continue delivering sustained growth in the coming years, giving us confidence to continue investing in new technologies, facilities, highly-skilled jobs and in our local communities.’