Interactive Investor

FTSE 100 round-up: London Stock Exchange, Haleon and Howden Joinery

After yesterday’s punishing session, the FTSE 100 earnings season took a turn for the better today as two lesser lights received glowing reviews for their results.

29th February 2024 15:03

Graeme Evans from interactive investor

Investors shunned the AI potential of London Stock Exchange Group (LSE:LSEG) today as Haleon (LSE:HLN) and Howden Joinery Group (LSE:HWDN) emerged as the best performers in another busy session of 2023 results. 

LSEG shares continued their lacklustre start to the year, even though the company is now within weeks of unveiling its first products under a strategic partnership with Microsoft Corp (NASDAQ:MSFT).

The range, which has been developed after the US tech giant revealed a 4.2% stake in December 2022, embeds generative AI technologies as the companies look to transform how financial markets participants communicate, research, analyse data and trade. 

The Microsoft partnership means LSEG expects growth to accelerate after this year, in line with guidance it gave to the City at a capital markets  day towards the end of 2023.

Today’s results contained few surprises, with underlying revenues growth of 7.7% towards the upper end of the annual 6%-8% guidance after a 7.3% rise in data and analytics, 6.1% in capital markets and 17.4% in post-trade.

Costs were slightly above City forecasts as earnings lifted 1.9% to 323.9p a share. The dividend for payment on 22 May rose 5.3% to 79.3p a share, resulting in a total for the year of 115p and equivalent to a payout ratio of 36% earnings. 

The company, whose backers include fund manager Nick Train’s Finsbury Growth & Income Ord (LSE:FGT) Trust, also confirmed a £1 billion buyback worth about 2% of its market value. The intention is to target the holdings of the former owners of acquired data business Refinitiv.

Bank of America reiterated its “Buy” rating and 11,100p target price following the results as it looks for LSEG to benefit from strong recurring revenues and structural demand for data.

The support for Haleon shares came as the consumer healthcare business reported strong progress cutting the debt pile inherited after the GSK demerger 18 months ago.

Robust cash generation by the Sensodyne to Centrum business reduced debt by £2 billion to £8.5 billion, with leverage of three times adjusted earnings down from 3.6 at the end of 2022.

Haleon is comfortable with an eventual ratio of 2.5 times, giving it room to buy back £500 million of shares and increase 2023’s dividend to 35% of adjusted earnings from 30%.

This will result in the 16 May payment of 4.2p a share for a 2023 total of 6p. Going forward Haleon intends to grow the dividend at least in line with adjusted earnings.

Revenues for this year are expected to improve by in the region of 4-6%, having risen 8% in 2023 for a 10.4% uplift in operating profits to £2.5 billion.

The shares rallied 16.7p to 330.65p but UBS has a price target of 410p after noting a valuation multiple of 17.3 forecast 2024 earnings that sits at a 20% discount to European peers.

The best performance in the FTSE 100 index came from Howden Joinery after it delivered annual revenues of £2.3 billion unchanged on last year’s record and limited the impact of tough trading conditions to report a 19.3% drop in profits to £327.6 million.

Having grown its market share in 2023, the kitchen supplier reported “encouraging” revenue trends so far this year. A final dividend of 16.2p is due to be paid on 24 May, increasing the total for the year by 1.9% to 21p.

Shares rose 64p to 836.6p but DB Numis has a price target of 1,000p after forecasting earnings per share growth of 9% a year for 2025 and the year after. 

It notes that Howden trades on a multiple of 14 times forecast earnings for 2026, which compares with a 10-year average of 16 times and 12 times when adjusting for net cash.

The City firm said: “While cognisant of the uncertain macro backdrop, we view this as an attractive multiple for a high-quality company with a proven track record of outperformance and a clear runway of potential growth.”

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