Recent Business Updates Unveiled by 2 FTSE-100 Stocks: Royal Dutch Shell PLC & BAE Systems PLC

  • Jul 30, 2020 BST
  • Team Kalkine
Recent Business Updates Unveiled by 2 FTSE-100 Stocks: Royal Dutch Shell PLC & BAE Systems PLC

Summary

  • The FTSE-100 index was down by about 2.96 percent against the previous day close, and trading at 5,949.81 (as on 30 July 2020 before the market close at 2:20 PM GMT+1).
  • The UK car production declined by 40 percent year on year for the first six months in 2020. The car production between January 2020 to June 2020 was about 381,000 unit.
  • Royal Dutch Shell declared the interim dividend of USD 0.16 per share for Q2 FY2020.
  • Royal Dutch Shell expects the sale of Appalachia shale gas position to be completed in Q3 FY2020.
  • BAE Systems issued 10-year 3.4 percent bond and raised USD 1.3 billion in April 2020.
  • BAE Systems declared the interim dividend of 9.4 pence per share for H1 FY2020.

Given the above-market conditions, we would review two stocks - Royal Dutch Shell PLC (LON: RDSA) & BAE Systems PLC (LON: BA). RDSA is an energy stock, and BA is an industrials stock. Let’s walk through their financial and operational updates to understand the stock better.

Royal Dutch Shell PLC (LON: RDSA) – Reported revenue of USD 92.5 billion in H1 FY2020

Royal Dutch Shell PLC is a UK based Group engaged in energy and petrochemical business. The Group reports its operation under four segments, namely Integrated Gas which cover LNG activities, Upstream, which includes crude oil & gas exploration and extraction, Oil Products and Chemicals. It is included in the FTSE 100 index.

H1 FY2020 result (ended 30 June 2020) as reported on 30 July 2020

In H1 FY20, the Group reported a revenue of USD 92.5 billion, which declined from USD 174.2 billion in H1 FY19. The total expenditure during the reported period was USD 116.7 billion that was lower than USD 163.1 billion in H1 FY19 due to lower purchases. The Group reported a loss of USD 18.1 billion in H1 FY20 against the reported profit of USD 9.3 billion a year ago. It incurred a post-tax impairment charge of USD 8.1 billion related to operations at Prelude floating LNG and Queensland Curtis LNG in Australia. Integrated Gas, Upstream, Oil Products and Chemicals generated revenue of USD 17.5 billion, USD 3.5 billion, USD 65.8 billion and USD 5.5 billion, respectively. In H1 FY20, the Group generated an organic free cash flow of USD 10.0 billion. The cash capital expenditure was USD 8.5 billion in H1 FY20. As on 30 June 2020, the net debt was USD 77.8 billion and a net gearing of 32.7 percent. The Group declared the interim dividend of USD 0.16 per share for Q2 FY2020. Shell sold the position in Appalachia shale gas for USD 541 million and expected it to complete in Q3 FY20.

Q3 FY2020 Production Guidance

The Group expects Integrated gas production to be in the range of 820 – 880 thousand boe per day and LNG liquefaction volume to be 7.6 – 8.2 million tonnes. Upstream production is expected to be around 2,100 - 2,400 thousand boe per day. The production of Oil products to be about 4,000 – 5,000 thousand barrel per day with a refinery utilization in the range of 68 percent to 76 percent. Production of Chemicals sales volume is expected around 3,600 – 3,900 thousand tonnes with a chemical plant utilization of approximately 78 percent to 88 percent.

H1 FY2020 Revenue Segment wise

(Source: Group Website)

Share Price Performance Analysis

1-Year Chart as on July-30-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Royal Dutch Shell PLC’s shares were trading at GBX 1,154.8 down by about 5.87 percent from the last closing price (as on 30 July 2020 before the market close at 2:20 PM GMT+1). Stock 52-week High and Low were GBX 2,636.00 and GBX 946.10, respectively. The Group had a market capitalization of £103.88 billion.

Business Outlook

The Group highlighted that the outlook of the macroeconomic condition appears bleak, and the current economic situation has weighed down on the demand of the oil and gas-related products. It may cut down on the oil and gas production depending upon the need of the products. As outlined the net expense for full-year FY20 could be in the range of USD 3,200 million to USD 3,500 million and the corporate adjusted earning net of expense to be in the range of USD 800 million to USD 875 million.

BAE Systems PLC (LON: BA) – Contributed £1.0 billion to the UK pension scheme

BAE Systems PLC is a UK based group that provides technology and solutions to the aerospace and defense sector. The Group classifies the business under Electronic Systems, Cyber & Intelligence, Platforms & Services (US), Air and Maritime. The Group is included in the FTSE 100 index.

H1 FY2020 result (ended 30 June 2020) as reported on 30 July 2020

In H1 FY20, the Group reported sales of £9.9 billion, which increased by 4 percent year on year from £9.4 billion in H1 FY19. The underlying EBITA was £0.8 billion, and earnings per share was 18.7 pence per share. The operating business cash flow, excluding the £1 billion pension contribution was £0.1 billion. The order intake increased from £8.4 billion in H1 FY19 to £9.3 billion in H1 FY20. The order backlog was £46.1 billion. As on 30 June 2020, BAE Systems had net debt of £2.0 billion and net assets of £4.6 billion. In April 2020, the Group issued 10-year 3.4 percent bond and raised USD 1.3 billion. The funds were used to contribute £1.0 billion to the UK pension scheme. The Group declared the interim dividend of 9.4 pence per share for H1 FY20 that would be paid in November 2020.

Financial Summary for H1 FY2020

(Source: Group Website)

Share Price Performance Analysis

1-Year Chart as on July-30-2020, before the market close (Source: Refinitiv, Thomson Reuters)

BAE Systems PLC’s shares were trading at GBX 498.8 up by about 4.59 percent from the last closing price (as on 30 July 2020 before the market close at 2:20 PM GMT+1). Stock 52-week High and Low were GBX 672.80 and GBX 428.60, respectively. The Group had a market capitalization of £15.34 billion.

Business Outlook and Guidance

BAE Systems anticipates the sales to increase by low single-digit for full-year FY20 compared to FY19. The sales would be underpinned by increased trading of F-35, Combat Vehicles and Qatar Typhoon. Commercial business growth is expected to be bleak, whereas electronic defense portfolio is expected to grow. The earnings per share in FY20 is expected to be lower than that in FY19. The free cash flow is expected to be close to £800 million excluding £1 billion non-recurring contributions to UK pension. The Group would focus on the Defense and Security business and expects a steady performance of Defense business in H2 FY20 that has resumed to near the normal level of activity.

 


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