LONDON BRIEFING: Shell nears debt target to trigger higher payouts

(Alliance News) - Royal Dutch Shell on Thursday reported a larger-than-expected jump in quarterly earnings on improved commodity prices.

Shell's adjusted earnings jumped to USD3.23 billion from USD2.86 billion - ahead of company-compiled consensus at USD3.13 billion - as it swung to a profit attributable to shareholders of USD5.66 billion from a loss of USD24 million year-on-year.

The improved earnings print reflects higher realised oil and liquefied natural gas prices, Shell said.

At the end of the quarter, net debt stood at USD71.3 billion, down from USD75.4 billion at the end of 2020 as the company progresses towards the USD65 billion target. Once this is achieved, Shell plans to increase shareholder distributions to 20% to 30% of cash flow from operations.

The dividend for the quarter was USD0.1735 per share, up 4% on the previous quarter.

"As previously announced, the first quarter 2021 dividend per share has been increased by around 4%, in line with our progressive dividend policy. We have reduced net debt by more than USD4 billion this quarter, progressing towards the USD65 billion milestone to increase shareholder distributions. Our competitive and robust financial performance provides the platform to achieve the goals of our Powering Progress strategy," said Chief Executive Ben van Beurden.

Peer BP, which reported on Tuesday, said it would buyback USD500 million of shares in the second quarter after reducing net debt to USD33.31 billion - less than half Shell's current total.

Shell 'A' shares were up 1.4% early Thursday.

Separately, consumer goods firm Unilever said it has approved a share buyback programme of up to EUR3 billion, to commence in May. Its shares were up 3.5%.

Here is what you need to know at the London market open:

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MARKETS

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FTSE 100: up 0.6% at 7,006.99

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Hang Seng: up 0.7% at 29,265.01

Nikkei 225: Tokyo market closed for holiday.

DJIA: closed down 164.55 points, or 0.5%, at 33,820.38

S&P 500: closed down 3.54 points, or 0.1%, at 4,183.18

Nasdaq Composite: closed down 39.19 points, or 0.3%, at 14,051.03

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EUR: up at USD1.2118 (USD1.2100)

GBP: up at USD1.3960 (USD1.3912)

USD: down at JPY108.77 (JPY108.85)

Gold: up at USD1,778.58 per ounce (USD1,772.08)

Oil (Brent): firm at USD67.71 a barrel (USD67.65)

(changes since previous London equities close)

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ECONOMICS AND GENERAL

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Thursday's Key Economic Events still to come

Japan Showa Day holiday. Financial markets closed.

0955 CEST Germany unemployment

1000 CEST EU monetary developments in euro area

1100 CEST EU business & consumer surveys

1400 CEST Germany provisional consumer price index

0830 EDT US initial jobless claims

0830 EDT US advance estimate gross domestic product

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The number of cars built in the UK has increased for the first time after 18 months of decline, figures show. The Society of Motor Manufacturers & Traders said the March figures were a "major step in the right direction" but added that with factories shut for much of March 2020, output was always going to be up. The trade body reported that 115,498 cars were built in March, 46% more than the same month a year ago. The figures were published a year since the coronavirus crisis caused all UK automotive plants to close in mid-March 2020, after only 78,767 cars had left factory gates that month.

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BROKER RATING CHANGES

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BARCLAYS CUTS DIXONS CARPHONE TO 'EQUAL WEIGHT' (OVERWEIGHT) - TARGET 145 PENCE

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BERENBERG RAISES TT ELECTRONICS PRICE TARGET TO 285 (230) PENCE - 'BUY'

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JPMORGAN RAISES ST JAMES'S PLACE PRICE TARGET TO 1465 (1406) PENCE - 'OVERWEIGHT'

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JPMORGAN RAISES SCHRODERS PRICE TARGET TO 3485 (3400) PENCE - 'NEUTRAL'

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COMPANIES - FTSE 100

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NatWest reported a jump in quarterly profit, even as total income fell. The UK state-back bank's pretax profit surged to GBP946 million for the first quarter of 2021 from GBP519 million a year ago, on total income of GBP2.66 billion, down 16% from GBP3.16 billion. Natwest recorded a net impairment release of GBP102 million in the first quarter, compared to a charge of GBP802 million a year ago. NatWest retained its outlook guidance. Chief Executive Alison Rose said: "Defaults remain low as a result of the UK government support schemes and there are reasons for optimism with the vaccine programmes progressing at pace and restrictions being eased. However, there is continuing uncertainty for our economy and for many of our customers as a result of Covid-19."

