Interactive Investor

Shares round-up: Serco, BAE Systems, Anglo American

25th February 2021 13:49

Graeme Evans from interactive investor

Latest results batch shows the growing optimism of UK-listed companies after a tough 2020.

Dividend cheer from Serco (LSE:SRP), BAE Systems (LSE:BA.) and Anglo American (LSE:AAL) today highlighted the growing optimism of UK-listed companies as they seek to recover from an arduous 2020.

The latest batch of corporate results were generally well received by the London market, with the FTSE 100 index 0.5% higher at 6,700 and Morgan Sindall in a league of its own in the FTSE 250 index after it upgraded 2021 forecasts and raised its dividend.

Anglo American continued recent strong momentum for the commodities sector after its 2020 results included a 53% rise in its final dividend to $0.72 (£0.51) a share. Despite major disruption to production in South Africa, and elsewhere, due to the pandemic, Anglo still managed to report underlying earnings just 2% lower at $9.8 billion in 2020.

The copper, diamonds and platinum mining specialist said one of its most significant investments of the year was the Woodsmith polyhalite project in the UK, which it acquired for £405 million last March following the takeover of popular retail stock Sirius Minerals.

Anglo said it spent $292 million on the North York Moors development last year, having extended excavation of the conveyor tunnel to 7.4 miles by December and assembled the first shaft-boring machine within the mine head service shaft.

It said a review confirmed the high quality of project design, but that capital expenditure this year would need to be $200 million higher than expected, at around $500 million.

Todays results from BAE Systems helped its shares to rise by 1% after reassuring comments from chief executive Charles Woodburn included a forecast for sales growth of between 3% and 5% this year.

He has been encouraged by an order backlog of more than £45 billion, and suggests that defence and security spending will remain protected after the pandemic.

In the US, where BAE generates about 45% of revenues, a new White House administration hasnt damaged the outlook, despite the departure of big defence spender Donald Trump.

BAE said: “Our defence and security capabilities remain highly relevant in an uncertain global environment, with complex threats and with the additional need for governments to drive a domestic economic prosperity agenda in a post-pandemic world.”

Today’s results included a 14.3p a share dividend for payment in June, having paid 2019s deferred 13.8p a share dividend worth £444 million to shareholders in September and the interim dividend of £302 million in November.

A landmark session for outsourcing giant Serco saw plans for its first dividend payment since 2014. The award is likely to prove controversial, given that Serco took £350 million of revenues from the government for its work in the NHS Test and Trace scheme.

But chief executive Rupert Soames pointed out that the net benefit from Covid-19 work amounted to 1% of profits when pandemic disruption at other operations is included.

He added that it was important for the company to repay the support of shareholders, who had injected £850 million of additional equity during Serco's troubled years.

Shares jumped 6%, or 8.4p, to 137.6p as Soames also pushed profits guidance 6% higher for 2021, although the business will still grow at a slower rate than in previous years.

His forecast excludes the addition of US defence intelligence specialist Whitney, Bradley & Brown (WBB), which Serco announced it would buy earlier this month.  

Analysts at Jefferies believe theres the potential for Serco shares to reach 170p, with counterparts at Liberum having a figure of 180p.

The broker said that the UK Government's increased need for assistance from support services companies such as Serco was likely to remains as long as the pandemic continues.

Liberum added: “In the UK & Europe, Test and Trace is still expected to be a significant contributor in 2021. In the Americas, the WBB acquisition enhances Serco's defence capabilities and the Biden election win should be positive for Obamacare.”

In the FTSE 250 index, Morgan Sindall (LSE:MGNS) shares jumped 12% or 180p to 1,668p after revealing in annual results that it is well set for strong growth in 2021, based on robust market positions in national and social infrastructure as well as affordable housing and regeneration work.

It has re-instated medium-term targets, and, with a much-improved cash position, has declared a final dividend of 40p a share after reinstating distributions in November.

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