St. James's Place Is Top Pick Among UK Asset, -2-

1043 GMT - Reports of Haleon exploring a potential sale of its Nicotinell brand of nicotine gum, patches and lozenges seems to be part of a streamlining strategy as it follows similar reports in February regarding the company's intention to sell its ChapStick lip balm brand, head of investment at Interactive Investor Victoria Scholar says in a note. The consumer-healthcare business--which was spun out of GSK and is partly owned by Pfizer--could be focusing on its biggest and most profitable brands while looking to dispose non-core holdings, she says. However, analyst views have been mixed regarding the company's prospects, with both Deutsche Bank and Barclays cutting its target price on the stock Tuesday morning, Scholar says. ([e-mail])

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Anglo American 1H Earnings Should Fall On Quarter Due to Several Factors

1040 GMT - Anglo American's 1H underlying Ebitda is expected to fall sequentially on several drivers, and there is modest downside risk to production guidance, UBS analysts write in a research note. The diversified mining group's 1H, which it reports on July 27, will be hurt by higher costs, weaker platinum group metals profitability, foreign exchange and some sales volume disruption in June, the analysts say. UBS sees 1H underlying Ebitda at $5.2 billion, versus $5.8 billion in 2H 2022, with net earnings at $1.5 billion and dividends of 50 cents a share, versus consensus of $2.1 billion and 65 cents a share, respectively. "We see modest downside risk to 2023 production guidance and upside to unit-cost guidance," the analysts add. ([e-mail])

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Sainsbury's Faces Increasing Competition as Costs Pressures Remain

1038 GMT - Sainsbury's 1Q performance was solid on the back of a return to volume growth and improved market-share performance, Wealth Club manager of the quality shares portfolio Charlie Huggins says in a note. The grocer's launch of its loyalty card program helped consumers to save money, and seems to have been well received as the group continued to work on lowering prices, he highlights. However, Sainsbury's is facing increasing competition, with Aldi, Lidl and Amazon all looking to expand in U.K. grocery, he says. "Cost pressures remain intense, for both Sainsbury's and its customers, meaning profits will likely go nowhere this year," Huggins adds. ([e-mail])

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De Beers's New Botswana Sales Pact Implies Big Ebitda Hit by 2033

1017 GMT - Anglo American-owned De Beers's extension of its sales agreement with Botswana implies a significant hit to Ebitda and, more indirectly, rough-diamond price volatility, UBS analysts write in a research note. The new agreement increases the diamond output sold by the Botswana state-owned Okavango Diamond Co. to 30%, lifting it 2% a year to 50% by 2033, the final year of the contract. This will hurt Ebitda from loss of volumes by around $130 million by 2033, the analysts estimates. Additionally, as the ODC sells most of it stones in auctions, this will result in more volatility to rough prices with the total volume of rough sold by De Beers falling to around 23 million carats from 29 million carats. ([e-mail])

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Augmentum's FY 2023 Revenue Growth Was Solid

1010 GMT - Augmentum Fintech's management proved its credentials with the strong performance of its underlying assets, Liberum says in a note after the U.K. venture-capital investor posted results for fiscal 2023 with net asset value up 2.4% partly driven by higher revenue, namely by that of its top 10 investments growing 117% on year. "Declining comparables reduced the valuation of investee companies by GBP81.2 million (-27.5%) largely offsetting the increase in valuations from revenue growth," analyst Joachim Klement writes. Shares currently trade on a 39% discount to NAV with Augmentum's active buyback of shares being accretive to NAV, he adds, noting the group is expected to continue to strike a balance between buybacks and future investments given its high cash holdings. ([e-mail])

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Sainsbury's Lower Margins Likely to Hit 1H Profit

1002 GMT - Sainsbury's needs to pass on higher costs to consumers in order to preserve already low profit margins or it will likely see a drop in 1H profit, Admirals market analyst Roberto Rivero says in a note. The British grocer reported surprising growth in sales during the first quarter, which naturally will drive revenues, he says. However, the question remains how much costs have increased and what the impact on margins will be given the high levels of inflation, he says. "Until we see a normalization in inflation, it is likely that supermarket margins will continue to come under pressure," Rivero adds. ([e-mail])

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Wizz Air's Sharp Growth Slowdown in June Raises Questions

0941 GMT - Although Wizz Air's passengers in June rose 22.5% year-on-year, they were down from May's 35% growth and April's 32% rate, Goodbody analysts Mark Simpson and Dudley Shanley say in a note. Still, load factor--a measure of how full an airplane is--rose 6.1 percentage points to around 92%, a key positive on the back of year-on-year capacity growth of only 14% in June as compared with May's 26%, the analysts say. The market might question why there has been this sharp downturn in growth rates and how this tallies with the target of improved fleet utilization rates, the analysts say. "As such, until that issue is addressed, we feel the response to this data release will be cautious," they say. ([e-mail])

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Sainsbury's Drops After Sitting Tight on FY Guidance

0933 GMT - Sainsbury's shares top the FTSE 100 fallers, down 1.6% to 270 pence after the U.K. grocer reported first-quarter volume gains, but left its full-year guidance unchanged. The retailer's renewed focus on cutting prices in its core food business is helping it do better than rivals, UBS says. While Sainsbury's left its FY23/24 underlying pretax profit guidance unchanged at between GBP640 million-GBP700m, the robust 1Q trading prompts UBS to increase its forecast to GBP685m--from GBP674m beforehand--and to raise its price target to 275p from 270p, though it keeps its neutral recommendation. "Sustained grocery momentum and a better-than-expected Argos performance is likely to make us more constructive going forward," UBS analysts say in a note. ([e-mail])

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UK Energy Supply Sector Set to Return to Profit, Ofgem Says

0915 GMT - The U.K. energy retail sector is expected to return to profitability this year for the first time since 2018, Ofgem Chief Executive Jonathan Brearley writes in a letter to suppliers. Following a period where energy suppliers largely made losses due to difficult trading conditions, the price cap has now dropped and wholesale energy prices have fallen from the peaks reached in the second half of 2022 and early 2023. "This means the sector is likely to return to profit this year and suppliers can recoup some of the losses from recent years," the U.K. energy regulator says. However, "suppliers must reciprocate the support the sector was given by consumers and taxpayers when wholesale prices increased by behaving responsibly as prices fall and profits return," Brearley adds. ([e-mail])

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