Interactive Investor

Super Thursday features big gains from Centrica and Vodafone

12th January 2023 13:10

by Graeme Evans from interactive investor

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Already an exciting start to the year for investors, a bunch of positive responses to updates from popular stocks has delivered further profits for shareholders today.

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Centrica (LSE:CNA) stole the limelight on a super Thursday of retail updates as the British Gas owner’s second earnings upgrade in three months sent shares sharply higher.

The latest increase of 4.2p to 96p provides a further boost for around 500,000 retail shareholders after they recently received a first dividend payment in three years.

Today’s brief update reinforces City expectations on the full-year dividend due to be announced on 16 February, as Centrica announced earnings for 2022 should be above 30p compared with City expectations closer to 24.7p. It also forecast net cash above £1 billion, which is in line with analysts’ estimates of around £1.15 billion.

A 3p a share dividend from across 2022 trading had been forecast by UBS prior to today’s update, having seen the payment of an interim dividend of 1p a share in November.

These figures are still a long way off the levels enjoyed by shareholders as recently as 2018, but today’s update represents another step in the right direction after a period of pandemic disruption and restructuring under chief executive Chris O’Shea.

The company gave little trading detail today, apart from highlighting a strong operational performance and good levels of infrastructure asset availability. Demand during December’s cold snap is likely to have lifted the performance of the UK’s biggest electricity supplier.

Ongoing high wholesale prices have also boosted its upstream oil and gas assets and 20% stake in nuclear power generation. When Centrica posted interim results at the end of July it said it was on track for 2022 earnings at the top end of the City’s 10p to 15p estimate.

It also pledged to retain its historic policy of paying a third of the full-year dividend as an interim award, with dividend cover from earnings moving to around two times “over time”.

Alongside today’s update, Centrica said that Kate Ringrose will step down as chief financial officer on 28 February and is expected to leave Centrica by the end of the year. She is being replaced by Russell O'Brien, who is joining from Shell and will be the sixth person to hold the role since 2014.

Best of the rest

Centrica was joined on the FTSE 100 risers board by Vodafone Group (LSE:VOD) after analysts at Bank of America said shares now looked too cheap after falling from 130p in the summer to below 90p at the start of trading today.

Sentiment towards Vodafone is at multi-year lows, but the bank notes the upside risk to rebased consensus forecasts from easing energy costs, price rises and cost-cutting.

It also believes a new management can be a catalyst to expedite Vodafone’s restructuring strategy and reallocate capital into core markets and away from those with poor returns.

A 30% dividend cut is a potential risk but the bank suspects this is priced into the current yield of 9%, and that a reduction would derive a more sustainable 6% yield along with a better Vodafone. It moved to a “buy” recommendation, with a sum of parts price target of 131p.

Other stocks doing well today included the consumer reviews platform Trustpilot Group (LSE:TRST), which jumped 12.45p to 105.8p after chief executive Peter Holten Mühlmann reported “clear progress on our path to profitability”.

For 2022, Trustpilot said it expects to report total revenues of $149 million (£122.7 million), representing growth of 13% over the prior year despite significant currency headwinds.

It also forecast that results on 21 March will show underlying earnings ahead of expectations and with a strong balance sheet showing an unchanged $73.5 million (£60.6 million) of cash.

Analysts at Peel Hunt called the update a solid statement that should ease concerns on the viability of the Trustpilot model. They added: “We are seeing KPIs remaining strong with good customer momentum and resilient bookings growth despite macro conditions.”

The strong share price performance boosted FTSE 250-listed tech investor Molten Ventures (LSE:GROW)s, which first backed the Trustpilot business in 2013.

On AIM, Portmeirion Group (LSE:PMP) shares jumped 55p to 377.5p after the owner of homewares brands including Royal Worcester and Spode said a strong Christmas trading period meant 2022 revenues will be at least £110 million and some 4% ahead of City expectations.

Profits for the year will be 10% higher than 2021 and ahead of pre-Covid 2019 levels. Three-quarter of sales come from outside the UK, with a focus on further geographical expansion and operating efficiencies keeping the company on track for a longer-term margin target above 13%.

Analysts at Panmure Gordon today left their price target unchanged at 810p, describing the shares as “outstanding value”. They added: “With a prospective price/earnings multiple of 6.9x and yield of 4.8%, it is hard to imagine many stocks providing more upside.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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