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Shell (SHEL), Flutter Entertainment (FLTR), Johnson Matthey (JMAT), Topps Tiles (TPT) and Victoria (VCP)
Shell (SHEL) delivered a downbeat trading update for the fourth quarter, trimming its liquefied natural gas (LNG) production outlook, while lowering expectations for its oil & gas trading activities – the latter can act as a hedge against erratic hydrocarbon prices. Indeed, overall profitability will be constrained due to the expiration of hedging contracts that were entered into subsequent to Russia’s invasion of Ukraine.
Reduced cargo deliveries mean that LNG production volumes for the quarter have been revised to 6.8mn-7.2mn metric tons, from a previous guidance of 6.9mn-7.5mn. The quarter-on-quarter performance of its chemicals and oil products division has also deteriorated due to softening seasonal demand, in turn placing a strain on margins.
The energy giant indicated that it would book $1.5bn-$3.0bn (£1.2bn-£2.4bn) in non-cash, post-tax impairments for the quarter, including up to $1.2bn in its renewables division. The spread suggests that the book value of its green energy assets could be more open to interpretation than its conventional businesses. The group revealed that it will take a $1.3bn hit in the final quarter due to the timing of payments for emissions certificates linked to related regulations in Germany and US Biofuel programmes. MR
Flutter takes a bath on the NFL
Flutter Entertainment (FLTR) said its profits would be hit by “the most customer friendly” set of results in American Football in almost 20 years.
The owner of the Fanduel, Betfair and Paddy Power gambling brands said the NFL season has seen “the highest rate of favourites winning” since online sports betting began. As a result, it is warning that its US revenue will be around $370mn lower than the midpoint of its previous guidance range, at around $5.78bn. Adjusted cash profit will also be $205mn lower at $505mn.
Outside of the US, more favourable results in the English Premier League means UK and Ireland revenue will be about 2 per cent higher than previous guidance. Flutter shifted its primary listing to the US in May last year but retains a secondary listing in London. Its shares fell by 3 per cent. MF
Johnson Matthey’s investor spat continues
Johnson Matthey (JMAT) increasingly strident exchanges with one of its activist investors hit the headlines again after the FTSE 250 chemicals group responded to an open letter published by Standard Investments on 7 Jan. Management was moved to publish its entire response to Standard Investments, which owns 4 per cent of the shares since buying a holding in 2022, as part of an earlier exchange before Christmas.
The investment company, which specialises in high tech industrial investments, is owned and run by billionaires David Millstone and David Winter, aka the two Davids. Standard’s argument with Johnson Matthey centres on the expertise and makeup of the board which it alleges has led to “significant destruction of shareholder value”.
Management counters that it has offered more dialogue between Standard Investments and individual board members and reiterated its current position: “The board and management team reiterate they are resolute in their focus on improving JM's share price performance and delivering value for shareholders. JM is fully committed to driving enhanced performance, higher cash flow and stronger capital discipline”. JH
Topps chief to retire
Topps Tiles (TPT) announced that its chief executive, Rob Parker, is to retire. Parker has been running Topps for six years and spent the previous 12 as its chief financial officer. He will remain in place towards the end of the year “to ensure an orderly transfer”.
Topps also reported a 3.5 per cent increase in like-for-like sales in the 13 weeks to 28 December, which it attributed to an improvement in its trade offer. The shares jumped by 8 per cent.
Topps has faced criticism from its biggest single shareholder – private equity firm MS Galleon, which has a 29.9 per cent stake. It wrote to chair Paul Forman last month arguing that the company had lost its way, calling for a “comprehensive review of its leadership and strategy”.
MS Galleon had previously sought the removal of Topps directors, but the board fought back by accusing the firm of trying to seize control of the business and of trying to influence sourcing by making Topps buy products from one of its portfolio companies. MF
Victoria struggles to make progress
Shares in flooring distributor Victoria (VCP) plunged after the company said that consumer demand “remains subdued”.
Although full-year earnings were unchanged, with management pointing to actions that removed £12mn of costs in the first half, the subdued outlook led to a 9 per cent drop in the company’s share price.
Consensus forecasts are for the company to generate an operating profit of £31mn on revenue of around £1.16bn this year but it continues to be weighed down by debt. Moody’s downgraded the company’s credit rating in October, stating that without a meaningful recovery, the company’s adjusted debt could balloon to 10 times Ebitda by the end of its current financial year. At the half-year stage, the company reported net debt (excluding leases and preferred equity) of £658mn. MF
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