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Unilever reported annual underlying sales growth of 5.7% for the first quarter of 2021, driven by volume, up 4.7%, with price hikes contributing 1.0%. Turnover fell by 0.9% to EUR12.3 billion, however, largely due to a negative currency-related impact of 8.0%. Unilever's Foods & Refreshment arm achieved underlying sales growth of 9.8% - with out-of-home ice cream returning to growth and in-home ice cream up double-digits - fuelled by volumes, while Home Care reported sales growth of 5.9% and Beauty & Personal Care growth of 2.3%. "We are confident that we will deliver underlying sales growth in 2021 within our multi-year framework of 3% to 5%, with the first half around the top of this range. We expect to increase underlying operating margin slightly for the full year, though with a decline in the first half driven by Covid-19 impacts, higher cost inflation and increased marketing spend over the prior year," said Chief Executive Alan Jope. Unilever will pay a quarterly dividend of EUR0.4268 per share and has approved a share buyback programme of up to EUR3 billion, to commence in May.

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Medical devices maker Smith & Nephew reinstated its full-year guidance after a strong start to the year. First quarter revenue of USD1.26 billion was up 12% on a year ago on a reported basis and 6.2% higher underlying. All three global franchises - Orthopaedics, Sports Medicine & ENT and Advanced Wound Management - returned to growth on a reported and underlying basis. S&N reinstated guidance for 2020, targeting underlying revenue growth in a range of 10.0% to 13.0% and a trading profit margin around 18.0% to 19.0%. This assumes improvement in conditions through the year, with surgery volumes largely unconstrained by Covid-19 in the second half. "Our first priority for 2021 is to return to growth and recapture our pre-Covid momentum, and we are encouraged by our early progress through Q1," said Chief Executive Roland Diggelmann, adding that there is "improving visibility" as vaccine programmes roll out and healthcare systems reopen.

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BT confirmed reports in the Telegraph and Financial Times that it is considering the sale of some or all of the telecommunications company's television arm BT Sport. "Early discussions are being held with a number of select strategic partners, to explore ways to generate investment, strengthen our sports business, and help take it to the next stage in its growth. The discussions are confidential and may or may not lead to an outcome," BT said.

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St James's Place had GBP135.46 billion in funds under management at the end of the first quarter, up 33% from GBP101.67 billion a year before, following GBP2.90 billion in net inflows during the recent quarter and GBP3.22 billion in positive net investment return.

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Schroders said assets under management, including joint ventures and associates, totalled GBP672.0 billion on March 31, up from GBP663.0 billion on December 31.

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COMPANIES - FTSE 250

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Inchcape said its first-quarter results were ahead of internal expectations. The automotive distribution, retail and services company reported revenue of GBP1.9 billion for the quarter, up 2% on an organic basis but 3% lower reported. "Our first-quarter results were ahead of our expectations. The performance demonstrates the underlying resilience of the group - with revenue growth underpinned by a widespread recovery in our Distribution business," said Chief Executive Duncan Tait. Distribution revenue rose 10% on a reported basis in the period, while Retail sales were down 18%. Tait said: "Looking ahead, while the pandemic situation presents continued uncertainty, absent any severe disruptions we continue to expect material growth in profits and an improved operating margin for FY21."

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COMPANIES - GLOBAL

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Airbus said it made a promising start to 2021, swinging to a first-quarter profit, though the aerospace and defence firm cautioned that Covid-19 still has a tight grip on the industry. In the three months ended March 31, revenue fell 1.6% year-on-year to EUR10.46 billion from EUR10.63 billion a year earlier. Airbus said it swung to a first-quarter net income of EUR362 million from a EUR481 million loss a year earlier. Airbus posted a EUR59 million one-off financial gain in the first-quarter, reflecting the "revaluation of financial instruments and the evolution of the US dollar". This compared with a EUR477 million one-off hit a year earlier, hit by the full impairment of a loan to communications company OneWeb. "The good Q1 results mainly reflect our commercial aircraft delivery performance, cost and cash containment, progress with the restructuring plan as well as positive contributions from our helicopter and defence and space activities," Chief Executive Officer Guillaume Faury said.

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Thursday's Shareholder Meetings

CRH PLC - AGM

Devro PLC - AGM

Flutter Entertainment PLC - AGM

Glencore PLC - AGM

Grafton Group PLC - AGM

Greencoat Renewables PLC - AGM

Hawkwing PLC - AGM

ITV PLC - AGM

James Fisher & Sons PLC - AGM

Kerry Group PLC - AGM

Meggitt PLC - AGM

Schroders PLC - AGM

STV Group PLC - AGM

Synthomer PLC - AGM

Weir Group PLC - AGM

Yamana Gold Inc - AGM

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By Tom Waite; thomaslwaite@alliancenews.com

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