How well these two LSE players are performing after releasing their trading update: BAE Systems & J D Wetherspoon?

Summary

  • BAE Systems Plc is expecting its FY20 revenues to grow by a low single-digit percentage.
  • The Company has announced an interim dividend of 9.4 pence to be paid on 30 November 2020.
  • J D Wetherspoon Plc has reported a revenue decline of 30.60% year-on-year in FY20.
  • 756 pubs in England, Northern Ireland and the Republic of Ireland will remain closed due to Covid-19 restrictions.

BAE Systems Plc (LON: BA.) and J D Wetherspoon Plc (LON: JDW) are industrial and consumer stocks, respectively. Shares of BA. and JDW were down by 1.01% and 0.98%, respectively, from their last closing price (as on 12 November 2020, before the market close at 8:10 AM GMT).

Would recent acquisitions made by BAE Systems Plc proven to be lucrative?

BAE Systems Plc is a FTSE 100 listed company, which works across various business segments like Electronic Systems, Cyber & Intelligence, Platforms & Services, Air and Maritime.

 

Upcoming Event: The Company will announce its financial results for the year ending 31 December 2020 on 25 February 2021.

 

FY20 trading update as reported on 11 November 2020

Market Updates

  • The UK Government has updated to meet the NATO target of spending of at least 2.0% of Gross Domestic Product on defence.
  • The business in Australia will be boosted as the government updated in July to increase its 10-year investment in new and upgraded defence capabilities from $195 billion AUD to $270 billion AUD.
  • The business in the US will remain aligned to customer priorities and, the two-year budget deal enacted in 2019 established a defence spending level of $740 billion for the fiscal year 2021.

Operational Update

  • The Company has exited its ex-Silversky business in early November 2020.
  • The defence business segment is operating with 90% of employees, and the majority of people are working from home.
  • Regarding the Electronic Systems segment, the integration of Airborne Tactical Radios andMilitary Global Positioning System is performing well and has better prospects for growth.
  • In Maritime, the fifth and final OPV, HMS Spey, was accepted by the Ministry of Defence in October,and the acquisition of Techmodal is an exciting step for the sector.
  • The Company has announced an interim dividend of 9.4 pence per share to be paid on 30 November 2020.

 

H1 FY20 financial highlights (ended 30 June 2020) as reported on 30 July 2020

(Source: Company result)

 

  • The revenue of the Company has increased by 5% year-on-year for H1 FY20 ended on 30 June 2020 to £9,871 million, excluding the impact of acquisitions. Underlying EBITA has declined 10% year-on-year to £895 million.
  • The Company is had net debt of £2,038 million as at 30 June 2020 (£743 million at 31 December 2019) due to an acquisition of the Airborne Tactical Radios business for £217million in cash.
  • Order backlog stood at £46.1 billion during H1 FY20.

 

Segmental Analysis

(Source: Company result)

The top-line of the Company has witnessed significant growth across four business segments except for Maritime, which got affected due to Covid-19 pandemic. However, underlying EBITA has seen a decline in all sectors except the Cyber & Intelligence segment.

Share Price Performance Analysis of BAE Systems Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of BAE Systems Plc were trading at GBX 470.95 and were down by close to 1.01% against the previous closing price (as on 12 November 2020, before the market close at 8:10 AM GMT). BA.'s 52-week High and Low were GBX 672.80 and GBX 395.90, respectively. BAE Systems Plc had a market capitalization of around £13.89 billion.

Business Outlook

The Company is expecting its sales to have decent growth of low single-digit percentage during FY20 considering the impact of two acquisitions. The increased volumes in F-35, Combat Vehicles and development in the electronic defence portfolio will offset the weak performance of its commercial business. The Company is expecting its free cash flow to remain approximately £800 million for FY20. The Company has bright prospects because of large order backlog and incumbent programme positions.

 

Is the trading business of J D Wetherspoon Plc getting affected by Covid-19 restrictions?

J D Wetherspoon Plc is the FTSE 250 listed Company that owns and operates pubs throughout the UK and Ireland.

 

Upcoming Event: The Company will announce its next trading update on 20 January 2021.

 

 

Q1 FY21 trading update (for 15 weeks to 8 November 2020) as reported on 11 November 2020

The sales of the Company declined by 27.6% for the 15 weeks ended on 8 November 2020. The 756 pubs in England, Northern Ireland and the Republic of Ireland will remain closed until it receives a further update from the UK and Irish governments to the effect that pubs are allowed to re-open.

The Company has significantly high liquidity of £234 million as of 25 October 2020.  The cash burn during the month of closure is estimated to be approximately £14 million.

Recent News

Ben Thorne has been appointed as a non-executive director of the Company with effect from 17 December 2020.

FY2020 financial highlights (ended 26 July 2020) as reported on 21 October 2020

(Source: Company result)

The sales during FY20 ended on 26 July 2020 have declined by 30.6% to £1,262.04 million while operating profit dropped by 94.6% to £7.2 million during FY20.

Regarding the financial position, total capital investment was £171.6 million in the period (2019: £167.6 million) out of which £41.0 million was invested in new pubs and pub extensions, £32.1 million in existing pubs & IT and £98.5 million in freehold reversions, where Wetherspoon was already a tenant. The net debt during the period has increased by £80.0 million to £817.0 million.

(Source: Company result)

All business segments have witnessed a significant decline in their sales as bar sales decreased by 29.3%, food sales by 30.1%, slot/fruit machine sales by 20.9% and hotel room sales by 38.7%.

Share Price Performance Analysis of J D Wetherspoon Plc

(Source: Refinitiv, chart created by Kalkine Group)

Shares of J D Wetherspoon Plc were trading at GBX 1,109.00 and were down by around 0.98% against the previous closing price (as on 12 November 2020, before the market close at 8:10 AM GMT). JDW's 52-week High and Low were GBX 1,734.00 and GBX 492.00, respectively. J D Wetherspoon Plc had a market capitalization of around £1.11billion.

Business Outlook

The Company is facing a lot of challenges from the start of FY21 and carrying the negative momentum that it went through in the second half of FY20. The trading business is getting affected by the restrictions caused by the pandemic, and the adverse impact will remain for a while as the duration of restrictions is still unknown. The Company has also referred to the entire regulatory situation as chaotic, determining the negative consequences of changing national and local regulation. The Company has also raised doubts regarding the imposition of the curfew.

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